Danske Daily. Market Movers. Selected Market News

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1 Investment Research General Market Conditions 29 June 2015 Danske Daily Market Movers Market focus will continue to be on Greece, as no agreement was reached this weekend. The Greek government announced a referendum on the bailout package to be held on July 5, which means uncertainty will stay with us for at least another week and probably longer. Bank holidays have been declared in Greece from Monday. The big question today is how the institutions will react to the Greek announcement, see also Grexit - what if? Greek referendum changes the game, 29 June Iran and the P5+1 group of countries are eyeing the 30 June deadline for a final accord on Iran s nuclear programme. Both sides have indicated optimism that a deal is close, while the talks may extend beyond the deadline tomorrow. We expect the German HICP to decline to 0.4% y/y, a moderation from May s 0.7% y/y increase, which was partly caused by one-offs. In the US, pending home sales for May are released and we expect a substantial increase of 2% m/m as recent housing market indicators in general have been upbeat. In Norway we will get retail sales data for May and we expect some payback from the strong April data, which were boosted by the timing of Easter. For more on Scandi markets see page 2. Selected Market News Over the weekend negotiations on a new Greek bailout package made a u-turn. Greece s Prime Minister Tsipras on Friday called for a referendum on the Institutions proposals. The government recommends a No vote but argues this is not the same as a vote for Grexit. The most recent Greek opinion polls point to a Yes to the creditors proposal but all surveys were conducted before the government recommended a No vote. In our view, we are on the default, but no Grexit path but this is not sustainable given the very negative sentiment between Greece and the creditors. ECB has decided to keep the Emergency Liquidity Assistance capped at Friday s level, implying there will be no further liquidity support to Greek banks. Bank holidays have been declared in Greece from Monday and the Greek stock market has been closed. ATMs are closed Monday and will reopen Tuesday subject to withdrawal limits. The IMF payment is not expected to be paid on 30 June. Missing the payment will not trigger a credit event but EFSF loans can be called immediately due. Focus now turns to the backstop facilities. Both the Eurogroup and the ECB gave a clear signal they are ready to intervene but admittedly, the ECB statement could have been more explicit. However, we expect the ECB will step up QE purchases as we enter the week. If this is not enough, other tools are likely to be explored. Financial markets reacted swiftly when opening for the week. EUR/USD dropped to 1.10 and the price on gold rose 0.6% to above USD1.182/oz. Bank of Japan stated earlier today that it plans liquidity help if needed if the situation with Greece provokes turmoil. Market overview USD Oil Brent, USD Gold, USD Note: * The itraxx Europe Index shows the spread development for the most liquid investment grade CDS contracts in the euro credit market. **The itraxx Europe Crossover show the spread development of the most liquid non-investment grade CDS contracts in the euro credit market. ***The Markit CDX North America Investment Grade Index shows the spread development for the most liquid investment grade CDS contracts in the US credit market. Source: Bloomberg Selected readings from Danske Bank Strategy: Out of sync China: PBoC cuts interest rates by 25bp Senior Analyst Jens Nærvig Pedersen jenpe@danskebank.dk 07:30 1 day,% S&P500 (close) S&P500 fut (chng from close) Nikkei Hang Seng :00 07:30, bp US 2y gov US 10y gov itraxx Europe (IG) itraxx Xover (Non IG) , % EUR/USD USD/JPY EUR/CHF EUR/GBP EUR/SEK EUR/NOK Today [Tex Important disclosures and certifications are contained from page 5 of this report.

2 Scandi Markets In Norway retail sales data for May are due for release today. To date, private consumption has actually accelerated despite the oil price halving. The fundamentals are solid, with lower interest rates offsetting the effects of lower wage growth, and unemployment still climbing only moderately. The strong data for April were probably due largely to the timing of Easter; however, so we expect retail sales to fall 2.5% m/m in May. Fixed Income Markets The fixed income market will be characterised by a broad risk-off move when it opens. We expect Bunds to rally, core curves to flatten, ASW spreads to widen and we believe the peripheral government bonds could widen as much as 30-50bp versus core government bonds initially. The extent of the move will be heavily dependent on the magnitude of any response from policymakers with ECB being the far most important. Down the road, we expect the ECB to respond in a significant move to counter any material deterioration to its monetary policy stance. Therefore, we foresee that contagion will not extend for more than a few weeks. In particular, since we do not see this as a systemic euro risk, and as the Euro leaders including the ECB have the tools to eliminate contagion. In fact, a strong signal from the ECB would, in our view, be sufficient to turn the initial sell-off into a rally. FX Markets FX markets will open today with an omnipresent uncertainty about Greece and the future of the single currency, and as such a risk-off reaction will be the start to the week. This will trigger a rally in the usual safe-haven currencies, USD, JPY and CHF. That said, the initial flight-to-quality response will soon be dominated by expected monetary policy responses. The market will speculate that the ECB will stand ready to add more QE, if the Greek situation escalates. This would be crucial for EUR-crosses, which will fall broadly, and EUR/USD could test the late-may low around 8, even as expectations for a Fed rate hike are pushed back. Notably, the latter will likely limit the fall in the cross as FOMC has clearly stated its reluctance to start hiking at a time of elevated European uncertainty. The same reasoning applies to Bank of England and GBP. Crucially, the SNB is largely left without tools and EUR/CHF will be in for a marked sell-off in coming days. EUR/DKK should also come under downward pressure in coming days supporting our view that rate hikes from DN are not imminent. The Riksbank will be keen to stress that its tolerance for EUR/SEK downside is limited and signal its willingness to cut rates again if needed. This should secure that EUR/SEK will continue to trade in a range near term. EUR/NOK may initially rise given NOK's sensitivity to risk aversion and the oil price. However, any EUR/NOK rally will be short-lived if ECB adds to QE. US S&P500 future US 10y gov yield Global FX Scandi FX EUR/USD (LHS) USD/JPY (RHS) EUR/SEK (LHS) EUR/NOK (RHS) June

