jul 02 danske weekly focus
TRANSCRIPT
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Investment Research
Market Movers ahead
ECB meeting on Thursday questions are expected to centre around additionalliquidity measures and the ECBs asset purchases.
Developments in Euroland bond markets and news out of southern Europe. US non-manufacturing ISM will it hold up better than its manufacturing sibling?
Monetary policy meeting at the Bank of England is not expected to bring anychanges.
Swedish industrial data and the governments net borrowing needs. Norwegian CPI.Global Update
Global PMIs have fallen fundamentals suggest a slowdown, but the European debtcrisis has likely accelerated the decline.
The Riksbank hiked rates by 25bp, as expected, and the repo path was revised slightlyhigher in 2010 and 2011, but lower in 2012-13.
The expiry of the one-year LTRO has brought the duration of Euroland money marketliquidity lower, which has put upward pressure on short-term rates.
The G-20 summit highlighted the change in policy focus from coordinated globalgrowth support to a more diverse agenda. In Europe, focus is on public finances and
in Asia attention has turned to inflation fighting.
Focus
The combination of general pressure on the euro and the SNB ceasing to intervene inthe FX market has opened the door to the downside in EUR/CHF.
We see a high probability of further support for the Swiss franc in the coming months.However, if the markets faith in the euro improves, profit-taking could lead to asharp upward correction in EUR/CHF a key risk to our forecast.
02 July 2010
Editors
Allan von Mehren
+45 4512 8055
Steen Bocian
+45 45 12 85 31
Weekly FocusFear of a major slowdown is mounting
Contents
Market movers ahead ........................................... 2
Global update................................................................... 4
Scandi Update ................................................................ 6
Focus: FX Strategy - CHF: Risks remain
for an even stronger franc ................................. 7Fixed Income: Slowdown fears pushyields lower .................................................................... 11
FX: Dollar suffers on weak data ................ 12
Commodities: Costs catching up withprices ................................................................................... 13
Credit ................................................................................... 14
Financial views........................................................... 15
Macroeconomic forecast .............................. 17
Financial forecast ................................................... 18
Calendar ........................................................................... 19
Leading indicators are rolling over Swedish Riksbank hikes repo rate
Source: OECD, Ecowin and Danske Markets Source: Riksbanken and Danske Markets
98 00 02 04 06 08 10
25
35
45
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65
75
-20
-15
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-5
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20 % m/m, AR Index
>
05 06 07 08 09 10 11 12 13
0.0
1.0
2.0
3.0
4.0
5.0
0.0
1.0
2.0
3.0
4.0
5.0% %
Repo rate
Riksbank repo rateforecast, July
Riksbank repo rateforecast, April
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Weekly Focus
Market movers ahead
Global
The only major event coming up next week is the ECB meeting on Thursday. Untilthen, markets will digest the US employment report and be driven by overall riskappetite. Developments in Euroland bond markets and news out of Southern Europe
will be important to watch.
In the US the coming week should be relatively quiet at least in terms of data andspeeches. US markets are closed on Monday to observe Independence Day (4 July).
The ISM non-manufacturing index will be the primary release and we look for a
decline to 54.4 given the recent weakness in housing and equity markets. The weekly
release of jobless claims could also attract attention given the recent increased
uncertainty about the state of the US labour market. After a stream of Fed speeches
this week, which have in general left an impression of the FOMC moving in a slightly
more dovish direction, there is only one speech scheduled for next week. Minneapolis
Fed President Kocherlakota (non-voter) will deliver a speech on policy and regulation
on Wednesday.
In the euro area next weeks key event will be the ECB meeting on Thursday. It willbe yet another interesting meeting, and there are many relevant topics to discuss at the
Q&A session. On 30 June the one-year covered bond purchase programme was
completed. The ECB has bought EUR60bn as planned, which it now aims to hold to
maturity. Mr Trichet is likely to be questioned about whether the programme could be
reopened. Questions will also address the effect from the expiry of the one-year Long-
term refinancing operation (LTRO) on 1 July. Two new ECB operations have been
introduced to finance the EUR442bn that matures with the 1Y LTRO. Fifty four per
cent of the expiring liquidity was rolled, which was in line with expectations, and
excess liquidity has thus declined. The ECB could be asked whether it plans to
introduce new liquidity facilities. There has been speculation about a new six-monthtender, which could explain the large roll in the six-day fine-tuning auction. Further,
Mr Trichet could be asked about the Securities Market Programme (SMP), which
covers the ECBs government bond purchases, and why the ECB is not doing more to
keep sovereign spreads in PIIGS against Germany lower. Mr Trichet is however not
likely to get specific on the SMP, which we saw at the meeting last month. Besides
the ECB meeting, we look out for German factory orders.
In the UK focus will be on Thursdays publication of May industrial productionnumbers and the BoE monetary policy meeting. While the June PMI and recent orders
data indicate a loss of momentum, the underlying trend remains for higher
manufacturing output. The BoE is not expected to bring any changes to the monetary
policy setting, despite the recent tight budget, as Sentance is expected to remain the
sole advocate for a tighter policy.
In Switzerland attention will focus on the June inflation numbers due out onTuesday. We expect the inflation rate to decline from 1.1% in May to 0.8% in June,
once again underlining that inflationary pressures do not necessitate early rate hikes.
It is also worth keeping an eye on Mondays retail sales data for May and the June
unemployment numbers due out on Thursday.
Next weeks calendar is extremely light in Asia. In China there will be no majorreleases this week and in Japan the only major release will be machinery orders for
May, which should confirm that business investments in Japan have bottomed out.
Modest inflation in Switzerland
Source: Reuters Ecowin
The euro debt crisis will continue to be
key for markets
Source: Reuters Ecowin and Danske Markets
US non-manu ISM: new orders tanked
in May but employment improved
Source: Reuters Ecowin and Danske Markets
Can German factory orders continue
up?
Source: Reuters Ecowin
05 06 07 08 09 10
-1,5
-0,5
0,5
1,5
2,5
3,5
-1,5
-0,5
0,5
1,5
2,5
3,5% y/y % y/y
CPI% y/y % y/y
dec
09
jan
10
feb mar apr maj jun
0
200
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1000bp bp
Portugal
5Y CDS spreads
Spain
Greece
98 00 02 04 06 08 10
31
36
41
46
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56
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65Index Index
>
98 00 02 04 06 08 10
73
83
93
103
113
123
133
85
90
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100
105
110
115
1202005=100
>
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Weekly Focus
Scandies
Denmark is heading for a rather heavy data calendar in the week ahead. Attentionwill focus particularly on business sales and purchases of goods and services and the
trade balance data for May, which should give us a snapshot of the condition of
exports and hence tell us whether the recovery in the Danish economy is taking hold.
The coming week will also see the release of industrial production data for May,
insolvencies and enforced sales of properties for June and current account numbers
for May (Friday).
