Investment Research General Market Conditions 26 September 2013

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1 Investment Research General Market Conditions 26 September 2013 Danske Daily Market movers today With the deadline looming on Monday focus in the US will continue to be on the negotiations about an agreement for funding non-mandatory government spending for the new budget-year to avoid a government shutdown. With the Senate yesterday voting to go ahead with a bill that includes funding for Obama s healthcare plan, the ball now appears to have been played back to the Republican House-majority to suggest a path forward. In the US the benchmark revision of the important non-farm payroll data is scheduled to be released at 16:00 CET. However, the revision only covers data until March this year, so the revisions should not alter the picture of the US labour market in recent months. In addition, the second revision of Q2 GDP and the weekly claim data could get some attention in the US. In Europe the most important data is money supply growth for the euro area and not least the data for household and business credit growth released in connection with these data. In addition we have speeches from ECB governing council members Jörg Asmussen and Vitor Constancio. In Sweden trade balance data, producer prices and household credit growth are released and in Denmark the unemployment rate is expected to remain unchanged at 5.7% in August. For more on Scandi markets see page 2. Selected market news By a vote, the US Senate last night moved forward the House spending bill. According to several media, Senate Democrats are likely to change the language on defunding the 2010 healthcare law before a final vote as soon as this weekend could send the bill as produced by the Senate back for a new vote in the House. However, Republicans are not likely to accept funding Obama's healthcare law and so far no deal seems to be in sight as both parties remain far apart on how to avoid a government shutdown. In respect of the US debt ceiling negotiations, US Treasury Secretary Lew last night warned that the government could start to run short of funds by 17 October, unless Congress votes to lift the ceiling before then. All in all, however, it has been a relatively quiet session overnight where the looming US government shutdown continues to weigh on investors risk appetite. For the fifth consecutive day US equities ended the day lower giving the SP 500 index its worst losing streak since 28 December last year when the fiscal cliff was looming ahead of New Year. Yields on 10-year US treasuries also edged a few bp lower and closed at 2.629%. The sour sentiment has continued in the Asian session where most regional indices are down this morning. In Japan, however, Nikkei is up and USD/JPY trades higher amid speculations that the government will cut corporate taxes. Market overview 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 Senior Analyst Morten Helt mohel@danskebank.com 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 USD Oil Brent, USD Gold, USD Selected readings from Danske Bank EM Bond Snapshot: September 2013 Today [Tex Important disclosures and certifications are contained from page 4 of this report.

