JUL 09 Danske Research Weekly Focus

8/9/2019 JUL 09 Danske Research Weekly Focus

1/23

www.danskeresearch.com

Investment Research

Market Movers ahead

The US data release calendar is quite full. Most notable of the US figures will be the

retail sales report for June.

In the euro area, the German ZEW expectations index will get the most attention. The

bank stress tests to be published on 23 July will also attract a lot of attention.

In the UK, the minutes from the 8 July Monetary Policy meeting at the Bank of

England will be released on 21 July.

In Asia, the main focus next week will be China, where GDP for Q2 is due to be

released.

In Japan, focus will be on the Upper House election on 11 July.

In Sweden, we are particularly looking forward to delving into the apparent tensions

within the Riksbank board.

Global Update

This week the IMF adjusted its forecast for global growth upwards for 2010, but at the

same time emphasised that downside risks have increased.

Data from the US was mixed, but nevertheless helped to reduce concerns about a

sharp decline in US growth.

In Europe, ECB president Trichet did not seem concerned about the latest increases in

money market rates.

Focus

Global growth to slow but by how much?

Prospects of a double-dip scenario?

09 July 2010

Editors

Allan von Mehren

+45 4512 8055

[email protected]

Steen Bocian

+45 45 12 85 31

[email protected]

Weekly FocusGlobal growth slowing down

Contents

Market movers ahead ........................................... 2

Global update................................................................... 5

Scandi Update ................................................................ 7

Focus: Research - Global: Growth is

bound to slow but by how much? ........... 9

Equities: Q2 earnings should easeinvestor concerns .................................................. 12

Fixed Income: ECBs Trichet in a goodmood ..................................................................................... 13

FX: EUR has wind in its sails ........................ 14

Commodities: Supply fears support oil..................................................................................................... 15

Credit ................................................................................... 16

Financial views........................................................... 17

Macroeconomic forecast .............................. 19

Financial forecast ................................................... 20

Calendar ........................................................................... 21

ISM indices suggest slower US growth Headwind on the equity markets

Source: Reuters Ecowin and Danske Markets Source: Reuters Ecowin and Danske Markets


2/23

2 | 09 July 2010www.danskeresearch.com

Weekly Focus

Market movers ahead

Global

Next weeks US data release calendar is quite full. On Wednesday we expect theretail sales report for June to reveal a continued decline, driven by a drop in both car

sales and gasoline prices. On the other hand, chain store sales showed firm June

figures. Therefore we also expect continued positive figures for retail sales less autos

and gas. On Friday Junes CPI is expected to show some easing, with a slight drop of

0.1% from May to June, reflecting the declining gasoline prices. Hence, core CPI is

likely to increase slightly. Later on Friday University of Michigan confidence is

expected to show a decline in consumer confidence. This is primarily driven by the

drop in equities, causing consumers to be increasingly cautious, although lower

gasoline prices will counterbalance some of the effect. Given the recent increase in

talk about further quantitative easing from the Fed, there will be attention on the

speeches by Bernanke and board member Duke on Monday. Further, FOMC minutesare due to be released on Wednesday. In addition, the US earnings season is set to

start next week kicking off with Alcoa on Monday.

Over the next few weeks, the most notable US figures will be ISM on 2 August and

non-farm payrolls on 6 August. The fear is that July figures will turn out to be weak

as the June numbers. If so, it could add to the growing fear of a severe economic

slowdown.

In the euro area,the German ZEW expectations index will receive some attention on

Tuesday as it has been a good early indicator of turns in Ifo and PMI during this

crisis. Our model indicates a modest decline in ZEW expectations and we see some

signs that it has bottomed. Euroland industrial production is projected to haveincreased 0.8%. Details on euro area inflation in June are likely to reveal that core

inflation remained at 0.8% while the energy contribution fell significantly. Core

inflation is expected to stay below 1% for the rest of 2010.

Bank stress tests to be published on 23 July will attract a lot of attention. Politicians

repeat the mantra that the stress tests will restore confidence. We are not so sure. No

matter what the stress tests show, the market will continue to be concerned that the

real picture of the German Landesbanks and in particular the Spanish Cajas is bleak.

The next pivotal event in the UK market might very well be on 21 July when the

minutes from the 8 July Monetary Policy meeting at the Bank of England will be

released. As widely expected, the BoE kept its policy rate unchanged at 0.5% and settarget for the asset purchase programme at GBP200bn. Remember that MPC member

Sentance last time voted for a rate hike of 25bp due to the current high inflation. The

market will scrutinise the minutes to see if more members have joined Sentance this

time. In that respect, note that Junes inflation numbers are expected to overshoot the

3.0% limit for the fourth month in a row. The market looks for a 3.2% reading.

No important data or speeches from central bankers are on the agenda in Switzerland

in the coming week. Looking further ahead, the KOF leading indicator on 30 July will

be among the more interesting releases. The focus here will be on whether the

US retail sales boosted by discounts

Source: Reuters Ecowin and Danske Markets

Switzerland: Strong growth

Source: Reuters EcoWin

Germany: Further decline in ZEW?


May Jul Sep Nov Jan Mar May

09 10

-2.5

-1.5

-0.5

0.5

1.5

2.5

-2.5

-1.5

-0.5

0.5

1.5

2.5% m/m % m/m

DB forecast

Retail sales ex. autos,building materials, and

gasoline

Retail sales total

9 2 94 96 98 00 02 0 4 06 0 8 1 0

-4

-3

-2

-1

0

1

2

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% y / yInde x

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>


3/23


Weekly Focus

indicator is beginning to show signs of a slower rate of growth. We predict a small

rise in the KOF from 2.25 to 2.30, which would underline that the economy is still in

fine fettle.

In Asia the main focus next week will be China where most economic data for June

will be released together with GDP for Q2. In our view, these figures will proveweaker than the current consensus. Based on early foreign trade reports from Taiwan

and South Korea, we expect Chinas foreign trade data to be particularly weak with a

sharp drop in both imports and exports, with weakness most pronounced in imports.

We expect industrial production to edge 1.8% m/m higher in June following a similar

increase in the previous month. For Q2 as a whole, we expect growth in industrial

production to have slowed to 3.5% q/q from 4.4% q/q in Q1. Based on the

development in industrial production, Q2 GDP growth is expected to have slowed to

around 9% q/q AR from 12% q/q AR in Q1. Hence, GDP growth has probably been

slightly below potential in Q2. CPI inflation probably edged slightly higher to 3.3%

y/y from 3.1% y/y in the previous month. Nonetheless, the message from the June

data now is that the risk of overheating is now declining fast and inflation will soonpeak

In Japan focus will be on the Upper House election on 11 July. Currently the DPJ

coalition government has a slight majority in the Upper House and it looks

increasingly likely that the coalition government will lose this majority, albeit it will

be broadly status quo for DPJ. DPJ currently has a majority in the more important

Lower House and hence DPJ will remain in power even if the coalition government

lose its majority, so we expect no major market impact. We expect no new easing

initiatives from the Bank of Japan (BoJ) in connection with the monetary meeting on

15 July. However, we suspect BoJ could soon start to move towards an easing bias on

the back of slower growth and the strong JPY.