In Sweden, we see industrial data (orders, production) and the governments netborrowing needs. Usually none of the above data has the power to make a lasting
impact on financial markets.
Due to the discrepancies in real hard data and sentiment indicators, we tend to rely
more on hard industrial data than the various survey data presented. This has proven a
successful strategy throughout the crisis and we believe this will continue to be the
case. To be consistent with our latest growth forecasts, industrial production should
average some 2% q/q in Q2, which means that the outcome for May should comedown somewhat compared with April not to render our industrial production forecast
obsolete.
The governments borrowing need is expected by the Swedish National Debt Office
(SNDO) to reach SEK18.9bn and we see no reason to deviate from that number in
either direction.
In Norway focus will be on the CPI numbers on Friday. We expect that the coremeasure will drop to 1.0% y/y in June from 1.5% in May. It is primarily due to a so-
called base effect, but it still underlines that inflation is currently not an issue in
Norway, and that Norges Bank is in no hurry to hike rates. Our forecast is below that
of Norges Bank which expects 1.17% according to the latest monetary policy report.
Headline inflation is expected to fall to 1.7% from 2.5%.
Market movers ahead
Source: Bloomberg and Danske Markets
Global movers Event Period Danske Consensus Previous
Mon 05-Jul 9:15 CHF Retail sales (real) y/y May 1.3%
Tue 06-Jul 9:15 CHF CPI m/m|y/y Jun -0.2%|0.8% -0.1%|1.1%
16:00 USD ISM (NAPM) non-manufacturing Index Jun 54.4 55.0 55.4
Wed 07-Jul 12:00 DEM Factory Orders m/m|y/y May 0.2%|.. 0.4%|24.9% 2.8%|29.6%
21:35 USD Fed's Kocherlakota (non-voter, neutral) speaks
Thu 08-Jul 1:50 JPY Machine orders m/m|y/y May 4.0%|9.4%
7:45 CHF Unemployment (sa) % Jun 4.0
10:30 G BP Industrial Production m/m|y/y May 0.4%3.2% -0.4%|2.1%
12:00 DEM Industrial production mm/|y/y May 0.8%|9.2% 0.9%|13.3%
13:00 GBP BoE rate announcement Jul 0.5% 0.5%
13:45 EUR ECB Announces Interest Rates 1.0% 1.0% 1.0%
14:30 USD Initial jobless claims 1000 460 472
14:30 EUR ECB's Trichet Speaks at ECB Monthly News Conference
Scandi movers Event Period Danske Consensus Previous
Thu 08-Jul 9:30 SEK CPI m/m|y/y Jun 0.1%|1.0% 0.1%|1.0% 0.2%|1.2%
Fri 09-Jul 9:30 SEK Industrial production m/m|y/y May 0.9%|7.3%
10:00 NOK Consumer prices m/m|y/y Jun -0.3%|1.7% -0.5%|2.5%
Machinery orders improving in Japan
Source: Reuters Ecowin
Danish exports are improving
Source: Reuters Ecowin
Important input to Q2 GDP
Source: Statistics Sweden
06 07 08 09 10
-20
-15
-10
-5
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5
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-15
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-5
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Domestic machinery orders
% 3m/3 % 3m/3m
01 02 03 04 05 06 07 08 09
150
170
190
210
230
250
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170
190
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250bn DKK bn DKK
Exports - Purchacesand sales by industri
Exports - official
08 09 10
-40
-30
-20
-10
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30 % y/y % y/yIndustrial Production ex Energy (vol)Industrial Production, total (vol)Orders, total (vol)
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Weekly Focus
Global update
Everyone for themselves
The G-20 summit in Canada last week showed that the G-20 countries ambitions from
last year for coordinated macroeconomic support for the global economy and changes in
financial sector regulation are falling apart. Particularly, it has proved difficult to maintain
focus only on supporting growth. In Europe consolidation of public finances has now
become major priority. In Asia particularly in China focus has gradually shifted to
containing inflation and China cannot be expected to be as strong a growth engine for the
global economy as it has been since early-2008. And now there are signs that the global
recovery in manufacturing is starting to lose some steam. The big question is to what
degree this is just a temporary mid-term crisis or the prelude to a more severe slowdown?
Euroland survives the expiry of one-year refinancing operation
The key event in the euro area this week has certainly been the expiry of the ECB one-
year long-term refinancing operation (LTRO) worth EUR442bn. European money
markets were nervous ahead of expiry. The accumulated roll of the LTRO was 54%
(EUR243bn) in line with expectations. Read more here: Strategy: ECB - Duration on
liquidity falls significantly
On the data front, the week kicked off with the ECB report on monetary developments.
The report showed a decline in M3 growth to minus 0.2% y/y, which partly could be
explained by technical factors. On a positive note, the monetary data indicates that the
shrinking of bank credit may indeed have come to an end. For instance, loans to
households continue to improve. The June unemployment report from the German
Bundesbank showed that the German unemployment rate remained at 7.7% in June. In
month-on-month terms, however, unemployment fell by 21,000, bringing the
accumulated drop in unemployment since the beginning of the year to 182,000. German
employment growth was positive during May. Final manufacturing PMI in German was
revised 0.3 points higher, and is thus unchanged at 58.4 in June compared to May.
Overall PMIs seems to have peaked a few months ago. The latest volatility in commodity
prices lowered inflation in the euro area to 1.4% in June from 1.6% in May. There are
currently very limited inflationary pressures in the euro area, and unless commodity
prices spike we should expect inflation to remain relatively subdued.
Another round of weak US data
This weeks round of data (excluding the employment report which was not yet released
at the time of writing) did nothing to ease market fears of a significant slowdown ineconomic activity in the second half of the year.
"[Heading 2]"
Recovery in global manufacturing
losing steam
Source: Reuters Ecowin and Markit
Euro area inflation to remain subdued
Source: Reuters Ecowin
Manufacturing PMI appears to have
peaked
Source: Reuters Ecowin and Markit
05 06 07 08 09 10
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
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4.0
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-1.0
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4.5% y/y % y/y
Euro area, CPI
05 06 07 08 09 10
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65PMI manufacturing Germany
France
Index
Spain
Italy
http://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdfhttp://danskeanalyse.danskebank.dk/link/ECBLTRO010710/$file/ECB_LTRO_010710.pdf -
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Weekly Focus
The manufacturing ISM took an unusually large decline of 3.5 points with the new orders
indices hit hard, see Flash Comment - US: manufacturing slowdown fast-forwarded by
debt crisis. Fundamentals had been pointing to a slowdown in the manufacturing
production over H2, but the deterioration in financial markets has likely accelerated that
decline. While there is a direct negative impact from the decline in equity markets and
deterioration in credit markets there has likely also been a sentiment effect where
increased uncertainty has depressed demand. Consumers are also starting to react to the
deterioration and general rise in uncertainty. The conference boards measure of
consumer confidence fell back to its March level after two months of strong increases.
