Weekly Focus Uncertainty from start of year has eased but Brexit risks lurking

Transcription

1 Investment Research General Market Conditions 29 April 206 Weekly Focus Uncertainty from start of year has eased but Brexit risks lurking Market movers ahead Signals about the direction of ISM manufacturing in April are mixed, so we expect it to stay around the current level, only slightly above 50. Contents The US jobs report is due on Friday and we expect another solid increase of 20,000. As long as employment continues to rise at a solid pace, we think the Fed will focus on wage growth. We estimate average hourly earnings rose 0.3% m/m. The Bank of England meeting seems likely to be a nonevent on paper but any comments on Brexit and uncertainties in either the minutes, the inflation report or at the press conference could have the potential to move markets. In the euro area, we look for an increase in Sentix investor confidence. We estimate both German factory orders and industrial production for March increased, as the uncertainty seen at the start of the year has eased. Inflation figures for April are due in Denmark and Sweden. In Denmark, we estimate inflation increased to 0.2%, while for Sweden we estimate an outcome a notch or two below the Riksbank s latest forecast. EUR/DKK has traded below central parity in April and the FX reserves figures will show whether the Danish central bank had to intervene in order to weaken the DKK. We expect Norges Bank to keep rates unchanged in May but the bank may signal that a rate cut in June is now more or less likely than it was at the March meeting. Global macro and market themes The BoJ s inaction may be due to the economy doing better than many envisaged. The pickup in global inflation is flying under the radar, in our view. Market movers... 2 Global Macro and Market Themes... 6 Scandi update... 8 Latest research from Danske Bank Markets... 9 Macroeconomic forecast... 0 Financial forecast... Calendar... 2 Financial views Major indices 29Apr 3M 2M 0yr EUR swap EUR/USD ICE Brent oil Apr 6M 224M S&P % 58% Source: Danske Bank Upside risks to the long end of the EUR swap curve are rising on oil, global IP, reduced Brexit risks and issuance. The USD is set to weaken short term against emerging market currencies and the JPY and to strengthen against the EUR. Emerging market equities are set to rally further on China and metal prices. Solid employment growth in the US Higher Sentix due to lower uncertainty Follow us on Twitter for the latest on macroeconomic and financial market Editor Source: BLS Source: Sentix, ZEW Mikael Olai Milhøj milh@danskebank.dk Important disclosures and certifications are contained from page 6 of this report.

2 Market movers Global In the US, several important releases are due in the coming two weeks. We have had some mixed signals about the direction of ISM manufacturing in April following the sharp rebound over the past couple of months. While the ISM orderinventory balance in March suggested an increase, Markit PMI has declined to the lowest level since 2009 in April. Regional indices have pointed in different directions but on average suggest an unchanged print. We think ISM manufacturing will stay around the current level of 5.8 suggesting that while the manufacturing cycle seems to have turned, we should not expect a sharp rebound in manufacturing production. ISM nonmanufacturing will give us more insight into activity growth outside manufacturing, which is most important for employment growth. We expect an increase to 55. In the April statement, the Fed recognised that the labour market continued to strengthen in Q, despite weak GDP growth. The labour market is one of the bright spots in the US economy and, as long as employment continues to rise at a solid pace, we think the Fed has its eyes on things other than employment growth. We estimate nonfarm payrolls grew 20,000 in April, more or less in line with the recent trend, leaving the unemployment rate unchanged at 5.0% due to the increasing labour force. Due to the Fed s increasing focus on inflation, we would keep an eye on average hourly earnings, which we estimate rose 0.25% m/m in April, implying an unchanged wage inflation rate at 2.3% y/y. Weak GDP growth in Q was driven partly by slower growth in private consumption. Our estimate (and the Fed s) of a rebound in GDP growth in Q2 is based on a rebound in private consumption growth. Thus, the retail sales data for April will be important. Also, keep an eye on the preliminary University of Michigan consumer survey in May. Consumer confidence has fallen for four consecutive months but is still at a relatively high level. Although it is natural that consumer confidence has fallen from the previous high level, we need consumers to stay optimistic as private consumption is the main US growth driver. We expect the Fed to keep an eye on consumers longterm inflation expectations, which in April fell back to a recordlow 2.5% y/y. In the euro area, April manufacturing PMI figures for Spain and Italy are due to be released on Monday. We expect to see a moderate decline as indicated by the flash PMI data last week, where the euro area manufacturing PMI declined marginally, but the German manufacturing PMI improved pointing to a decrease in the remaining countries on aggregate. Similarly, we also get April data for the service PMI for Spain and Italy on Wednesday and here we look for a small improvement in the Italian figure, while we estimate the Spanish PMI has declined a bit. On Wednesday, euro area retail sales data for March is also scheduled for release and, on the back of the mixed German and French figures released on Friday, we forecast a decline of 0.4% for the euro area. Note that despite having seen some weakness in the private consumption data over the past couple of months, we still expect it to be an important driving force of the growth in the rest of 206. On Thursday, the ECB presents its Economic Bulletin but we do not expect it to attract much attention given last week s ECB meeting did not contain any major news. We expect ISM manufacturing to stabilise around current level Source. ISM, Markit Economics Employment has continued to strengthen despite weak GDP growth Source: BLS Diverging PMI figures in April Source: Markit Industrial production to go a bit higher Source: Eurostat, Markit 2 29 April 206