Scandi

A wealth of data are due out in Denmark in the coming weeks. On 12 July consumer

and net price indices for June will be released: we anticipate inflation of 2.1% y/y or

0.2% m/m. Consumer expectations for July are due out on 22 July: we predict a rise in

the consumer confidence index from -1.5 to 0.5. Statistics Denmarks house prices for

Q1 will be released on 26 July: we expect confirmation of the rise already seen in the

Association of Danish Mortgage Banks house price data. Unemployment figures for

June will be out on 29 July: we expect a largely unchanged level. Figures for business

confidence will also be released that day.

China: Growth slowing

Source: Reuters Ecowin

Denmark: Unemployment has turned


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Industrial production >>

Forecast

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4/23


Weekly Focus

In Sweden we are particularly looking forward to delving into the apparent tensions

within the Riksbank board. Remember that there are now (again) two dissenters:

Svensson and Ekholm. Quintessentially, all it would take for a complete change of

heart within the Riksbank board would be for Governor Ingves (holding the casting

vote) to jump the fence. We do not judge this as very probable in the short term, but,

still. Under any circumstances, the minutes, set to be released on 15 July, will be an

interesting read, and if there are any indications of a softening tone among the

hawks we could be in for a major financial market reaction. On 15 July house price

data will also be a point of great interest, particularly since Governor Ingves has put

great emphasis on housing and household credit developments when arguing for a

normalisation of rates.

No important data on the agenda in Norway in the coming week, but the foreign trade

figures could give us an idea of how developments in the global economy are

affecting exporters. The global upswing starting in 2003 produced a significant

upswing for Norwegian exporters, with strong growth in prices as well as volumes.

Since the financial crisis, however, Norwegian exporters have recovered slowly giventhe high rates of growth in the global economy. One key element of our forecasts for

the Norwegian economy is that global demand for energy and commodities will once

again push up both prices and volumes of Norwegian export goods.

Market movers ahead

Source: Bloomberg and Danske Markets

Global movers Event Period Danske Consensus Previous

Mon 12-Jul - CNY Trade balance (from 7/10) USD bn Jun 20.3 15.6 19.5

- JPY Upper House elect ion (on 7/11)

16:00 USD Fed's Bernanke (voter, neutral) speaks

Tue 13-Jul 10:30 GBP CPI m/m|y/y Jun 0.0%|3.2% 0.2%|3.4%

11:00 DEM ZEW economic sentiment Index Jul 29.8 25.0 28.7

11:00 DEM ZEW current situation Index Jul 0.0 -3.0 -7.9

Wed 14-Jul 11:00 EUR CPI, final m/m|y/y Jun 0.0%|1.4% 0.0%|1.4% 0.1%|

14:30 USD Retail sales m/m Jun -0.3% -0.2% -1.2%

20:00 USD Minutes from FOMC meeting

Thu 15-Jul - JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10

4:00 CNY GDP Constant Price y/y 2nd quarter 10.3% 11.0% 11.9%

4:00 CNY CPI y/y Jun 3.3% 3.3% 3.1%

4:00 CNY Industrial production y/y Jun 15.0% 15.2% 16.5%

Fri 16-Jul 14:30 USD CPI m/m|y/y Jun -0.1%|1.1% 0.0%|1.2% -0.2%|2.0%

15:55 USD University of Michigan Confidence Index Jul 73.2 74.0 76.0

Scandi movers Event Period Danske Consensus Previous

Mon 12-Jul 9:30 DKK CPI m/m|y/y Jun 0.2%|2.1% 0.0%|2.2%

Sweden: Housing in for a slowdown?

Source: Statistics Sweden

Norway: Exporters to make a

comeback?


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1.600Market value / Taxation value

House price coefficient

House price coefficient (MA3)

98 00 02 04 06 08 10

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1601998=100 1998=100

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5/23


Weekly Focus

Global update

IMF emphasises downside risks

This week the IMF adjusted its forecast for global growth upwards for 2010, but it wasdriven solely by higher activity in H1. In addition, the IMF emphasised that downside

risks have increased and it discussed the risk of a double-dip in the US housing market.

Data from the US was mixed, but nevertheless helped to reduce concerns about a sharp

decline in US growth. In Europe, ECB president Trichet was almost light-hearted at the

monthly press conference and did not seem concerned about the latest increases in money

market rates. Greek data indicated that fiscal tightening is on track. In Asia, the Bank of

Korea joined the rate hike club (India, Malaysia, Taiwan). Data nevertheless suggests that

growth in Asia is slowing.

EUR/USD has strengthened during the week. Stock markets bottomed on Monday and

have since gained considerably.

Renewed focus on US but limited new information

Markets have turned focus back to the strength of the US recovery but this weeks data

revealed little news on the matter. After the significant drop in the manufacturing ISM,

expectations for the nonmanufacturing ISM had been scaled back. The index declined 1.2

points which is less drastic than the drop in its manufacturing counterpart and the details

of the survey were mixed. The business activity index remains high, although it came off

its peak in May, suggesting that the expansion in the service sector continues. New orders

on the other hand dropped to the lowest level since December 2009, signalling that the

rapid expansion in demand may have run its course.

Judging from retail sales reports from chain stores, consumer spending nevertheless rose

in June with heavy discounts to clear out merchandise before the back-to-school period

kicks off later this month boosting sales. Finally, initial jobless claims broke the upward

trend and fell to its lowest level since early May last week. That said, initial jobless

claims are still high and at these levels would suggest growth in nonfarm payrolls of a

modest +50K. Continuing claims took a massive decline as well although this does not

necessarily reflect that people have moved into employment.

Good news from Greece

Data from the Greek central bank indicates a sharp improvement in the government

budget compared with last years spending spree. If the data can be trusted, it indicates a

tightening which is even sharper than what has been put forward in the austerity plans. On

Thursday, Greece took another big step in the right direction towards fiscal consolidation,

as a tough pension reform was pushed through in parliament. The reform increases the

retirement age and reduces benefits.

The ECB meeting did not bring any changes in key interest rates, and the Governing

Council did not introduce any liquidity measures. Read more in our comment Flash

Comment: Trichet was almost light-hearted.

Jobless claims data improves slightly


Still strong momentum in the

industrial sector


PMIs indicate a peak in euro area

growth


ISM indices suggest slower US growth

ahead


08 09 10

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Initial jobless claims >>

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6/23


Weekly Focus

Euro area retail sales increased 0.2% in May, which was slightly below expectations. We

still fail to see signs of a notable rebound in private consumption, which we expect to

remain flat during Q2. Service PMI declined in Spain and Italy, which was not surprising

given the latest decline in global leading indicators. A downbeat report that adds to the

picture of slow growth in southern Europe in H2 10. On the other hand, hard data shows

that industrial activity expanded briskly in Germany and France during May. This

indicates, despite the decline in leading indicators, that the economic recovery saw strong

momentum in May in the two largest countries within the euro area. Details reveal that

the automobile industry expanded robustly. Even though German factory orders declined

during May, we look for robust GDP expansion in Germany and France during Q2.

South Korea joins the rate hike club

The Bank of Korea in the past week finally joined the Asian rate hike club by raising its

leading interest rates by 25bp to 2.25%. So far India, Malaysia, Taiwan and now South

Korea have raised their leading interest rates, while China has tightened mainly through

non-conventional measures like tightening access to mortgage credit. The big question of

course is whether the Asian growth and monetary cycle will continue to diverge from the

US and Europe.