Furthermore, housing data is currently looking very weak. Pending home sales suffered a
significant decline of 30% in May which brings the index below the lows in 2008 and
2009. The level reflects the dynamics from the expiration of the first time home buyer
credit. The tax credit boosted sales during the spring, but this effect is now reversing as
home buyers have been moving forward the purchases of homes. While the tax credit has
made it very difficult to assess the underlying trend in the housing market, fundamentals
for home sales are relatively positive, as mortgage rates are close to an all time low andhousehold incomes are improving.
The recent weakness has also had an impact on the thinking of at least some FOMC
members. The tone in the Fed speeches over the recent week has in general been tilted in
a more dovish direction. Several speakers have mentioned the risks to the US economy
from the deterioration in financial market conditions induced by the European debt crisis.
This implies that the monetary policy normalisation process is effectively on standby but
so far, there is nothing that points to the Fed considering more QE.
Growth appears to be slowing in Asia
Data released in Asia during the past week suggests that growth is slowing. On balance it
still looks it should be regarded as growth moderation from exceptionally strong growth
in the previous quarters rather than a more severe slowdown. That said down side risk on
our growth forecast is increasing. Both Chinas two manufacturing PMIs declined in
June, see Flash Comment China: Growth appears to be slowing. The manufacturing
PMIs suggests GDP growth is poised to slow to around 9% AR in H2 2010 from
currently about 12% q/q AR. On the positive the risk of overheating in China is now
declining fast. In that sense, China is now building the foundation for a soft landing of
the economy. On the policy front, the risk of aggressive monetary tightening from the
Peoples Bank of China (PBoC) is declining, although we still expect the PBoC to hike its
leading interest rate in Q3.
In Japan the Tankan business survey for Q2 came in stronger than expected and suggeststhat growth has remained very strong in Q2, but is poised to slow in the coming quarters,
Flash Comment - Japan: Recovery on track according to Tankan. On the other hand, May
data in general has been disappointing with industrial production declining marginally
0.1% m/m and the unemployment rate unexpectedly increasing to 5.1% from 5.0% in the
previous month. Overall these data are still consistent with GDP growth of close to 4%
q/q AR in Q2 and slowing to around 2% q/q AR in H2 10.
A slowdown in US manufacturing
production is in the cards
Source Reuters Ecowin and Danske Markets
Home sales distorted by tax credit
Source Reuters Ecowin and Danske Markets
Tankan suggest solid growth in Japan,but poised to slow
Source: Reuters Ecowin and Danske Markets
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65 Index 6 mth growth, AR %
Manufacturing production >>
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http://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentChina010710/$file/FlashComment_China_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentJapan010710/$file/FlashComment_Japan_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentJapan010710/$file/FlashComment_Japan_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentChina010710/$file/FlashComment_China_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdfhttp://danskeanalyse.danskebank.dk/link/FlashCommentISM010710/$file/FlashComment_ISM_010710.pdf -
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Weekly Focus
Scandi Update
Denmark revisions point to a more wobbly recovery
The most important indicators released during the past week were the revised Q1 GDP
numbers. At first glance, there appeared to be no major changes in the data and with Q1GDP growth of 0.5%, the Danish economic recovery remained on track.
However, significant revisions to some of the GDP components left the impression of a
slightly weaker recovery. Both exports and investment were revised sharply down,
although this was offset by stronger consumer and public spending. Consumer spending
growth was revised up from 1.1% q/q to 1.7% q/q, while public spending growth was
adjusted upward from 2.5% to 3.4% for 2009 and also proved to be DKK1bn higher in
Q1 10 than believed so far. This once again underlines the need for better control of
public spending. As such, we welcome the fiscal package presented by the Danish
government, which aims for zero growth in public spending during 2011-13.
The May jobless numbers supported our belief that Danish unemployment has peaked.
The official number of unemployed people declined once again, down by 2,000 from
April to May and unemployment has remained stable or slightly down since November
2009. Also, business indicators released during the week confirmed a more positive view
on the unemployment outlook and both the manufacturing and service industries expect to
expand their workforce during the coming months.
In spite of the improved labour market outlook, we do not expect a job recovery to be
waiting just around the corner. Danish businesses probably have further potential to
improve competitiveness and the economic recovery will only just be strong enough to
create new jobs in Denmark.
Sweden Riksbank initiates hiking phase
The Riksbank decided to raise interest rates by 25bp to 0.5% and also to make its hiking
phase more front-loaded. Taken in isolation, such actions should make financial marketsmore inclined to trade rates up. However, two of the executive board members (Karolina
Ekholm and Lars E O Svensson) decided to enter reservations to the decision and the
Riksbank made a slight downward revision to the repo rate path from 2012 onwards.
Furthermore, even the Riksbank itself seems to think that its view on the effects of fiscal
consolidation in Europe are too small, which is why its risk scenarios show a massive
downward bias in terms of repo rate outcomes. This leads the markets and to some
extent ourselves to think that the Riksbank might not even find the time to hike much
into 2011, with flat or even negative interest rate expectations a consequence.
Norway no consumer spending spree
In spite of lower inflation, solid real wage growth continued low interest rates, record-
high house prices and stable unemployment, consumer spending in Norway remains in
the doldrums. As consumer spending was again subdued in May, we have revised our
estimate of consumer spending growth down to 0.4% for Q2 10 and hence to 3.9% for
2010. Nonetheless, we expect overall growth in the Norwegian mainland economy to
remain just under 2% this year. Meanwhile, the June PMI numbers indicate that overall
industrial activity could now be accelerating in spite of signs of weakening growth in the
global economy. This could be because the long-awaited recovery in oil-related industries
has now taken off a view that is supported by a significant contribution from domestic
new orders. Furthermore, Norges Banks regional network recently showed a large
improvement in market outlook for oil-related industries.
Danish unemployment continues to
stabilise
Source: Statistics Denmark
Swedish Riksbank forecasting
flattener
Source: Riksbank
00 01 02 03 04 05 06 07 08 09
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Unemployment
05 06 07 08 09 10 11 12 13
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5.0% %
Repo rate
Riksbank repo rateforecast, July
Riksbank repo rateforecast, April
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Weekly Focus
Focus: FX Strategy - CHF: Risks remain for an evenstronger franc
EUR/CHF breaks below 1.31 for first time
The Swiss franc (CHF) has firmed more than 20% against the euro since the financial
crisis escalated in 2008, taking EUR/CHF below 1.31 for the first time. Since December
last year alone, when the Swiss National Bank (SNB) first allowed the franc to strengthen
significantly after maintaining a floor below EUR/CHF via intervention since March
2009 EUR/CHF has dropped by more than 12% (see chart 1).
Chart 1: Swiss franc hits new peak against the euro
Source: Reuters EcoWin
When a cork is kept below water
The explanation for the pronounced strengthening of the franc during the first six months
of the year can be found in two main factors:
General selling pressure on the EUR due to the European debt crisis: while thefranc has firmed 10% against the euro since New Year, the effective franc index has
only firmed 6%. This suggests that while the drop in EUR/CHF does represents
increased demand for the franc, it also very much represents an elevated risk premium
placed on the euro.