3 The following week starts with the release of the Sentix investor confidence for May on Monday. After remaining unchanged for the past three months, we believe the index has bottomed for now given the improved market sentiment lately and, therefore, we look for an increase in investor confidence. Moreover, we have also started to see an improvement in other sentiment indicators, such as the German ZEW indicator. On Monday, data for the German factory orders for Marts are also released and here we expect to see a small monthly increase, as the uncertainty from the start of the year has eased off but several key figures indicate no significant improvement in March for instance, the new orders component of the PMI figures, which declined marginally in March, was still above the 50 level, indicating progression. On the other hand, economic activity in the US and China has improved and could have affected the foreign component of orders positively. Going forward, the Brexit risk is likely to weigh on sentiment in the euro area and hence be negative for factory orders. On Tuesday, we get data for the German industrial production for March, which we also expect to increase slightly for the same reasons as factory orders. The same goes for the euro area industrial production for March, which is released on Thursday. In the UK, everything continues to be driven by the upcoming EU in/out referendum (see Brexit monitor No 2: Brexit fears have eased but uncertainties hit the economy 29 April). We do not expect much news from the Bank of England meeting on Thursday 2 May, which is one of the super meetings, with a policy announcement, minutes, inflation report and press conference. It is widely expected that the Bank of England (BoE) will maintain the Bank Rate and the stock of purchased assets at 0.50% and GBP375bn, respectively (both unanimously, 90). Although we already know much about the BoE s view on Brexit, any comments on Brexit and uncertainties in the minutes, inflation report or press conference will be thoroughly analysed. The press conference is likely to centre on the upcoming referendum. In terms of data releases, the main release is the PMI services index in April, which we expect to give us some information on how much the service sector grew at the beginning of Q2. GDP growth slowed to 0.4% q/q in Q and our main scenario is that growth will stay subdued ahead of the EU referendum. We estimate the index remained around teh current level of 53.7 which is relatively low compared with levels in recent years. Also, look out for the NIESR GDP estimate in April. The main mover in China over the coming weeks will be the PMI data from Caixin and NBS. Both numbers showed a strong improvement in March and, judging from the continued gain in commodity prices in April, growth seems to be picking up more broadly. The economy is seeing a boost from (a) a turn in construction, (b) a boost to infrastructure investment and (c) a rebound in exports. We believe these trends will continue to drive PMI higher in coming quarters. However, a small setback in April cannot be ruled out given the scope of increase in March but we see the trend moving up. This should provide support for emerging markets assets in general over coming quarters. Our estimate of Caixin PMI manufacturing is flat at 49.7 for April but forecasting one month s reading is a bit of guess work. The trend should be up, though. FX reserve data for April are due on 7 May. We look for a small decline, as China may have intervened a bit to avoid too great a weakening of the basket of currencies that it is now managing against. However, the big outflow has clearly dampened and hence we believe it will allow the basket to drift a bit without too much intervention. Sentix is set to increase Source: Sentix, ZEW We expect PMI services to stay at low level Source: ONS; Markit Economics China: Manufacturing has turned Source: Macrobond Financial 3 29 April 206