The past week has been light on economic data, but the latter continues to disappoint and

clearly suggests that growth in Asia is slowing. In Japan, machinery orders plunged 9.0%

m/m in May. It should be remembered that machinery orders are extremely volatile and

the overall trend still appears to be flat or slightly higher machinery orders. In Taiwan,

foreign trade data for June was weak, suggesting that the Chinese foreign trade data to be

released this weekend could be considerably weaker than the current market consensus.

Slower growth in Asia is entirely consistent with our current forecast and we continue to

regard the slowdown as a natural and healthy moderation on the back of the extremely

strong growth since early 2009. That said, downside risk on growth is increasing and therisk of overheating is receding across Asia.

The US Treasury Department has finally released its delayed report on the exchange

policy of the USs main trading partners. The Treasury report says that China took a

significant step last month when it abandoned its unofficial peg to the USD and allowed

RMB to appreciate. However, the report also says that RMB remains undervalued and it

is not clear whether the policy shift will correct the undervaluation. Hence, eventually

China will be judged on the size of the appreciation and tensions could resurface again at

some stage.

Weak Taiwanese foreign trade data

suggests Chinas will disappoint


Machinery losing some momentum in

Japan


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Domestic machinery

orders, excl. volatile

% 3m/3m


7/23


Weekly Focus

Scandi Update

Denmark Mass redundancies on the retreat

The National Labour Market Authority published figures during the week for the number

of redundancy notices served, showing an increase of 380 from 894 in May to 1,247 in

June. This increase is by no means alarming, however, and it is important to remember

that redundancies do tend to vary from month to month.

If we take a step back, the overall picture is that redundancies fell back sharply in 2009

and have generally been relatively stable so far in 2010 after the surge in late 2008 to a

peak of 5,300 in one month. They are now largely back to the levels seen before the crisis

hit the Danish labour market.

So there is much to suggest that the big rounds of redundancies are now very much

history. This is, of course, good news, showing that the labour market has put the shock

of the financial crisis behind it and is now generally back to a more normal state.

We reckon that the labour market has entered a more stable period with largely flat

unemployment. This naturally needs to be seen in the light of the past seven months

gentle decline in unemployment, but also of growth in general being expected to be

strong enough to create jobs in the economy. We therefore expect largely stable

unemployment through to the end of 2011.

Our more positive view of the labour market is also confirmed by a steep drop in the

number of people on job shares. When the crisis struck the Danish economy, many

businesses chose to put part of their workforce in job-sharing schemes as an alternative to

straight redundancies. The sharp fall in people on job shares means that there is no hidden

unemployment lurking around the corner as these temporary schemes come to an end.

Sweden Inflation recedes

Inflation came in much in line with our expectations. However, this implies that the

Riksbanks very recent forecast is already a notch above actual developments. Inflation

might not be in vogue among policymakers currently (how strange it feels to write such a

thing), but we are becoming increasingly worried about the deflationary (or

disinflationary for those of you who are into semantics) prospects for the Swedish

economy. Should these developments continue, we believe it will shortly take a

considerably more prominent position in the monetary policy analysis.

Also, and on the same note, the Swedish economy has recently posted some disappointing

outcomes in terms of growth data (PMI, industrial production and orders) adding to the

concerns one might have about the recovery, even the domestic recovery that just a few

weeks ago seemed so firm.

Redundancy notices back to pre-crisislevels

Source: Statistics Denmark

Inflation losing sight of the target?

Source: Statistics Sweden and the Riksbank

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8/23


Weekly Focus

Norway Looking ahead

The risk of a fresh downturn in the global economy will slow Norges Banks interest

rate increases. Nor is there anything in our own analysis to suggest problems with

rapidly rising inflation during the forecast period. On the face of it, this will increase

the central banks room for manoeuvre, with the result that considerable weight canbe attached to downside risk in the short term. However, we expect interest rates to

climb further than either the fixed income market or Norges Bank anticipates, for two

reasons. First, growth in the domestic economy will be healthier than anticipated and

in any case stronger than in Euroland. Second, the extremely low level of real

mortgage rates, combined with already high debt ratios and real house prices, brings

a latent risk of an imbalance in the housing market which could cause unexpectedly

large problems for Norwegian banks and the Norwegian economy. We therefore

expect that Norges Banks policy rate will rise to 2.25% in December and that we

could see more frequent hikes in 2011-12 than currently priced into the market.

Debt risk

Source: Reuters EcoWin, Danske Markets

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9/23


Weekly Focus

Focus: Research - Global: Growth is bound to slow but byhow much?

Rising fears of a double-dip scenario

While the global recovery set off to a strong start in 2010, new headaches have appeared

for the global economy. First, the debt crisis in the Euro area has created new uncertainty

and led to sharp declines in equities and credit bonds. This has provided a new and

unexpected headwind to the global economy. Second, the labour market in the US has

disappointed and hence is not giving as strong support to US consumers as projected. And

finally, Chinese growth appears to be slowing earlier as tightening measures may be

having a bigger effect than anticipated. These developments have raised fears of a

double-dip in financial markets.

We have for a long time expected some slowdown in the global economy in the second

half of 2010, but this slowdown may become stronger than expected due to the above

mentioned developments. We already see some tentative signs of this see Global

Business Cycle Monitor: Further declines in leading indicators. It will be crucial forsentiment and the outlook for 2011 how much growth actually slows.

For now we will sketch some of the factors that will shape the slowdown. After the

summer break we will quantify these effects more rigorously to gauge the risk of a

double-dip scenario more precisely.

The balance of tailwinds and headwinds is turning

Judging the short-term swings in the growth rates is about estimating the changes in

short-term impulses that hit the economy (tailwinds and headwinds) and the development

in the inventory cycle. It is key to understand that it is the change in the tailwind that will

affect the change in the growth rate. This corresponds to riding a bike: A stronger

tailwind means you can go faster. If the tailwind fades so will your speed even though

the wind is still helping you.The strength of the labour market and potential pent up demand/over-investment will

determine whether an economy can stay on a recovery track when tailwind factors

disappear.

Using this approach it seems evident that a wide range of factors point to a weakening of

growth going forward:

The inventory cycle helped boost growth in 2009 and 2010, but there are signs

now that this effect has peaked and that the growth contribution from

inventories will decline from here on. Increased uncertainty could force a

sharper decline of this growth contribution, as companies become wary of

restocking when the outlook is more clouded.

Fiscal policy provided a decent tailwind in 2009 and 2010. This tailwind isslowly fading, though, and will become a not insignificant headwind in 2011 in

both Europe and US.

Monetary policy has provided a substantial tailwind to the economy as rates

were slashed to very low levels in 2008 and early-2009. This has led to a sharp

reduction in financing costs and thus increased disposable incomes and

corporate earnings. While low rates are still providing a tailwind for new

investments and consumption the effect on incomes and earnings was a one-off

increase and hence the growth impact will fade going forward. The tailwind is

still there but it is getting smaller.

Key points

Growth is bound to slow down in

the second half of 2010, as the

balance between tailwinds and

headwinds turns less favourable.

The key question though is how

much will growth slow. We still

dont expect growth to go below

potential growth over the coming

quarters, but a pick-up in

employment soon and no new

setbacks in financial markets are

key assumptions behind this

forecast.

Should current headwinds get

stronger we will have to re-

evaluate our outlook.

Equity markets from tailwind to

headwind


Signs of faster slowdown in China


Chief Analyst

Allan von Mehren

+45 4512 8055

[email protected]

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http://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdfhttp://danskeanalyse.danskebank.dk/link/BCMJuly2010/$file/BCM_July_2010.pdf


10/23


Weekly Focus

Emerging Markets growth provided a major boost to exports in 2009 and in

the first half of 2010 as Asia especially witnessed a sharp V-shape recovery.