Shift in Swiss monetary policy: the franc has strengthened significantly despiteaccelerating intervention from the SNB in the first five months of the year (FX
reserves have grown by CHF144bn in 2010 more than triple the increase for all of
2009). At the same time, the economic outlook has improved further and core
inflation has inched higher, meaning the risk of deflation has eased. The combination
of a disproportionately large intervention requirement to prevent the franc
strengthening and the reduced risk of deflation (deflation risk was the reason the SNB
began to intervene in the FX market in 2009) have resulted in the SNB to a much
greater extent allowing the market to determine the price of the franc.
Key points
EUR/CHF has broken below 1.31for the first time and might test
even lower levels
The combination of generalpressure on the euro and the
SNB ceasing to intervene in the
FX market has opened the door to
the downside in EUR/CHF
We see a high probability that theunwinding of CHF loans combined
with a favourable relative growth
and interest rate outlook will
further support the franc in the
coming months. We have
therefore decided to revise lower
our EUR/CHF forecast to 1.30
(1.37) for 3M, 1.28 (1.37) for 6M,
and 1.35 (1.41) for 12M old
forecast in brackets
Increased speculative interest inthe franc and the use of short
EUR/CHF positions as a hedge
against a euro collapse mean that
the latest drop in EUR/CHF may
prove overdone. If the markets
faith in the euro improves, profit-
taking could lead to a sharp
upwards correction in EUR/CHF
a key risk to our forecast
Senior Analyst
Kasper Kirkegaard
+45 45 13 70 18
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Weekly Focus
Significant probability that EUR/CHF will trade even lower
Fundamental support for the franc remains strong and is helping to drive a substantial
speculative demand. The Swiss economy by European standards looks strong: growth
is outpacing Euroland, the budget deficit is modest, government debt levels are low and
the current account surplus is high. Moreover, all the evidence suggests the SNB willtighten monetary policy before the ECB likely at the December meeting, but possibly
already in September meaning relative rates will, in contrast to previous economic
recovery periods, support the franc.
Chart 2: Relative rates have supported a lower EUR/CHF
07 08 09 10
50
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125
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175
200
225
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75EUR/CHF Bp
>
Source: Reuters EcoWin
As long as the euro remains under pressure (i.e. investors continue to demand a high risk
premium to hold euro) and the Swiss activity indicators remain strong, we see no reason
why EUR/CHF cannot drop further. Hence, in the short-to-medium-term, EUR/CHF
trading at levels between 1.25 and 1.30 should not be ruled out, as the unwinding of CHF
loans is currently reinforcing demand for the franc. Given the signal shift from the SNB
at its latest monetary policy meeting and that we see a significant risk of further
CHF loan closures, we have decided to revise lower our EUR/CHF forecast. We now
expect EUR/CHF at 1.30 in 3M (1.37), 1.28 in 6M (1.37) and 1.35 in 12M (1.41) old
forecast in brackets.
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Weekly Focus
Chart 3: Risk picture still skewed towards a stronger franc
Source: Danske Markets
Significant risk to forecast in both directions
Increased speculative interest in the franc and the use of short EUR/CHF positions as a
hedge against a euro collapse mean that the latest move lower in EUR/CHF may prove
overdone. If the markets faith in the euro and risky assets in general improves, profit-
taking on long CHF positions could lead to a sharp upwards correction in EUR/CHF,
though probably not all the way back to levels above 1.45. Hence there are indications
that the latest drop in EUR/CHF represents an overshoot of what could be considered as
the fundamental level in the longer term (PPP estimate is 1.48). However, as long as the
Swiss economy continues to outperform and uncertainty on the euro remains high, we
expect that CHF will be able to maintain an expensive level against EUR for the rest of
the year.
There is also significant downside risks to EUR/CHF. In particular, further unwinding of
CHF loans could contribute to maintaining a high demand for the franc and even lower
levels for EUR/CHF. However, while we can conclude that borrowing in the Swiss franc
was significant ahead of the crisis (see table 1), there is great uncertainty about how much
of this borrowing remains - though recent trade suggests that there is still a significant
unwinding potential. CHF borrowing is under particular pressure in the economies
outside the eurozone (not least Hungary and Poland), as the currencies of these countries
have weakened significantly against the franc. And while declining interest rates over the
past year have meant that regular interest rate payments have not risen too steeply for the
average borrower (despite the strengthening of the CHF), the latest CHF strengtheningcould result in forced closures, as the principal has increased.
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Borrowing in CHF a market snapshot from before the crisis struck
Low interest rates and relatively modest exchange rate fluctuations compared to other low-
yielding currencies made the franc a popular loan currency in the years up to the global recession
in 2008. Especially in countries such as Hungary, Poland and Iceland, CHF loans rose
dramatically during the upswing and in 2007 accounted for 31%, 17% and 23%, respectively, ototal borrowing according to SNB estimates. Surveys in Hungary suggest that the bulk of these
loans were taken out at up to 40% below current exchange rates hence the cost of borrowing
must have increased significantly for the average borrower.
Borrowing in CHF has also been significant in economies inside the eurozone and in economies
with a fixed exchange rate policy towards the euro. As can be seen from table 1, Austria,
Luxembourg and Denmark have been particularly keen on CHF loans.
Table 1: Loans to non-bank clients ( in CHF billion)
Source: Brown et al.,Swiss Franc Lending in Europe
, Swiss National Bank (SNB), February 2009.
Share of foreign currency loans Share of total loans
2002/04 2007 2007 2007
Euroland
Austria 45 84 69% 13.4%
Germany 64 60 13% 1.2%
France 13 30 11% 0.8%
Luxembourg 24 25 24% 7.9%
Greece 2 10 31% 0.2%
Italy 8 8 20% 0.3%
Others 7 21 4% 0.3%
Total 163 238 15% 1.2%
Non Euroland
Hungary 1.2 32.6 56% 31.3%
Poland 6.1 30.9 69% 16.9%
UK 12 23.8 4% 0.5%
Iceland n/a 12.4 48% 23.0%
Denmark 1.4 9.4 28% 4.0%
Croatia 0.2 7.7 25% 16.4%
Others n/a 5.4 13% 0.3%
Total n/a 122.2 11% 1.8%
Swiss f ranc loans
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Fixed Income: Slowdown fears push yields lower
Soft US data scares the market
Global bond yields have continued to fall over the past week. German Bunds are once
again yielding close to record lows in the 2.5-2.6% range and the yield on the US 10-year
treasury has dropped below 3% for the first time since spring 2009.