4 Scandi In Denmark, the Nationalbank is due to publish currency reserves data for April on Tuesday. Last month was the first month in a year that the central bank did not intervene in the currency market to support the krone. We have also seen EUR/DKK trading below the central parity rate in other words, the krone is currently on the strong side. If necessary, the Nationalbank will intervene and sell the kroner to stop it from getting too strong. Therefore, it is possible that the bank may eventually see a need to cut interest rates to ease the pressure. Wednesday then brings Statistics Denmark s housing prices for February. The housing market has been busy over the past year, with a particularly strong increase in apartment prices. We expect the market to advance further this year but at a slightly more subdued tempo. The following Tuesday (0 May) brings trade balance and current account data for April. Although exports have struggled over the past year, Denmark is still running a big trade surplus and a big current account surplus. Inflation figures for April are released the same day. Prices in March were unchanged from last year. We expect inflation to regain some of the lost ground over coming months but much will depend on what happens to oil prices. Thus, we expect CPI of 0.3% m/m and 0.2% y/y. In Sweden, the weeks ahead contain two data points of particular interest: industrial data (Tuesday, 3 May at 09:30 CEST), which we expect to show things have normalised but we remain wary of the effects of the early Easter, and inflation (Thursday, 2 May at 09:30 CEST), where we expect an outcome a notch or two below the Riksbank s latest forecast. Note, however, that we do not yet have full input data on this number, so our estimate might change before the release but these changes will come from volatile products that should not change the overall conclusion from a Riksbank perspective. Remember, in a a couple of weeks we also receive GDP (30 May), which seems to us likely to come in on the low side of current expectations. Hence, financial markets are probably in for a period where rates will come down and the SEK might at least for domestic reasons and temporarily weaken somewhat. In Norway, a busy fortnight lies ahead, with the main event probably the ratesetting meeting at Norges Bank on 2 May. Not much has happened on the macro front since the bank s March meeting but, if anything, retail sales have been slightly on the weak side. The most important change is that oil prices have climbed almost USD0/bl, with the result that the krone has strengthened by around 2%. Normally, this level of appreciation would be enough to pull down the bank s interest rate path (although there is no MPR at this meeting) by close to 20bp, which would probably be sufficient to trigger a rate cut here and now. However, we do not expect one, partly because the krone s appreciation is due to higher oil prices, which are pulling interest rates in the other direction, and partly because Norges Bank has explicitly stated that the closer interest rates get to zero, the more it will take to change the interest rate path. Therefore, we expect the focus to be on how Norges Bank views the balance between a stronger krone on the one hand and higher oil prices on the other. The bank may signal that a rate cut in June is now more or less likely than it was at the March meeting. Also coming up are GDP figures for Q and we expect the mainland economy to grow 0.3% q/q, which is slightly higher than Norges Bank assumed in March. Statistics Norway will also release CPI data for April and we expect the annual rate of inflation to hold at 3.3%, driven by a correction of food prices and airfares following the effects of Easter in March. Currency reserves back to normal Source: Danmarks Nationalbank Parting ways with the Riksbank Source: SCB, Riksbank. Danske Bank Markets calculations Slightly higher growth ahead Source: Macrobond Financial, Danske Bank Markets 4 29 April 206

5 Market movers ahead Global movers Event Period Danske Consensus Previous During the week Sun 0 CNY PMI manufacturing Index Apr Mon 02May :5 USD Fed's Dudley (voter, dovish) speaks 6:00 USD ISM manufacturing Index Apr :00 EUR ECB's Draghi speaks in Frankfurt Tue 03May 3:45 CNY Caixin Manufacturing PMI Index Apr :30 USD Fed's Mester (voter, hawkish) speaks Wed 04May :00 EUR Retail sales m/m y/y Mar 0.3% 0.0% 2.7% 0.2% 2.4% 4:5 USD ADP employment 000 Apr :00 USD ISM nonmanufacturing Index Apr Thurs 05May 3:45 CNY Service PMI Index Apr :30 GBP PMI services Index Apr :30 USD Fed's Bullard (voter, hawkish) speaks Fri 06May 4:30 USD Non farm payrolls 000 Apr :30 USD Unemployment % Apr 5.0% 5.0% 5.0% 4:30 USD Average hourly earnings, nonfarm m/m y/y Apr 0.3% 2.3% 0.3% 2.4% 0.3% 2.3% Scandi movers Mon 02May 9:00 NOK PMI manufacturing Index Apr 46.8 Tue 03May 9:30 SEK Industrial production s.a. m/m y/y Mar 0.% 3.8% 6:00 DKK Currency reserves DKK bn Apr 42.4 Wed 04May 9:30 SEK Riksbank monetary minutes April 27th released Global movers Event Period Danske Consensus Previous During the week Sat 07 CNY Foreign exchange reserves bn. USD Apr Sun 08 CNY Exports y/y Apr.3%.5% Tue 0 5 CNY Money supply M2 y/y Apr 3.5% 3.4% Mon 09May 0:30 EUR Sentix Investor Confidence Index May :00 EUR Eurogroup meeting in Greece Thurs 2May 3:00 GBP BoE announces asset purchase target GBP bn May :00 GBP BoE rate announcement % 0.5% 0.5% 0.5% 3:00 GBP BoE minutes 3:00 GBP BoE Inflation report Fri 3May :00 EUR GDP, 2nd estimate, preliminary q/q y/y st quarter 0.6% 0.6%.6% 4:30 USD Retail sales control group m/m Apr 0.% 6:00 USD University of Michigan Confidence, preliminary Index May Scandi movers Tue 0May 9:00 DKK CPI m/m y/y Apr 0.3% 0.2% 0.% 0.0% 0:00 NOK CPI m/m y/y Apr 0.5% 3.3% 0:00 NOK Manufacturing production m/m y/y Mar 0.3% 0.7% 6.0% Wed May 8:00 SEK Prospera inflation expectations Thurs 2May 9:30 SEK CPI m/m y/y Apr 0.5% 0.8% 9:30 SEK Underlying inflation CPIF m/m y/y Apr 0.5%.5% 0:00 NOK Norges Banks monetary policy meeting % 0.5% 0.5% 0:00 NOK GDP (mainland) q/q st quarter 0.3% 0.% Source: Bloomberg, Danske Bank Markets 5 29 April 206