Asia has been growing above its potential growth rate though and policymakers

have tightened policy to slow growth down. We are already seeing signs of this

happening in China, where recent indicators such as PMI could indicate a

somewhat stronger and earlier slowdown than envisaged. Hence this strong

tailwind for the developed countries also looks bound to become smaller.

The development in risky assets worked as a strong tailwind in 2009, as

equities rallied strongly and corporate yields declined substantially. This

reduced financing costs for companies, increased wealth for consumers and

worked to boost overall sentiment. However, this tailwind has unexpectedly

turned into a headwind as risk markets have sold off strongly over the past 2

months.

Housing market incentives in the US provided a strong tailwind to the housing

market boosting home sales over the past year and giving support to house

prices. As these incentives have expired this tailwind is disappearing.

While most of these effects were anticipated and already discounted in current forecasts,

the development in risky assets and the early warnings of a sharper decline in the

contribution from the inventory cycle are new.

There are also stabilising forces pulling in the other direction though. Bond yields are

lower than expected and oil prices have also seen a setback, which increases purchasing

power somewhat. But it is questionable whether these are strong enough to compensate

for the new headwinds.

Employment and pent-up demand all the more important now

With the growth impulses turning more negative than expected it is all the more important

that the labour market shows improvement and provides support to consumer incomes.

While this has actually happened we have to say that the improvement has disappointed

lately at least in the US where employment growth slowed again in May and June after

showing stronger-than-expected gains in March and April.

It is paramount that we see stronger job growth in the US soon. If economic growth slows

too much before job gains have picked up the momentum in the labour market could fade

again by the end of the year, leaving little support for the economy. We still expect this to

come through, but the recent data has of course raised some uncertainty in this area.

Lean corporate sector means increased resilience

On a positive note, the corporate sector is in much better shape this time, compared with

2008, for example. The crisis led to enormous cutbacks in employment, investment and

inventories. The corporate sector is therefore extremely lean now and inventories are at a

very low level. Should global growth slow more strongly, there is no extra layer of fat

that will need to be cut away this time. This in itself would put a limit on any new decline

in growth rates.

Metal prices and freight rates also

point to slowing activity


The boost to growth from inventories

has peaked


US fiscal policy tightening ahead in

2011


Interest rates: Both level and change

matters


jan

08

maj sep jan

09

maj sep jan

10

maj

1500

2000

2500

3000

3500

4000

4500

0

2000

4000

6000

8000

10000

12000 Index Index

>

00 01 02 03 04 05 06 07 08 09

-4

-3

-2

-1

0

1

2

3

4US inventories,contr. to GDP growth, q/q AR

Grey bars mark recession periods

04 05 06 07 08 09 10 11 12

-8

-6

-4

-2

0

2

4

-8

-6

-4

-2

0

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4 % of GDP % of GDP

US, cyclically adjusted primary deficit(Office of Management and Budget)

00 02 04 06 08 10

-5

-3

-1

1

3

5

7

-5

-3

-1

1

3

5

7

G3 3m libor, y/y change, % point

G3 3m libor rate, %


11/23


Weekly Focus

Conclusion: Rising risks, but too early to call for a double-dip

While downside risks have increased and growth is bound to slow, we believe it is too

early to call for a double-dip in which growth gets stuck below trend growth. Our current

forecasts, however, are based on the expectation that job gains pick up soon and equity

and credit markets stabilise and recover. Should these factors fail to come through in thecoming months we will have to re-evaluate the outlook.

For more on the effects of the euro crisis see also Research US: Euro crisis could speed

up manufacturing slowdown, where we look at different scenarios for the US

manufacturing sector depending on the development in financial markets.

Important that the job growth picks up


Scenarios for ISM depending on

financial market developments


05 06 07 08 09 10

-900

-700

-500

-300

-100

100

300

105

107

109

111

113

115

117Mn Monthly chng, '000

>

07 08 09 10 11

30

35

40

45

50

55

60

65

30

35

40

45

50

55

60

65

Index Index

ISM

Before shock

Global crisis

Current shock(no improvement)
http://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdfhttp://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdfhttp://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdfhttp://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdfhttp://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdfhttp://danskeanalyse.danskebank.dk/Link/ResearchUS280510/$file/Research_US_280510.pdf


12/23


Weekly Focus

Equities: Q2 earnings should ease investor concerns

Profits: Investors downgrade, analysts upgrade

Global equities have corrected by 14% (S&P Global 1200) since the middle of April thelargest correction since the recovery began in March 2009. At the same time, analysts

worldwide have revised up aggregate expectations for global corporate earnings for 2010

and 2011 by 3% and 2%, respectively. Hence there is a glaring disparity between

investors and analysts when it comes to interpreting the events of the past three or four

months.

Analysts see no global cooling. Investors see PIIGS!

The analyst corps being positive about the world reflects the healthy state of the corporate

sector at present and that companies do not have the visibility to foresee either the

consequences or the profile of the growth slowdown that is coming in H2 10. In contrast,

equity investors, with the PIIGS crisis as a catalyst, are now discounting a severeslowdown that will soon bring the global economy worryingly close to the growth

nightmare of 2008.

Expectations gap as in summer 2008

We have looked at the large spread in earnings expectations, and it seems the market, in

terms of the S&P500, is discounting growth of 5.1% per year (end of June) for the next

five years. Analysts, when asked, say 10.6% (IBES long-term growth June 2010). There

is thus a 5%+ difference in expected annual S&P500 EPS growth rates between 2010 and

2014. As our graph illustrates, this expectations gap has not been wider since 2008, when

it reached around 10% (after the Lehman shock in September 2008). In the summer

months ahead of the Lehman collapse, the gap was in fact also 5%. Hence todays equitymarket resembles the market of mid-2008 in terms of expectations. Back then investors

were right in thinking the situation was set to deteriorate. But who is right this time?

Reporting season will provide the succour the market needs

This time investors are too worried, in our view, and if we are correct and H2 10 delivers

a gentle slowdown rather than a hard landing, we believe the equity market could rise

10-15% in H2 10. We base this on the good health of the corporate sector in the west. The

earnings base has recovered strongly after the profit cycle bottomed in Q2 09 and under-

rather than an over-investment in jobs and capital equipment has been the case in recent

years. Hence, the corporate sector is the strong anchor that will draw investors back to

equities. In the short term, we expect that Q2 earnings, in particular, will provide thesuccour investors are currently yearning for. While companies may not know when the

slowdown will strike, they are well prepared in that they have not yet invested in M&A,

capex or jobs. Industry giants as diverse as Siemens, Samsung and AP Moller Maersk are

all making positive noises ahead of their quarterly reports, and barring new

disappointments in connection with the EUs stress-test of the bank sectors sensitivity to

future EU recessions (to be presented 23 July), we expect that double-dip fears among

investors will be considerably calmed, with equity price increases as the tangible result.

Chief Analyst

Morten Kongshaug

+45 4512 80 57

[email protected]

S&P500 long-term growth: Analysts

say 10%. The market says 5.

Source: Reuters Ecowin, IBES

96 98 00 02 04 06 08 10

-12.5

-7.5

-2.5

2.5

7.5Growthgap p.a.%


13/23


14/23


Weekly Focus

FX: EUR has wind in its sails

EUR has had the wind in its sails over the past month, with EUR/USD climbing from

1.20 to almost 1.27. This appreciation follows a series of disappointing US data which

have pulled down US yields, while European yields have risen with the ECB withdrawingliquidity from the market.