The rapid move lower has mainly been driven by a round of negative surprises from the
US, where economic data has been weakening across the board and increased the concern
of a hard landing in the second half of the year. Consequently, the spread between US and
German 10-year bonds have been tightening significantly.
Concerns for a hard landing in H2 and the European debt crisis are likely to remain key
themes in the fixed income market in the coming months. This implies that the high
correlation to equity and credit markets is here for a while yet. Given our view that
leading indicators and underlying inflation will continue gradually lower over the course
of H2, the downward pressure on bond yields is likely to remain in place. That said webelieve that the bond markets have got a bit ahead of themselves with the current
valuation looking a little stretched.
We continue to believe that a global double-dip recession is quite unlikely and that
upcoming US labour market data will indicate that the recovery has become more
resilient. Furthermore, the earnings season is approaching and our equity research team
expects some encouraging news. In combination with evidence from incoming data we
believe that market fears of a hard landing will moderate, which could support risk taking
and give a small lift to bond yields in the coming month. However, market volatility is
likely to remain high and caution is warranted.
EONIA rates move higher on less demand for liquidity
The two-year Schatz yield stands out as an exception this week. While the general trend
has been for lower bond yields, the two-year Schatz yield has been moving higher. This
has been driven by a steepening in the EONIA curve, following the roll of the EUR442bn
12-month LTRO from June 2009. While the total allotment of EUR132bn into the three-
month tender and the six-day fine-tuning operations was quite as expected, it was
surprising that so much was allocated into the six-day allotment. Generally, this leaves
the EONIA market with a much lower duration on money market liquidity. Indeed this
makes any future exit from the ECB more flexible, which in turn explains the steeper
EONIA curve and the increase in two-year Schatz yield.
ECB meeting key event next week
The ECB meeting on Thursday is the key event for European fixed income markets next
week. The focus will be on the press conference and questions about the government
bond purchase programme and the liquidity operations. While there are plenty of options
for the ECB, it is not our main scenario that the ECB will announce new liquidity
measures or commit more explicitly to purchasing specific amounts of government debt.
That said the uncertainty surrounding the meeting is expected to be high.
Key events of the week ahead
ECB meeting. US Non-manufacturing ISM. Bond auction in Germany
(EUR5bln 10yr) and Austria (5yr
and 10yr).
Bond auction in US (USD12bn10yr TIPS).
US German 10yr spread is tightening
Source: Ecowin and Danske Bank
German 2Y yield
Source: Bloomberg and Danske Bank
Senior Analyst
Jesper Fischer-Nielsen
+45 45 12 85 18
Jan
09
Apr Jul Oct Jan
10
Apr
-100
-50
0
50
100
150
2.00
2.25
2.50
2.75
3.00
3.25
3.50
3.75
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>
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FX: Dollar suffers on weak data
US data has disappointed over the past couple of weeks and double-dip fears have
resurfaced. Consumer confidence has sky-dived, unemployment claims are up,
manufacturing is slowing and the housing market is once again plummeting without thegovernment incentives that boosted the market earlier this year.
For a long time, the market reaction to weak US numbers has been weaker risk appetite,
which has had a tendency to push EUR/USD lower. However, this week, EUR/USD
actually had a textbook reaction to the negative US data surprises and EUR/USD has
once again been pushed above 1.25 a move that probably was reinforced by the many
short euro positions that are currently in place in light of the European debt crisis.
It is also noteworthy that relative rates currently are working against the dollar. The two-
year swap spread between Euroland and the US has widened by 45bp in just a month to
currently +44bp. However, we doubt that EUR/USD will continue to trade higher in the
coming months. We believe the market will soon start to focus on the European debt
problems once again. It is also likely that that the European numbers will also start to
disappoint if the current weakness in the US economy continues.
Sterling has peaked for now
Since late May, EUR/GBP has traded around 6% lower as PIIGS debt concerns have put
the psychologically important 0.80 level back within reach. However, UK-related factors
have also exerted downward pressure on the cross: (i) the crisis budget to improve the
governments balance has been well-received, seemingly convincing investors that harsh
austerity measures can sustain the UKs top credit rating, without economic growth
coming to a standstill; and (ii) hawkish comments from BoEs Sentance and his vote for a
25bp hike at the last MPC meeting have fuelled speculation that the BoE may be moving
closer to reducing monetary stimulus. In our view, recent sterling strength seems
overdone; we still doubt that the UK will manage to avoid being downgraded, and despite
Sentances dissent, the MPC appears a long way from tightening policy. Also, our short-
term financial model indicates that an upward correction in EUR/GBP could be imminent.
Riksbank concerned about European debt crisis
As widely expected, the Riksbank this week hiked rates by 25bp to 0.5%. However, the
bank was less hawkish than expected, saying that the fiscal tightening that some countries
need to undertake is expected to dampen GDP growth in the euro area and in Sweden in
the longer run. The Riksbank revised its rate path in 2012 down by 50bp.
The market initially dumped the SEK as the downward revision was a surprise the
market. However, we still see value in Swedish kroner. Sweden is still well ahead of the
ECB and the Fed, and is the first major non-commodity central bank to hike rates.
In fact, the Riksbank perfectly expresses our view on the SEK in its Monetary Policy
report saying, Fundamental factors indicate that the krona will strengthen over thecoming years to the levels prevailing before the crisis. Swedish public finances are sound,
and GDP growth in Sweden is expected to be higher than abroad. A higher Swedish
policy rate relative to other countries is also expected to contribute to a stronger krona
rate.
Weekly changes against EUR
Source: Bloomberg
EUR-USD 2y swap spread has
widened
Source: Ecowin
EUR/GBP short-term financial model
Source: Ecowin
EUR/SEK trading on relative rates
Source: Ecowin
Chief Analyst
Arne Lohmann Rasmussen
+45 45 12 85 32
Senior Analyst
Sverre Holbek+45 45 14 88 82
-6.0%-4.5%-3.0%-1.5%0.0% 1.5%
AUD
NZD
CAD
USD
NOK
SEK
GBP
JPYCHF
Jan
10
Feb Mar Apr May Jun
0
10
20
30
40
50
60
70
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50EUR/USD Bp
>
EUR/GBP Spot EUR/GBP
Feb
08
Apr Jun Aug Oct Dec
09
Feb Apr Jun Aug Oct Dec
10
Feb Apr Jun
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00EUR/GBP
Jan
09
Mar May Jul Sep Nov Jan
10
Mar May Jul
9.00
9.25
9.50
9.75
10.00
10.25
10.50
10.75
11.00
11.25
11.5011.75
12.00
12.25
12.50-90
-80
-70
-60-50
-40
-30
-20
-10
0
10
20
30
40
50
bp
>
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Commodities: Costs catching up with prices
Weekly update: headwinds from sentiment and tailwinds fromstorms
The past week has seen a further sell-off for both energy and base metals. In particular,copper has been hit hard by the softness in economic data with notably the Chinese and
Euroland PMIs suggesting that the manufacturing cycle may now have peaked. Our
economists point out that while the figures indicate above-trend growth for Q2, the
numbers also suggest that the industrial recovery is losing more steam, except in Italy and
Germany.