2 Scandi markets today Statistics Sweden (SCB) releases trade balance and producer prices (incl. export and import prices) for August. Our take is more optimistic than market consensus and, to be honest, we are far from certain of a higher outcome, since production data and surveys have had a tendency to disappoint over the past few months. That said, disappointments have been mainly driven by larger-than-expected imports, which softens the blow to our optimistic take on Sweden since it is an indication of rising domestic demand as well as a need to replenish inventories of input goods in the export industry. In short, thus, we are more interested to see a continued growth in both exports and imports, than bicker about the level of August trade balance per se. In addition, we also receive household credit growth, a number that continues to warrant attention, but perhaps less from a Riksbank perspective than from a regulatory perspective now that the Swedish FSA has assumed increased responsibility for financial stability. All in all, today's data are interesting but should be put into context and even rather large deviations are not necessarily important for the policy stance. Low for long will continue to be the Riksbank mantra, even past today's outcomes. The unemployment rate in Denmark likely remained unchanged in August at 5.7%. At the beginning of the year the unemployment rate was at 6.1% and it has since declined steadily. We expect this trend to continue as the economy improves further. Fixed Income markets The core fixed income markets continue their march toward lower yields and the recent sessions offered little in the way of a material challenge to this bias. We are unwilling to encourage selling (i.e. go for higher rates) at this stage, particularly as momentum remains firm and positions are far from long. In addition, there is month- and quarter-end next week, which often leads to duration extensions. FX markets Scandinavian currencies came under further pressure yesterday as disappointing data suggested that both the Riksbank and Norges Bank might keep rates low for a longer period of time. While today s data releases from Sweden might not trigger any significant market reactions, we expect data to support the Riksbank s view of low rates for long. Near term it might be difficult for EUR/SEK and EUR/NOK to trade markedly lower and risks are probably skewed to the upside as investors risk appetite remains subdued due to the looming US government shutdown. Key figures and events Thursday, September 26, 2013 Period Danske Bank Consensus Previous 8:45 FRF Consumer confidence Index Sep :00 DKK Gross uemployment s.a. K (%) Aug 5.7% 15 (5.7%) 9:30 SEK PPI m/m y/y Aug 0.9% -2.8% 9:30 SEK Trade balance SEK bn Aug :00 EUR M3 money supply y/y Aug 2.2% 2.2% 10:30 EUR ECB's Asmussen speaks in Berlin 10:30 GBP Current Account GBP bn 2nd quarter :30 GBP GDP (final edition) q/q y/y 2nd quarter 0.7% % 0.7% % 14:30 USD Initial jobless claims :30 USD GDP, third release q/q ann. 2nd quarter 2.7% % 15:20 EUR ECB's Mersch speaks in Frankfurt 16:00 USD Pending home sales m/m y/y Aug % -% -1.3% 8.6% 16:10 EUR ECB's Constancio speaks in Frankfurt 18:15 USD Fed's Kocherlakota (non-voter, dove) speaks US S&P500 future Tue Wed Fri Mon Tue Thu US 10y gov yield Tue Wed Thu Mon Tue Thu Global FX EUR/USD (LHS) USD/JPY (RHS) Tue Wed Fri Mon Tue Thu Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) Tue Wed Fri Mon Tue Source: Bloomberg, Danske Bank Markets 2 26 September 2013

3 Today s market data: 26 September STOCKS DJSTOXX % Max Max OM XC % Min -0.6 Min -0.8 OM XS % OSE BX % Grey line indicates closing of Danish markets S&P500 Intraday, % DOW JONES NASDAQ 1 month 2.2% 1 month 2.6% S&P Year-to-date 18.7% Year-to-date 8.6% NIKKEI (07:30) % FX & COMMODITIES EUR 17:00 07:30 +/- USD JPY day Max ## GBP month Min ## NOK Year-t-date SEK DKK CRB C R B, R aw PLN USD 17:00 07:30 +/- JPY day month 4 GBP month Year-to-date 3.29 CHF Year-t-date YIELDS & INTEREST RATES Go ld, $ 1M future USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00 07:30 +/-, bp 2.68 USD2Y USD10Y USD USD 10Y Max 0.4 Max EUR USD 30Y Min 0.3 Min 2.6 GBP JPY 10Y DKK SEK :30(-1)* 17:00 +/-, bp NOK DEM 10Y USD2Y (lhs) EUR/USD Intraday USD10Y (rhs) Eurostoxx Intraday, % Grey line indicates opening of US markets :30 07:30 Close Close PLN DKK 10Y /- +/- -0.4% -0.2% -0.3% Oil, B rent, $ Industrials SEK 10Y NOK 10Y PLN 10Y * As of closing previous trading day Y Yield Spread to Germany USDJPYGBPFRF ITL DKKSEKNOKPLN US Yield Curve ## M ax ## M ax ## M in ## M in ### 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) C redit spread, it raxx s. 11* Credit spreads Swap Spread, bp** :00 07:30 +/- 07:30 1 day 1 month USD 10Y Europe (IG) JPY 10Y HiVol Xover (N-IG) :30(-1)* 17:00 +/ EUR 10Y DKK 10Y Finan. Sr SEK 10Y Finan. Sub Sep Nov Dec Feb Mar May Jun Aug Sep NOK 10Y Non-finan itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 3 26 September 2013

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