The FX market is also focusing less on the risk of collapse in the European bond market,

and the risk premium the market previously attached to EUR has shrunk. Finally, it may

be that buybacks of short EUR positions have accentuated the latest movement. In this

context we recommend following the weekly IMM data published every Friday night.

These provide an overview of speculative positioning in the FX market, which may be

crucial in the short term not least over the summer when liquidity can be limited.

However, we think it is still too early to declare the EURs troubles over. On 23 July, the

long-awaited stress tests for the European banking sector will be published. The report

could turn the spotlight back onto Europes big debt problems. It is also worth noting thatalthough risk appetite in financial markets has improved, the Spanish/German 10Y

government bond spread has actually widened by more than 20bp in less than three

weeks.

Fears of a global double-dip have mounted on the back of weak US data and a downturn

in business confidence indicators. We do not anticipate a double-dip (see focus article),

but there is a growing risk of the market pricing in a greater probability of such a

scenario. This would tend to strengthen USD by triggering fresh safe-haven flows into US

assets.

Our FX forecast indicates a fall in EUR/USD to 1.15 on a three-month view. Following

the latest rise in EUR/USD, this would be quite a sharp movement in just three months,so we have our forecast under review. However, we still think that the overall risk for

EUR/USD is on the downside in the coming months.

On the other hand, as ECB governor Jean-Claude Trichet pointed out at last weeks rate

meeting, the soccer World Cup has shown that Europe should never be underestimated. If

the economies of southern Europe can convince markets that they have their budget

deficits under control, the stress tests prove unproblematic, global growth remains intact,

and yield spreads continue to be to EURs advantage, it is not beyond the realms of

possibility that EUR/USD has already bottomed out in the present cycle.

CHF intervention not to be ruled out

As financial markets have regained their risk appetite, we have seen some stabilisation in

EUR/CHF. We also feel that the risk to CHF has become more two-sided. There are

already some speculative long CHF positions in the market, and the low inflation figures

for June go to show that the risk of deflation and so intervention by the SNB cannot

be ignored altogether. The latest messages from the SNB have also been less dismissive

of intervention, and in general we reckon that the risk of big swings in EUR/CHF remains

high.

Weekly change, %

Source: Bloomberg

EUR/USD on the up

Source: Ecowin

CHF more stable

Source: Ecowin

Senior Analyst

John Hydeskov

+ 45 4512 8497

[email protected]

-3. 0% -1.5% 0. 0% 1.5% 3. 0%

JPY

GBP

USD

NOK

CHF

SEK

CAD

NZD

AUD


15/23


Weekly Focus

Commodities: Supply fears support oil

Past week: Healthy gains across the board

Commodities have on the whole witnessed decent gains this week as risk sentiment has

improved and supply factors have given support. The grains segment has been boosted by

news of overly wet conditions for crops in the US, which could damage yields this season

despite earlier indications of otherwise good crop progress. We discuss the factors driving

oil process below.

Oil higher as supply concerns lend support

Oil prices rose briefly above USD75/barrel this week as a range of factors provide

support. First of all, the weekly report on US oil stocks showed massive draws last week.

However, up until now there has been little sign of the usual seasonal fall in inventories,

usually seen when refiners start to produce for the driving season. The major reason for

the stock draw was that hurricane Alex forced some producers in the US Gulf to cease

production and Mexico closed loading terminals, which send output to US refiners.

Second, the US Department of Energy said in its monthly Short-Term Energy Outlook

released this week that the production impact of the six-month drilling moratorium in the

US is likely to be higher than forecast earlier: 31,000 b/d in Q4 and 82,000 in 2011.

However, the restrictions on offshore drilling are now leading oil companies to seek out

other options, such as shallow waters and shale oil. Further adding to the range of

supportive supply factors was news that a weather system in the Mexican Gulf could

develop into a cyclone. This could disturb production further.

Finally, important for the energy demand outlook, the IMF released its quarterly World

Economic Outlookthis week and the fund raised its global growth forecast to 4.6% y/y

(previously 4.2%). Notably, the IMF also highlighted risks to the recovery, stressing thathigher growth forecasts derive mainly from better-than-expected H1 figures.

Notwithstanding, this will likely imply that the International Energy Agency (IEA) will

raise their global oil demand forecast when publishing its monthly report next week.

On the whole, we still look for oil prices to average USD81-82 in H2 and edge higher to

USD90 in 2011 as OCED demand picks up. However, risks to our forecasts are

extraordinarily high at present as uncertainties regarding the global recovery are large and

the demand outlook is fragile.

Regarding the price of oil products i.e. crack spreads these have narrowed a little of

late following a surge in, not least, gasoline prices earlier in the year. Specifically, the

ICE gasoil spread to Brent is now around USD11.5/barrel compared with a high ofUSD14/barrel in mid-June. Overall, we see light-heavy spreads widening moderately over

our forecast horizon, not least distillate prices could be pushed higher as manufacturing

activity gains pace.

In contrast, the spread between fuel oil and crude prices remains compressed i.e. fuel oil

trades at a relatively small discount to Brent. We expect this to continue into early-2011

as we see Opec keeping production levels largely at current levels and thus the amount of

heavy oil put on the market to stay broadly unchanged.

Weekly changes

Source: Bloomberg, Danske Markets.

Week ahead

IEA Oil Market Report (Tue)

US retail sales (Tue)

Euroland industrial prod (Wed)

Opec monthly report

US industrial production (Thu)

Light cracks spreads narrowing again

Source: Danske Markets.

Senior Analyst

Christin Tuxen

+45 4513 7867

[email protected]

0 2 4 6 8 10 12

ICE Brent

ICE Gasoil

ICE Jet fuel

Fuel oil 3.5%

Aluminium

Copper

Steel

LIFFE Wheat

Five-day change,%

0

5

10

15

20

Jun-09 Dec-09 Jun-10

Gasoil (USD/bbl)

Heat oil

Gasoline


16/23


Weekly Focus

Credit

Market commentary

This week has seen strong activity in the primary market, despite the holiday season and

positive sentiment, characterised by a general spread tightening. New issuance has moved

down the capital structure from covered bonds, which saw strong new issuance during

June, to senior financials. Four new deals alone were announced on Thursday (UBS,

SocGen, RBS and an Intesa Sanpaolo LT2). The market seems able to absorb the volume

but subsequent spread performance in the secondary market is limited. Spread

differentiation remains significant with strong names able to print tighter than CDS, while

weaker names come with a material premium. As the primary market was effectively

closed during the latter part of spring, we would not be surprised to see continued healthy

issuance despite competition from the summer weather.

The iTraxx Main investment grade index currently trades at 119 basis points (9bp tighter

during the week), whereas the crossover index trades at 534bp (33bp tighter). iTraxx

Senior Financials outperformed Main during the week and trades at 139bp (17bp tighter).

We believe much bad news has already been discounted but with weak consumer

confidence numbers coming out from the US as well as ongoing fiscal challenges in many

countries, growth is likely to be shallow. Substantial spread tightening therefore seems

unlikely in the short term. Still we remain constructive on non-financial credit on the back

of sound company fundamentals and improving credit metrics. Many Nordic Q2 interim

reports are out next week (Investor, SEB, SKF, Hafslund, Fortum, Elisa, TVO) and given

solid expected performance, outlook statements will attract most attention, in our view.