6 Global Macro and Market Themes Inflation, higher rates and the continuing EM rally On Thursday the Bank of Japan (BoJ) surprised us and the market by staying put at its monetary policy meeting. At first glance, it appears that there has been something in the cooking at the G20 meeting in Shanghai in late February when policymakers agreed not to engage in competitive devaluations. Japan is also chairing the G7 meeting in May and the BoJ may have been reluctant to cut rates deeper into negative territory right before that meeting. However, it may also be that BoJ is seeing something that the market, and we, have not been paying enough attention to. For several years the market has been focusing on the lack of growth with some prominent economists, e.g. Lawrence Summers, arguing that the world is facing a secular stagnation of weak demand. The IMF and others continue to paint a very downbeat picture of the global economy, stressing the need for action from policymakers if the world were to escape a lowforlong period of growth. We very much agree with this view as central banks have been the only game in town in recent years and there is diminishing return from further monetary stimulus. However, the global economy may have underperformed in recent years due to fallouts from the global crisis, particularly the European debt crisis in followed by the hard landing in China s manufacturing/construction sector in Without any new shocks (for example a Brexit) the global economy may, for the first time in a long time, actually surprise to the upside (see Chart ). Meanwhile, markets may not be paying enough attention to the turn in inflation. Yes, the oil price is still down around 27% y/y but that compares with 47% y/y in February. And if the oil price stays at current levels, the base effect will disappear in August. The pickup in core inflation in a number of countries has clearly gone under the radar. For example, Norway, Sweden, the US and the UK have seen a pickup in core CPI over the past quarter (but not the euro zone) and labour markets in e.g. Japan continue to tighten (see Chart 2 and Chart 3). Key points The BoJ s inaction may be due the economy doing better than many envisaged. The pickup in global inflation is flying under the radar, in our view. Upside risks to the long end of the EUR swap curve are rising on oil, global IP, reduced Brexit risks and issuance. The USD is set to weaken short term against EM and JPY; to strengthen against EUR EM equities to rally further on China, metal prices. Chart 2. The Phillips curve is starting to work in Japan Chart. Is this what we are facing? Source: Macrobond Financial, Bloomberg Source: IMF, Bloomberg, Danske Bank 6 29 April 206