3 Key figures and events Monday, June 29, 2015 Period Danske Bank Consensus Previous 1:50 JPY Industrial production, preliminary m/m y/y May -1.1%I % -2.3% 1.2% 0.1% 1:50 JPY Large retailers' sales y/y May 3.5% 8.6% 1:50 JPY Retail trade m/m y/y May % 2.2% 0.3% 4.9% 9:00 ESP HICP, preliminary m/m y/y Jun..I-0.3% %I-0.2% 0.4% -0.3% 9:00 ESP Retail Sales y/y May 4.0% 9:00 DKK Confidence indicator, industry Index Jun 9:00 DKK CB's securities statistics May 9:00 DKK Foriegn portfolio investments May 9:00 CHF SNB sight deposit 10:00 NOK Retail sales, s.a. m/m May -2.5% -1.7% % 10:30 GBP Broad money M4 m/m y/y May 0.4% % 11:00 EUR Business climate indicator Net bal. Jun :00 EUR Industrial confidence Net bal. Jun :00 EUR Economic confidence Index Jun :00 EUR Consumer confidence, final Net bal. Jun :00 EUR Service confidence Net bal. Jun :00 DEM HICP, preliminary m/m y/y Jun..I0.4% 0.2%I0.4% 0.1% 0.7% 16:00 USD Pending home sales m/m y/y May %I.. %.. 3.4% 13.4% Source: Bloomberg, Danske Bank Markets 3 29 June

4 Today s market data: 29 June 2015 DOW JONES NASDAQ 1 month -0.3% 1 month -0.6% S&P % Year-to-date 2.1% Year-to-date 14.0% NIKKEI (07:30) % EUR 17:00 07:30 * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 M on STOCKS Grey line indicates closing of Danish markets EUR/USD Intraday FX & COMMODITIES YIELDS & INTEREST RATES Gold, $ USD-Yields Intraday Spread, Policy Rate 3M bp 17:00 07:30, bp 0.72 USD2Y USD10Y USD USD 10Y Max 0.7 Max 2.5 EUR USD 30Y Min 0.6 Min 2.3 USD2Y GBP JPY 10Y (lhs) DKK USD10 Y (rhs) 2.34 SEK :30(-1)* 17:00, bp NOK DEM 10Y PLN DKK 10Y S&P500 Intraday, % Eurostoxx Intraday, % Close DJSTOXX % 0.30 Max Max 0.4 OMXC % 0 Min Min OMXS % OSE BX % Oil, Brent, $ USD : JPY day Max GBP month Min 109 NOK Year-t-date SEK DKK CRB CRB, Raw SEK 10Y NOK 10Y PLN 10Y * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 M on * As of closing previous trading day Grey line indicates opening of US markets Close % -0.6% 10Y Yield Spread to Germany USD JPY GBP FRF ITL DKKSEKNOKPLN US Yield Curve Max 00 0 Max Min Min USD2Y USD5Y USD10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) German Yield Curve DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) Non-finan. Credit spread, itraxx s. 11* 07:30 1 day 1 month Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) JPY 10Y HiVol Xover (N-IG) :30(-1)* 17: EUR 10Y DKK 10Y Finan. Sr SEK 10Y Finan. Sub Jul Aug Sep Nov Dec Feb Mar May Jun NOK 10Y itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) :00 * As of closing previous trading day 07: PLN M future Industrials USD 17:00 07:30 07: JPY day month 0.29 GBP month Year-to-date CHF Year-t-date Source: Bloomberg, Danske Bank Markets 4 29 June

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