Upcoming European bank stress tests

Yesterday, CEBS came out with a press release naming the 91 banks to be included in the

upcoming stress tests, as well as confirming the date of July 23 for publication. The four

Swedish large cap names were included, as expected as well as Danske, Jyske and

Sydbank in the Danish universe and OP-Pohjola Group (parent of Pohjola Bank) in

Finland. Our view is that the market reaction is more likely to be positive than negative,

as so many market participants have been sceptical. With regard to the Nordic banks, this

could focus attention on their strong capitalisation and limited exposure to PIIGS. In

combination with our expectations of solid Q2 reports this could be a short-term positive.

Table 1. Selected new issues during the week

Name Rating Coupon Maturity Currency Size

Bond spread on

issue date, (bp)*Deutsche Telekom BBB+/Baa1 4.25% 12Y EUR 1.25bn 173

Swedish Match BBB/Baa2 4.34% 5Y SEK 0.7bn NA.

Barclays (LT2) AA-/Aa3 6% 11Y EUR 1.5bn 343

Rabobank AAA/Aaa 4.125% 15Y EUR 1bn 162

BNP Paribas AA/Aa2 2.875% 5Y EUR 1bn 87

Note: Ratings are Moody's and S&P. * Mid-Swaps for Fixed, Discount Margin for floating.

Source: Danske Markets and Bloomberg.

iTraxx Europe (5Y CDS)

Source: Markit

iTraxx Crossover (5Y CDS)

Source: Markit

Senior Analyst

Peter Tind Larsen, PhD

+45 45 12 8508

[email protected]

0

50

100

150

200

250

jun-07 dec-07 jun-08 dec-08 jun-09 dec-09 jun-1

bp

0

200

400

600

800

1,000

1,200

1,400

jun-07 dec-07 jun-08 dec-08 jun-09 dec-09 jun-10

bp


17/23


Weekly Focus

Financial views

Equities The stock market is nervous that the economic slowdown phase that we are facing in

H2 10 will be a trough ride that will bring the global economy to its knees for the

second time in three years. There will be room for more sell-offs if we experience a

true double-dip for the global economy. In the short term investors will for a period

at least be occupied with the Q2 reporting season which, in our view, is likely to

dampen the fears of a double-dip in H2 10. We expect solid corporate earnings

growth in Q2, which together with modestly positive profit guides for H2 10 will

likely calm the nerves of investors. Together with the Q2 reports, we anticipate the

release of the EU banking stress tests on July 23, to remove uncertainty for the

banking industry, which more than any sector has been hit by fears in connection with

the PIIGS crisis. We stick to our global markets forecast of 10-15% end-year 2010.

Fixed Income Global: Risk sentiment remains the key driver of global bond yields, as financial

markets continue to trade on the European debt crisis and the fear of a hard landing in

the global economy. Following the recent sharp decline in yields, bond markets are

now pricing in a substantial slowdown in H2. Until evidence of resilience in global

growth and/or improvement in debt markets is seen, bond yields will be depressed.

Euroland intra-spreads: We remain overweight on Germany, Italy, the Netherlands,

Austria and Ireland. We are underweight on France, Spain, Greece and Portugal. We

recommend 5Y Italy versus France and 30Y Italy versus Germany.

Scandinavian government bonds are performing well relative to Euroland and we

remain overweight 10Y DGBs and 10Y SGBs vs France.

Credit

While July is typically a quiet month, we have seen healthy activity in the primary

market following the effectively closed period in May and early-June. The market has

been able to absorb the volume, but subsequent performance in the secondary market

has been limited. Going forward we expect liquidity to continue to improve.

We are positive on investment grade credit from non-financial companies. Company

credit metrics are sound and we thus consider the default risk in the short- to medium-

term as very low. Furthermore, companies of high credit quality offer an alternative

for investors seeking an exit from what they perceive to be risky sovereign exposure.

Banks are likely to remain under pressure for some time on the back of sovereign

distress and the austerity measures currently being undertaken.

FX outlook The euro has received support as the ECB managed a reduction of its liquidity

provision without adding to already high market tension. However, with Spain bonds

still suffering and the EU banking stress-tests coming up attention remains on the euro

debt crisis and the uptick in EUR/USD is likely to be temporary. EUR/CHF has tested

new lows, but with speculative investors already long the Swiss franc the risk picture

has become more two-sided not least after currency intervention once again has

moved closer after the lower than expected CPI numbers.

Equities and US 10Y yield


EUR/USD and USD/JPY


Credit spreads


Commodity prices


Jan

10

Feb Mar Apr May Jun Jul

2.9

3.1

3.3

3.5

3.7

3.9

925

975

1025

1075

1125

1175

1225

1275 Index %

US 10-year gov bond >>

07 08 09 10

1.5

2.5

3.5

4.5

5.5

6.5

0.0

5.0

10.0

15.0

20.0

25.0 % points % points

>

Jul

09

Sep Nov Jan

10

Mar May Jul

2250

2500

2750

3000

3250

3500

3750

4000

55

60

65

70

75

80

85

90USD/barrel Index

LME metal prices >>


18/23


Weekly Focus

SEK has performed on global risk appetite and strong growth momentum should

warrant lower levels of EUR/SEK going forward. NOK has been weak lately, but

given the latest spike in risk appetite it offers value once again.

Commodities

Commodities have recovered lately, as risk sentiment has improved and supplyfactors have given support. We look for oil prices to consolidate recent gains to the

USD75/barrel level base metals are likely be sensitive to any surprises in industrial

production figures out of the US and Euroland next week.


19/23


Weekly Focus

Macroeconomic forecast

Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.

Macro forecast, Scandinavia

Denmark 2009 -4.7 -4.6 3.4 -13.0 -1.7 -10.2 -13.2 1.3 3.6 -3.0 38.0 3.92010 1.5 2.8 1.6 -6.9 0.8 2.6 1.4 2.2 4.1 -5.6 42.1 4.12011 1.8 2.3 0.5 1.2 0.2 3.9 3.9 1.8 4.0 -4.5 46.5 4.1

Sweden 2009 -5.1 -0.8 1.7 -16.0 -1.5 -12.4 -13.2 -0.3 8.4 -2.1 38.9 7.22010 2.7 2.2 1.5 2.3 1.1 9.1 11.3 1.3 9.3 -3.5 43.6 6.32011 1.5 1.4 1.3 1.8 0.0 3.3 3.2 2.1 10.1 -4.1 47.2 6.6

Norway 2009 -1.6 0.2 4.8 -7.9 -2.1 -3.9 -10.3 2.1 3.1 8.0 26.0 19.02010 1.8 3.9 2.7 -7.2 0.8 1.1 1.9 2.5 3.3 12.0 26.0 24.92011 3.1 4.2 2.3 3.8 0.1 0.3 5.5 1.7 3.2 10.0 - 17.0

Macro forecast, Euroland

Euroland 2009 -4.0 -0.5 2.3 -10.8 -0.8 -12.6 -11.4 0.3 9.4 -6.3 78.7 -0.72010 1.3 0.1 1.4 -2.0 0.4 7.9 5.8 1.4 9.8 -6.7 84.8 -0.32011 2.1 1.2 1.1 3.8 0.0 5.4 4.6 1.6 9.5 -6.0 88.5 -0.2