Although some headwinds from manufacturing sentiment are materialising now, oil
prices have received some support from the prospects of a distorting hurricane season this
year. However, the first major tropical storm this year, Hurricane Alex, has so far evolved
relatively favourably and stayed clear of oil fields. In addition, while grains have long
been lagging the rest of the commodity complex, the quarterly USDA report on US stocks
and acreage released this week showed that stocks of wheat, corn and soybeans fell in Q2.In particular, corn saw a significant increase as the report also showed that farmers have
planted fewer acres than previously estimated.
Forecast update: new price floors materialising
Crucially, the price slides seen not least in the base-metals complex imply that cost curves
may now be catching up with prices. For aluminium this is increasingly becoming an
issue, as both alumina and energy costs are on the rise, meaning that marginal Chinese
producers could thus soon be squeezed out. Some producers of zinc and nickel are also on
the brink of loss-making production at current prices levels. This could lead to cutbacks
in metals output in the near term. At the same time, the oil industry is also facing rising
costs going forward: due to offshore drilling restrictions, stricter safety standards and anincrease in insurance premiums, oil majors also look set to face higher pressure on
margins going forward. Overall, this suggests that both the oil and base metals markets
are seeing price floors materialising now.
Overall, the message from our last Commodities Monthly remains intact, new price levels
have been reached but the course of direction is in our view higher than now. As a result,
we have made few changes to our price forecasts this time. Thus, we still look for Brent
to average USD81 in 2010 (previously USD80) and USD90 in 2011 as the rebound in
energy demand continues and supply restraint leads to stock draws. We expect aluminium
to eventually see weakness from elevated stocks and unwinding of term deals, but will
also receive potential support from the launch of a new ETF and rising costs. Copper
should benefit from an improving housing/construction sector whereas steel could seesome seasonal weakness over the summer but perform again later in the year as OECD
activity gains pace.
To put our outlook for the rest of 2010 into perspective: over the winter of 2009-10 we
saw a decoupling of commodities from the US dollar during spring this year,
decoupling from fundamentals was a defining feature later in the year, we expect to see
commodities re-couple with both the dollar and fundamentals, both of which should
eventually prove broadly supportive for prices. Read more in our recent Commodities
Monthly.
Weekly changes
Source: Bloomberg, Danske Markets.
Week ahead
Chinese trade data (Mon) EIA Short-Term Energy Outlook
(Wed)
Euro-zone industrial production(Thu)
USDA WASDE (Fri)
Senior AnalystChristin Tuxen
+45 4513 7867
Danske Markets forecasts
Source: EcoWin, Danske Markets.
Note: index with 10Q2=100.
-10 -5 0 5 10
NY WTI
NY Gasoline
ICE Brent
Aluminium
Copper
Gold
LIFFE Wheat
Five-day change,%
90
100
110
120
130Al CuMatif Wheat Brent crudeSteel
http://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdfhttp://danskeresearch.danskebank.com/Link/CommoditiesMonthly/$file/CommoditiesMonthly.pdf -
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Weekly Focus
Credit
Market commentary
It was a depressive start to the week for credit indices. European money markets started in
fragile mode ahead of the expiry of the 1Y liquidity facility on Thursday, as markets
feared a restricted access to liquidity for a number of banks. To bridge the resulting
liquidity gap, the ECB conducted an unlimited 3M auction on Wednesday. The result of
that auction was better than feared as banks put in bids for less liquidity than anticipated,
indicating that access to liquidity is satisfactory for most. In the short term, fears of
systemic stress therefore seem to have abated although it must be stressed that market
confidence remains fragile, as illustrated by the negative reaction to the negative rating
news on Spain which should not come as a surprise and be priced in already. The
iTraxx investment grade index currently trades at 134bp whereas the crossover index
trades at 595bp. Cash market activity is relatively subdued with investors seeming to
prefer World Cup football to outright bets in the credit market.
Like the Jabulani football, the direction in the credit market is hard to predict. We believe
that much of the 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 slow in H2 2010. Substantial spread tightening therefore
seems unlikely in the short term. Still, we remain positive on non-financial credit on the
back of sound company fundamentals and improving credit metrics.
The primary market
After some busy weeks, activity in the primary market is levelling off slightly. Tensions
in the money market and a fast approaching summer holiday are likely culprits in our
view. Going forward, the next few weeks will probably decide whether we will see much
primary market activity during the summer. If markets remain downbeat in the short term
we believe the primary market will remain more or less inactive until the end of the
summer period. On the other hand, if markets regain confidence we believe that activity is
likely over the summer as was the case last year.
Table 1. Selected new issues during the week
Name Rating Coupon Maturity Currency Size
Bond spread on
issue date,
(bp)*
Credit Suisse Aa1/A+ FRN 3Y EUR 0.3bn 92
Deutsche Bahn Aa1/AA Fixed 15Y EUR 0.5bn 58bp
FIH (Gov. Guar.) Aaa/AAA FRN 3Y DKK 6.0bn 15Corio Baa1/BBB+ Fixed 7.5Y EUR TBD 200-220
Veolia A3/BBB+ Fixed 11Y EUR TBD 130bp
Hertz B1/B Fixed 5Y EUR 0.4bn Yield 8.5%
Note: Ratings are Moody's and S&P. * Mid-Swaps for Fixed, Discount Margin for floating
Source: Danske Markets & Bloomberg
iTraxx Europe (5Y CDS)
Source: Markit
iTraxx Crossover (5Y CDS)
Source: Markit
Senior Analyst
Henrik Arnt
+45 4512 8504
0
50
100
150
200
250
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-1
bp
0
200
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600
800
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1,200
1,400
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10
bp
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Financial views
Equities Equity markets are discounting a recession due to the European crisis. This is a much
harder expectation than suggested by current leading indicators. Hence our worry is
for a hard landing. However, for now we place more probability on a slowdown with
positive growth rates and we believe that Q2 is likely to be a positive trigger for a
very nervous global stock market. We expect the financial sector to be surrounded by
uncertainty for a longer period. In the short term, we expect the sector to perform in
contrast to the significant underperformance seen in recent months and therefore
recommend a neutral stance (previously underweight). We reiterate our overweight
recommendations on Industrials, Consumer Staples and Energy.
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 a substantial slowdown in H2. Until clear evidence of resilience in global
growth (i.e. solid job growth) and/or improvement in southern European debt markets
materialises, bond yields will remain depressed. Over the coming months we look for
moderately higher yields as incoming data will dampen fears of a hard landing.
However, markets are likely to remain very volatile.