7 Upside risks to EUR yields and continued EM outperformance Our base case remains that the selloff in longend yields will remain contained, particularly in Europe. However, the risks of a sharper selloff have increased. The sharp rise in the oil price, the pickup in the global IP cycle and reduced Brexit risks pose upside risks to eurozone rates. Inflation expectations in the euro zone in the form of 5Y5Y inflation expectations have remained tame but could rise with the oil prices in line with the correlation that has been in place since the global financial crisis. In addition, we are currently seeing a wave of issuance in the ultralong end of the European sovereign curves as shown by the 00Y bonds from Ireland, Belgium and France. Given that ultralong EU sovereign bonds yields trade above the EUR swap curve, this could create an incentive to move away from receiving swaps to buy bonds creating upward pressure on the EUR swap curve. Chart 3. Inflation is picking up Source: Macrobond Financial, Danske Bank We believe that the USD will weaken further particularly versus EM currencies but short term also versus the JPY. Nearterm, it is difficult to see what should stop the JPY rally given BoJ s inaction. The rebound in the Chinese construction sector should benefit miningintensive currencies in Latin America and Africa, while it should also benefit Asian currencies given trade links. Higher inflation should support the USD versus the EUR on relative rates as positioning is now much cleaner. However, we maintain our longheld view that the cross will head higher in H2 as fundamentals remain supportive. In equities, our highest conviction is that EM should outperform DM. In hindsight, the rally in metal prices in late 205 was a strong leading indicator for the EM rally in 206 (see Chart 4). China s construction turnaround should provide further support for metal prices and EM equities. In addition, the weaker USD is supporting inflows into EM and reducing the pressure on EM s FX reserves. Chart 4. Metal prices suggest more EM upside Source: Macrobond Financial Chart 5. Global market views Asset class Equities Short term: buy on dips Medium term: moderately positive Main factors The weakening of the USD makes the world a better place; commodities should stabilise further and it will be supportive of Chinese growth as it provides an opportunity for PBoC to ease further. EM should outperform DM in this environment and in terms of sectors, parts of the cyclical space will generally outperform defensives. Bond market Core yields: still low Bund yields in Q2 USeuro spread: wider but not before we see Fed hikes Peripheral spreads set to tighten further from here Credit spreads: neutral to tighter Higher QE,TLTRO II and 'hunt for yield' but no more rate cuts and higher US yields later this year. We still look for policy divergence in Q4 but for now 'hunt for yield' supports treasuries. QE, improving fundamentals and search for yield. However, a lot of event risk at the moment. Liquidity abundance and QE in corporate bonds. FX EUR/USD Lower nearterm on relative rates, Brexit fear USD/JPY BoJ inaction implies that USD/JPY will test lower near term EUR/SEK Trapped in range near term, lower medium term Fundamentals support cross in the medium to long term but downside risks short term from Fed and Brexit risks. USD/JPY to test lower near term on BoJ's inaction. We are currently reviewing our USD/JPY forecasts. Riksbank loosening up on SEK appreciation aversion; EUR/SEK set to fall eventually on strong Swedish fundamentals. EUR/NOK Settling in interval now, then lower as cycle turns Limited room for more easing to be priced from Norges Bank, fundamentals point to lower EUR/NOK in H2 6. Commodities Oil price Consolidation in US oil sector leading to recovery Metal prices Anticipating recovery in Chinese construction Gold price Flat near term OPEC has lost leverage over oil price; sliding dollar and improved growth outlook to drive oil price higher Consolidation in mining industry puts a floor under prices, awaiting support from higher global economic growth Shortterm support from repricing of Fed rate hikes. Agriculturals Upside risks, spillover from rally in palm oil price Attention has turned to La Niña weather risks in H2 6. Source: Danske Bank Markets 7 29 April 206

8 Scandi update Denmark Ministry o Finance revises down growth forecast The Ministry of Finance has slashed its forecast for economic growth this year from.9% to.%. However, in our view, the previous forecast was extremely unrealistic and the revised version is still on the optimistic side given that indicators are pointing to zero growth in Q. For the ministry s latest forecast to hold water, either the economy needs to take off big time over the rest of the year or there needs to be some major revisions of previous data. Meanwhile, Statistics Denmark has published its quarterly business tendency surveys. There was a slight decrease in the construction and services indicators, while manufacturing confidence was unchanged at low levels. Thus, the business sector is still not particularly positive about the economic outlook, which does not bode well for investment. However, we could usefully see an increase in investment to help get growth moving again. Manufacturers still downbeat Source: Statistics Denmark Sweden net negative We have received a lot of data over the past week: the Labor Force Survey, NIER confidence data, trade balance and retail sales etc. The Labor Force Survey was not in any way instrumental in changing any views but the loss of momentum in employment continues and the unemployment rate was marginally higher than expected. The NIER survey is no favourite of ours, so we leave this particular indicator be, despite it confirming a new weaker trend in household and business confidence. Retail sales and trade balance data were weaker than we would have liked to see, which could be attributable to the early Easter. However, these sets of data underline downside risks to Q GDP growth, which is due to be released at endmay. All in all, we feel the past week s data was weak, fitting our view of a clear momentum loss in Q. However, the weakness displayed might even be more than we bargained for when we constructed our most recent forecast for the Swedish economy. Deterioration is accelerating Source: SCB. Danske Bank Markets calculations Norway unemployment falling There are major variations in growth between sectors and regions in Norway currently as a result of the oil shock. Activity in oilrelated industries is still in decline but lower interest rates, a weaker krone and expansionary fiscal policy have propped up growth in other parts of the economy. The worry is that the downturn in oilrelated industries will spread to other sectors and regions. However, there are few signs of this to date and figures from the NAV during the week showed that total unemployment including job creation schemes fell for three months in a row. The number of vacancies is also rising and hit its highest level for more than three years in April. These data suggest that growth in the Norwegian economy as a whole is beginning to pick up, reducing the risk of more serious secondround effects from the oil downturn. Lower unemployment Source: Macrobond Financial 8 29 April 206