Germany 2009 -4.9 -0.1 3.4 -13.5 0.4 -14.5 -9.5 0.2 7.5 -3.5 73.0 4.02010 1.9 -1.0 2.1 9.9 0.1 8.9 8.8 1.0 8.1 -5.0 76.5 3.72011 2.7 1.7 1.4 7.4 0.0 7.0 6.7 1.2 7.6 -3.0 79.0 3.2

France 2009 -2.6 0.7 2.8 -7.0 -1.6 -10.7 -9.8 0.1 9.4 -8.3 78.0 -2.32010 1.6 1.3 1.7 -1.0 0.3 7.9 5.9 1.2 10.0 -8.5 82.0 -2.52011 1.8 1.4 1.0 4.2 0.1 6.2 6.2 1.5 9.7 -7.0 87.0 -2.2

Italy 2009 -5.1 -1.6 1.6 -13.1 -0.3 -19.2 -15.2 0.7 7.8 -5.3 114.6 -2.22010 1.3 0.9 1.3 0.1 0.2 8.0 6.0 1.9 8.6 -5.0 116.0 -2.02011 2.0 1.0 1.0 5.2 0.1 8.4 7.2 2.0 8.3 -4.5 117.5 -1.7

Spain 2009 -3.7 -5.1 5.0 -15.5 0.0 -12.0 -18.2 -0.3 18.1 -11.2 54.3 -5.22010 -0.3 -0.5 1.8 -5.6 0.0 7.2 4.6 0.9 20.1 -10.0 66.0 -4.1

2011 1.0 0.7 0.2 0.2 0.0 6.1 4.1 1.9 19.8 -8.5 73.0 -3.2Finland 2009 -7.8 -2.1 0.7 -13.4 0.0 -24.3 -22.3 0.0 8.2 -2.2 44.0 1.4

2010 1.8 1.0 0.5 -3.0 0.0 4.0 3.5 1.4 9.0 -3.9 49.5 1.42011 2.5 1.5 0.0 4.0 0.0 8.0 5.0 2.0 8.6 -3.3 52.0 2.2

Macro forecast, Global

USA 2009 -2.4 -0.6 1.8 -18.3 -0.6 -9.6 -13.9 -0.3 9.3 -9.9 83.8 -2.92010 3.3 2.7 0.3 2.9 1.2 12.1 11.3 1.6 9.4 -10.2 91.6 -3.92011 3.2 2.7 9.4 2.8 -0.4 6.4 6.4 1.6 9.4 -8.8 96.8 -3.8

Japan 2009 -5.2 -1.1 1.6 -14.4 -0.3 -24.1 -16.9 -1.4 4.7 -8.0 220.0 2.82010 3.3 2.2 1.6 -1.1 -0.1 23.7 2.6 -1.0 4.3 5.2 220.4 3.42011 2.1 1.7 1.0 2.5 0.0 5.4 5.4 0.1 - - - 3.0

China 2009 8.7 - - - - - - -0.7 4.3 -3.3 23.6 5.82010 10.2 - - - - - - 3.3 4.0 -2.2 20.5 4.82011 9.5 - - - - - - 3.5 4.0 -2.2 20.5 5.5

UK 2009 -4.9 -3.2 2.8 -14.9 -1.2 -10.6 -13.3 2.2 7.6 -10.4 68.6 -1.32010 1.3 0.9 3.0 -2.0 1.1 4.4 0.9 3.2 8.0 -10.7 80.3 -2.02011 2.3 2.6 2.2 2.2 1.3 6.9 5.0 2.1 8.1 -8.8 88.2 -1.2

2009 -1.5 1.2 2.5 -3.7 1.0 -9.3 -5.7 -0.5 3.7 1.4 38.8 8.3

2010 2.0 1.8 0.5 2.1 -0.7 7.0 5.0 1.0 3.8 -1.0 40.0 9.02011 1.7 1.6 1.0 1.5 -0.2 4.0 4.0 1.2 3.5 -0.5 39.0 10.0

Public

debt4

Public

budget4

Y ear GDP1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Infla-

tion1

Unem-

ploym.3

Infla-

tion1

Unem-

ploym.3

Switzer-

land

Y ear GDP1

Private

cons.1

Im-

ports1

Current

acc.4

Public

cons.1

Fixed

inv.1

Stock

build.2

Ex-

ports1

Current

acc.4

Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Ex-

ports

1

Im-

ports

1

Infla-

tion

1

Unem-

ploym.

3

Public

budget

4

Current

acc.

4

Public

debt

4

Y ear GDP

1

Private

cons.

1

Public

cons.

1

Fixed

inv.

1

Stock

build.

2


20/23


Weekly Focus

Financial forecast

Source: Danske Bank

Bond, money and currency markets

Currency

vs USD

Currency

vs SEK

USD 09-Jul - 750.9

+3m - 817

+6m - 780+12m - 724

EUR 09-Jul 126.9 953.1

+3m 115 940.0

+6m 118 920.0+12m 127 920.0

JPY 09-Jul 88.4 8.50

+3m 95 8.62

+6m 99 7.86+12m 102 7.08

GBP 09-Jul 151.8 1139.7

+3m 137 1119

+6m 139 1082+12m 155 1122

CHF 09-Jul 105.2 714.0

+3m 113 723

+6m 108 719+12m 106 681

DKK 09-Jul 587.3 128

+3m 647 126

+6m 631 124

+12m 587 123

SEK 09-Jul 750.9 -

+3m 817 -

+6m 780 -

+12m 724 -

NOK 09-Jul 637.8 117.7

+3m 665 122.9

+6m 644 121.1

+12m 598 121.1

PLN 09-Jul 321.3 233.7

+3m 343 238

+6m 335 233+12m 307 236

Equity markets

Regional

Price trend

12 mth.

Regional

recommen-dations

USA 0% till +10% Undervikt

Japan 0% till +10% Neutral

Emerging markets (USD) 0% till +10% verviktPan-Europe (EUR) 0% till +10% Neutral

Nordics

Sweden 0% till +10% Neutral

Norway 0% till +10% NeutralDenmark 0% till +10% Neutral

Commodities

07-Jul Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011

NYMEX WTI 72 81 81 80 85 87 89 92 94 82 91

ICE Brent 71 79 81 79 84 86 88 91 93 81 90Copper 6,605 7,274 7,072 7,200 7,500 8,000 8,400 8,600 8,700 7,261 8,425

Zinc 1,850 2,307 2,067 1,900 2,000 2,100 2,150 2,200 2,250 2,069 2,175

Nickel/1000 19 20 23 21 22 22 23 23 24 21 23

Steel 433 464 491 460 475 500 510 530 550 473 523

Aluminium 1,995 2,199 2,131 2,100 2,100 2,150 2,200 2,300 2,400 2,132 2,263

Gold 1,188 1,110 1,194 1,200 1,150 1,100 1,050 1,000 1,000 1,164 1,038

Matif Mill Wheat 149 126 131 132 123 120 127 127 127 128 125

CBOT Wheat 507 518 490 470 450 475 500 500 500 482 494

CBOT Corn 362 389 379 375 410 420 430 440 450 388 435CBOT Soybeans 970 969 932 975 990 1,000 1,010 1,020 1,030 967 1,015

HgLg

Medel

Hg

-5% till +5%

RiskPrice trend

3 mth.