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 weremain overweight 10Y DGBs and 10Y SGBs vs France.
Credit The primary market has reopened and secondary market activity has also picked up
slightly going forward we expect liquidity to continue to improve. However, the
segregation of market access for northern and southern European issuers is becoming
clearer. Furthermore, banks are likely to remain under pressure for some time on the
back of sovereign distress and the austerity measures currently being undertaken.
We are positive on investment grade credit from non-financial companies. Companycredit 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.
FX outlook The euro has received support as the ECB managed a reduction of its liquidity
provision without adding to already high market tension. Still, with Spain moving
closer to a downgrade, the focus of attention remains on the euro debt crisis and the
uptick in EUR/USD is likely to be temporary. EUR/GBP has fallen sharply and while
we see long-term value in sterling, the move looks overdone. EUR/CHF has
continued to push to new all-time lows, but with speculative investors already long in
the Swiss franc, a near-term correction cannot be ruled out, although the long-term
trend is for a stronger CHF.
Equities and US 10Y yield
Source: Reuters Ecowin
EUR/USD and USD/JPY
Source: Reuters Ecowin
Credit spreads
Source: Reuters Ecowin
Commodity prices
Source: Reuters Ecowin
Jan
10
Feb Mar Apr May Jun
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
2250
2500
2750
3000
3250
3500
3750
4000
55
60
65
70
75
80
85
90USD/barrel Index
LME metal prices >>
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Weekly Focus
The SEK sold off on a dovish Riksbank statement. However, sound fundamentals andstrong growth momentum should warrant lower levels of EUR/SEK going forward.
Commodities
Although some headwinds from manufacturing sentiment are materialising forcommodities at the moment, bullish supply-side factors are increasingly in focus.While some further softness cannot be ruled out we expect prices to have some
limited potential left this year.
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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 -4.9 -4.6 2.5 -12.0 -1.7 -10.3 -13.2 1.3 3.5 -2.8 38.8 4.02010 1.8 2.7 1.2 -2.3 0.8 2.7 2.6 2.2 4.1 -5.6 42.0 3.22011 1.9 2.5 0.5 1.3 0.2 3.5 3.5 1.8 4.0 -4.5 46.5 2.5
Sweden 2009 -4.9 -0.8 2.1 -15.3 -1.5 -12.5 -13.4 -0.3 8.4 -1.3 39.5 7.62010 1.8 2.2 4.6 0.4 0.5 3.5 6.8 1.4 10.3 -2.8 43.1 5.92011 2.0 1.8 1.5 2.2 0.0 4.4 4.2 2.4 10.3 1.0 44.0 6.8
Norway 2009 -1.4 0.1 5.0 -7.9 -1.8 -4.2 -9.6 2.2 3.1 8.0 26.0 19.02010 3.1 5.0 3.1 -0.5 1.0 2.3 5.6 2.5 3.3 12.0 26.0 24.92011 1.7 4.4 2.5 0.0 0.0 1.4 7.3 1.9 3.4 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 -4.12011 1.0 0.7 0.2 0.2 0.0 6.1 4.1 1.9 19.8 -8.5 73.0 -3.2
Finland 2009 -7.8 -2.1 0.7 -13.4 0.0 -24.3 -22.3 0.0 8.2 -2.2 44.0 1.42010 1.5 0.2 0.0 -4.0 0.0 4.0 2.0 1.4 10.0 -3.8 49.0 1.42011 2.5 1.5 0.5 3.5 0.0 9.0 5.5 2.0 9.2 -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
Y ear GDP
1
Private
cons.
1
Public
cons.
1
Fixed
inv.
1
Stock
build.
2
Ex-
ports
1
Im-
ports
1
Infla-
tion
1
Unem-
ploym.
3
Public
budget
4
Current
acc.
4
Public
debt
4
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
Infla-
tion1
Unem-
ploym.3
Switzer-
land
Y ear GDP1
Private
cons.1
Im-
ports1
Public
debt4
Public
budget4
Y ear GDP1
Private
cons.1
Public
cons.1
Fixed
inv.1
Stock
build.2
Infla-
tion1
Unem-
ploym.3
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Weekly Focus
Financial forecast
Source: Danske Markets
Bond and money marketsCurrency
vs USD
Currency
vs DKK
USD 02-Jul - 595.8
+3m - 647+6m - 631
+12m - 587
EUR 02-Jul 125.0 744.9
+3m 115 744.0
+6m 118 744.0
+12m 127 745.0
JPY 02-Jul 88.0 6.77
+3m 95 6.83
+6m 99 6.36
+12m 102 5.73
GBP 02-Jul 151.9 904.8
+3m 137 886
+6m 139 875
+12m 155 909
CHF 02-Jul 106.8 557.7
+3m 113 572
+6m 108 581
+12m 106 552
DKK 02-Jul 595.8 -
+3m 647 -
+6m 631 -
+12m 587 -
SEK 02-Jul 767.4 77.6
+3m 817 79.1
+6m 780 80.9
+12m 724 81.0
NOK 02-Jul 644.4 92.4
+3m 665 97.3
+6m 644 97.9
+12m 598 98.0
PLN 02-Jul 331.3 179.8
+3m 343 188
+6m 335 188
+12m 307 191
Equity markets
Regional
Price trend
12 mth.
Regional recommen-
dations
USA 0% to +10% Underweight
Japan 0% to +10% Neutral
Emerging markets (USD) 0% to +10% Overweight
Pan-Europe (EUR) 0% to +10% Neutral
Nordics
Sweden 0% to +10% Neutral
Norway 0% to +10% Neutral
Denmark 0% to +10% Neutral
Commodities
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011
NYMEX WTI 81 81 80 85 87 89 92 94 82 91ICE Brent 79 81 79 84 86 88 91 93 81 90
Copper 7,274 7,072 7,200 7,500 8,000 8,400 8,600 8,700 7,261 8,425
Zinc 2,307 2,067 1,900 2,000 2,100 2,150 2,200 2,250 2,069 2,175
Nickel/1000 20 23 21 22 22 23 23 24 21 23
Steel 464 491 460 475 500 510 530 550 473 523
Aluminium 2,199 2,131 2,100 2,100 2,150 2,200 2,300 2,400 2,132 2,263
Gold 1,110 1,194 1,200 1,150 1,100 1,050 1,000 1,000 1,164 1,038
Matif Mill Wheat 126 131 132 123 120 127 127 127 128 125
CBOT Wheat 518 490 470 450 475 500 500 500 482 494
CBOT Corn 389 379 375 410 420 430 440 450 388 435
CBOT Soybeans 969 932 975 990 1,000 1,010 1,020 1,030 967 1,015
0.50
Average
Key int.
rate
0.13
0.130.13
0.75
3.25
0.25
1.00
1.00
0.10
0.10
0.50
10-yr swap yield
0.81
1.05
1.05
1.05
3m interest rate
3.75
1.00
0.10
0.50
0.25
1.05
1.00
0.70
0.75
0.75
4.10
4.10
0.50
1.00
1.00
0.50
1.90
0.25
0.10
1.13
3.50
2.00
0.50
1.00
1.50
3.50
2.00
2.50
3.50
3.50
0.53
0.78
0.24
0.73
0.11
0.450.45
1.15
0.65
0.65
0.15
0.30
0.24
0.30
4.10
3.77
0.50
1.00
1.10
1.10
1.35
1.30
0.80
2.78
760
2.65
3.00
3.20
3.50
2.30
5.80
5.20
5.00
4.25
3.00
1.60
1.65
1.95
0.60
0.95
1.60
1.70
2.00
1.45
1.95
1.55
1.60
1.95
0.50
0.65
1.00
115118
127
109
117
130
1.17
390
125.0
-
-
-
-
110.0
744
744
745
959.5
805.8
414.3
760
395
395
940
920
920
765
82.3
133.6
744.9
84.0
85.0
82.0
130
128
135
0.98
1.44
0.46
1.44
0.55
1.79
1.30
1.35
1.65
1.30
High
3.16
4.59
Currency
vs EUR2-yr swap yield
Risk
Low -5% to +5%
Price trend
3 mth.
-5% to +5%
-5% to +5%
High
High
Low
Average
High
364
02-Jul
-5% to +5%
-5% to +5%
-5% to +5%
-5% to +5%
73
19
6,330
1,740
1,212
140
72
430
1,926
20112010
3.60
3.01
3.60
3.60
3.00
3.10
3.40
4.80
3.25
3.50
1.45
1.55
1.60
3.39
3.60
3.75
3.20
3.04
5.37
5.85
6.10
6.35
4.05
1.89
2.00
2.15
2.50
957
500
2.89
2.90
3.45
4.09
4.30
4.45
2.94
2.70
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Weekly Focus
Calendar
Source: Danske Markets
Key Data and Events in Week 27
Period Danske Bank Consensus Previous
- USD Independence Day - Market c losed9:15 CHF Retail sales (real) y/y May 1.3%
9:45 ITL PMI Services, Final Index Jun 53,6 53.5 53.7
9:50 FRF PMI Services, Final Index Jun 61.6 61.6 61.6
9:55 DEM PMI Services, Final Index Jun 54.6 54.6 54.6
10:00 EUR PMI Services, Final Jun 55.4 55.4 55.4
10:00 EUR PMI Composite, Final Index Jun 56.0 56.0 56.0
10:30 GBP PMI Services Jun 55.0 55.4
11:00 EUR Retail sales m/m|y/y May 0.3%|-0.5% 0.5%|-0.2% -1.5%|-1.8%
Period Danske Bank Consensus Previous
6:30 AUD RBA monetary policy meeting 4.50% 4.50% 4.50%
7:00 JPY Leading Economic Index, preliminary Index May 98.9 101.7
9:15 CHF CPI m/m|y/y Jun -0.2%|0.8% -0.1%|1.1%9:30 DKK Industrial production m/m May -0.8%
9:30 DKK Business Sales May
9:30 DKK Enforced sales (s.a.) Jun 455
16:00 USD ISM (NAPM) non-manufacturing Index Jun 54.4 55.0 55.4
Period Danske Bank Consensus Previous
8:45 FRF Trade Balance EUR bn. May -4.2
10:00 NOK Manufacturing Production m/m|y/y May 0.5%|.. 0.2%|3.0%
11:00 EUR GDP, s.a. - Final q/q|y/y 1st quarter 0.2%|0.6% 0.2%|0.6% 0.2%|0.6%
12:00 DEM Factory Orders m/m|y/y May 0.4%|24.9% 2.8%|29.6%
13:00 USD MBA Mortgage applications 8.8%
16:00 CAD Ivey PMI index Jun 64.0 62.7
21:35 USD Fed's Kocherlakota (non-voter, neutral) speaks
Period Danske Bank Consensus Previous
- JPY Eco Watchers Survey: Current Index Jun 47.7
1:50 JPY Machine orders m/m|y/y May 4.0%|9.4%
1:50 JPY Current Account Total JPY bn (s.a.) May 1199.8 1379.6
1:50 JPY Money supply M2+CD y/y Jun 3.1% 3.1%
1:50 JPY Bank Lending y/y Jun -2.0%
3:30 AUD Employment change Jun 15.0k 26.9k
7:45 CHF Unemployment (sa) % Jun 4.0
9:30 SEK CPI m/m|y/y Jun 0.1%|1.0% 0.1%|1.0% 0.2%|1.2%
10:30 GBP Industrial Production m/m|y/y May 0.4%3.2% -0.4%|2.1%
12:00 DEM Industrial production mm/|y/y May 0.8%|9.2% 0.9%|13.3%
13:00 GBP BoE rate announcement Jul 0.5% 0.5%
13:45 EUR ECB Announces Interest Rates 1.0% 1.0% 1.0%
14:30 USD Initial jobless claims 1000 460 472
14:30 EUR ECB's Trichet Speaks at ECB Monthly News Conference
21:00 USD Consumer credit bn. USD May -2.0 1.0
Monday, July 5, 2010
Tuesday, July 6, 2010
Wednesday, July 7, 2010
Thursday, July 8, 2010
-
8/9/2019 JUL 02 Danske Weekly Focus
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Weekly Focus
Calendar - continued
Source: Danske Markets
Period Danske Bank Consensus Previous
8:00 DEM Inflation (HICP), Final m/m | y/y Jun 0.0%|0.8% 0.0%|0.8%
8:45 FRF Manufacturing production m/m|y/y May 0.5%|7.0% 0.4%|8.5%
8:45 FRF Industrial production m/m|y/y May 0.3%|6.0% -0.3%|7.9%9:30 SEK Industrial production m/m|y/y May 0.9%|7.3%
9:30 DKK Current account DKK bn May 6.5 7.8
9:30 DKK Trade Balance DKK bn May 5.8
10:00 NOK Consumer prices m/m|y/y Jun -0.3%|1.7% -0.5%|2.5%
10:00 NOK Core inflation(CPI-ATE) m/my/y Jun -0.1%|1.0% ..|1.1% 0.1%|1.5%
10:00 NOK Producer prices m/m|y/y Jun -0.5%|18.4%
10:00 ITL Industrial production m/m|y/y May 1.0%|9.3% 1.0%|8.7%
10:30 GBP PPI - Output m/m|y/y Jun 0.1%|5.7% 0.3%|5.7%
13:00 CAD Unemployment rate Jun 8.1% 8.1%
13:00 CAD Net change in employment Jun 20000 24700
Period Danske Bank Consensus Previous
Fri 02 - 07 GBP Halifax house prices m/m|y/y Jun -0.4%|6.9%
Friday, July 9, 2010
During the week
-
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Weekly Focus
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