Lg -5% till +5%

-5% till +5%

-5% till +5%

-5% till +5%

760

760

395

395390

Hg-5% till +5%

Hg

745

920

940

920

953.1

765

130

128135

133.5

744

744

3.50

-

--

109

117130

84.0

85.082.0

3.06

1.93

4.45

4.30

4.80

2.70

2.90

3.45

3.20

3.25

1.45

1.22

4.05

2.00

2.152.50

1.551.60

3.60

3.75

6.356.10

5.853.50

3.50

3.603.60

3.00

3.103.40

2.00

2.50

3.50 5.805.20

5.00

3.50

3.20

3.50 4.57

0.10

0.60

1.60

1.05

1.05

1.05

1.05

1.60

1.65

1.95

1.00

0.50

0.50

0.50 1.951.60

1.55

1.001.00

1.30

1.451.95

1.30

1.351.65

5.34 407.8

0.50 1.78

1.00

2.00 3.17

3.25 4.25

1.50

4.10 809.5

0.50

1.00

0.25

1.79

3.00

2.30

2.00

3.00

0.50

0.50 0.45

0.95

112.2

0.50 1.43 3.40

0.65

0.50

3.60

0.61

1.00 1.44 2.89 -

0.13

0.130.75

1.00

118127

Average2010 2011

83.6

0.100.10

745.5

0.25

-5% till +5%

Key int.

rate2-yr swap yield 10-yr swap yield

Currency

vs EUR

0.13 0.93 3.07 126.9

115


21/23


Weekly Focus

Calendar

Source: Danske Markets

Key Data and Events in Week 28

Period Danske Bank Consensus Previous

- CNY Trade balance (from 7/10) USD bn Jun 20.3 15.6 19.5- OTH Earnings: Alcoa

- CNY Export (from 7/10) y/y Jun 35.1% 38.0% 48.5%

- CNY Import (from 7/10) y/y Jun 24.5% 35.4% 48.3%

- JPY Upper House election (on 7/11)

1:50 JPY Domestic CGPI m/m Jun -0.2%|0.6% 0.1%|0.4%

9:30 DKK CPI m/m|y/y Jun 0.2%|2.1% 0.0%|2.2%

10:30 GBP GDP, final q/q|y/y 1st quarter 0.3%|-0.2% 0.3%|-0.2%

15:00 USD Fed's Lacker (non-voter, hawk) speaks

16:00 USD Fed's Bernanke (voter, neutral) speaks

23:15 USD Fed's Duke (voter, neutral) speaks


- OTH Earnings: Intel- EUR Greek auction of 26 week T-bills (EUR1.25bn)

1:01 GBP RICS House Price Balance Index Jun 20% 22%

3:30 AUD Business confidence Index Jun 5

6:30 JPY Industrial production, final m/m|y/y May -0.1%|20.2%

7:00 JPY Consumer sentiment survey Index Jun 42.5 42.7

8:45 FRF Inflation (HICP) m/m|y/y Jun 0.0%|1.8% 0.1%|1.9%

9:00 ESP Inflation (HICP) m/m|y/y Jun 0.2%|1.5%

9:15 CHF Producer & Import prices m/m|y/y Jun 0.3%|1.4%

10:00 SEK Unemployment % Jun 4.5

10:30 GBP CPI m/m|y/y Jun 0.0%|3.2% 0.2%|3.4%

11:00 DEM ZEW economic sentiment Index Jul 29.8 25.0 28.7

11:00 DEM ZEW current situation Index Jul 0.0 -3.0 -7.9

11:15 EUR ECB allots funds in 3 month and 6 day refinancing operations

14:30 USD Trade balance USD bn May -39.0 -40.3

20:00 USD Budget statement USD bn Jun -73.8 -135.9


- OTH Ear ni ng s: Mar ri ott

0:45 NZD Retail sales m/m May 0.5% -0.3%

1:01 GBP Nationwide consumer confidence m/m|y/y Jun 65

11:00 EUR CPI - core, Final m/m|y/y Jun 0.8%| 0.9%| 0.8%|

11:00 EUR Industrial production m/m|y/y May 1.2%| 0.9%|11.4% 0.8%|9.5%

11:00 EUR CPI, final m/m|y/y Jun 0.0%|1.4% 0.0%|1.4% 0.1%|

13:00 USD MBA mortgage applications 6.7%

14:30 USD Import prices m/m|y/y Jun -0.4%|5.2% -0.6%|8.6%

14:30 USD Retail sales less autos m/m Jun 0.1% -0.1% -1.1%

14:30 USD Retail sales m/m Jun -0.3% -0.2% -1.2%

14:30 USD Retail sales less autos & gas m/m Jun 0.3% 0.2% -0.8%

20:00 USD Minutes from FOMC meeting

Monday, July 12, 2010

Tuesday, July 13, 2010

Wednesday, July 14, 2010


22/23


Weekly Focus

Calendar - continued

Source: Danske Markets


- JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10

- OTH Earnings: JPMorgan Chase, Novartis, Google

4:00 CNY GDP y/y 2nd quarter 10.3% 10.5% 11.9%4:00 CNY PPI y/y Jun 6.8% 7.1%

4:00 CNY CPI y/y Jun 3.3% 3.3% 3.1%

4:00 CNY Retail sales value y/y Jun 18.8% 18.7%

4:00 CNY Industrial production y/y Jun 15.0% 15.2% 16.5%

4:00 CNY Fixed assets investments y/y Jun 25.2% 25.9%

10:00 EUR ECB publishes July monthly report

11:00 CHF ZEW Index Jul 17.5

14:30 USD PPI m/m|y/y Jun -0.1%|3.1% -0.1%|3.1% -0.3%|5.3%

14:30 USD PPI core m/m Jun 0.1%|1.1% 0.1%|1.1% 0.2%|1.3%

14:30 USD Initial jobless claims 1000 453 454

14:30 USD Empire Manufacturing m/m Jul 18.25 19.57

15:15 USD Industrial production m/m Jun -0.1% 0.0% 1.2%

15:15 USD Capacity utilization Jun 74.2% 74.7%

16:00 USD Philadelphia Fed. Index Jul 10.0 8.0

16:00 USD Senat hearing on Fed nominations


- OTH Earnings: Mattel, Citigroup, LG Displayy, General Electric, Bank of America

0:45 NZD CPI q/q|y/y 2nd quarter 0.4%|2.0%

1:15 USD Fed's Lacker (non-voter, hawk) speaks

1:50 JPY Tertiary Industry Index m/m May -0.7% 2.1%

11:00 EUR Trade Balance (s.a.) EUR bn May 1.6

14:30 USD CPI m/m|y/y Jun -0.1%|1.1% 0.0%|1.2% -0.2%|2.0%

14:30 USD CPI ex. food & energy m/m|y/y Jun 0.1%|0.9% 0.1%|0.9% 0.1%|0.9%

14:30 CAD Leading indicator m/m Jun 0.9%

15:55 USD University of Michigan Confidence Index Jul 73.2 74.0 76.0


Sun 11 - 15 CNY Housing Prices Index Jun 12.4

Mon 12 - 15 CNY Money supply M2 y/y Jun 18.8% 21.0%

Mon 12 - 15 CNY Foreign Exchange Reserves bn. Usd Jun 2.47 2.45

Mon 12 - 16 CNY Actual FDIC Cumulative y/y Jun 15.8% 27.5%

Friday, July 16, 2010

During the week

Thursday, July 15, 2010


23/23

Weekly Focus

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Documents

JUL 09 Danske Research Weekly Focus