9 Latest research from Danske Bank Markets 28/4 China Profit growth up in March more to come In another piece of evidence that China is seeing a cyclical recovery, profit growth picked up in March. The annual growth rate went from 4.7% y/y in February to.% y/y in March. 27/4 FOMC Review: Fed kept its flexibility but June hike still seems unlikely As expected, the Fed maintained the target range at %. It removed 'global economic and financial developments continue to pose risks', which was included in the statement in March. 27/4 UK: Growth slowed in Q 6 have Brexit uncertainties hit the economy? The first estimate of UK Q 6 GDP growth showed that growth slowed to 0.4%q/q in Q 6 from 0.6% q/q in Q4 5. This was in line with consensus but higher than our expectation of a 0.3% q/q print. 27/ 4/6 A corporate default in Malaysia a warning sign for other highly leveraged emerging markets? While the default of a stateowned agency seems to be driven more by a payment dispute, we think Malaysia's high debt load, widespread corruption and slowing growth are worth noting by other highly leveraged emerging markets April 206

10 Macroeconomic forecast Macro forecast, Scandinavia Year GDP cons. Private cons. Fixed inv. Stock build. 2 Exports Imports Inflation Unemploym. 3 budget 4 debt 4 Current acc. 4 Denmark Sweden Norway Macro forecast, Euroland Year GDP cons. Private cons. Fixed inv. Stock build. 2 Exports Imports Inflation Unemploym. 3 budget 4 debt 4 Current acc. 4 Euroland Germany France Italy Spain Finland Macro forecast, Global Year GDP Private cons. cons. Fixed inv. Stock build. 2 Exports Imports Inflation Unemploym. 3 budget 4 debt 4 Current acc. 4 USA China UK Source: OECD and Danske Bank. ) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP April 206

11 Financial forecast Bond and money markets Source: Danske Bank Markets Currency vs USD Currency vs DKK USD 29Apr m m m EUR 29Apr m m m JPY 29Apr m m m GBP 29Apr m m m CHF 29Apr m m m DKK 29Apr m m m SEK 29Apr m m m NOK 29Apr m m m Equity Markets Regional Risk profile 3 mth Price trend 3 mth Price trend 2 mth Regional recommendations USA (USD) Strong domestic demand, strong USD, low oil price Medium 03% 58% Overweight Emerging markets (local ccy) Commodities and China stabilising High 3 +3% 03% Neutral Japan (JPY) Reflation, strong earnings growth, BoJ easing, weakining JP High 03% 80% Overweight Europe (excl. Nordics) Brexit, political uncertainty, weak growth, weak EUR High 3 +3% 58% Underweight Nordics Earnings growth, expensive valutaion Medium 03% 58% Overweight Commodities Key int. rate 3m interest rate 206 2yr swap yield 0yr swap yield Currency vs EUR Average 29Apr Q Q2 Q3 Q4 Q Q2 Q3 Q NYMEX WTI ICE Brent Copper 4,942 4,667 4,900 5,000 5,00 5,200 5,300 5,400 5,500 4,97 5,350 Zinc,92,682,800,850,900,950 2,000 2,050 2,00,808 2,025 Nickel 9,295 8,542 8,500 9,500 0,500 0,700 0,900,00,300 9,26,000 Aluminium,665,55,550,650,750,800,850,900,950,66,875 Gold,274,82,250,250,250,225,200,75,50,233,88 Matif Mill Wheat ( /t) Rapeseed ( /t) CBOT Wheat (USd/bushel) CBOT Corn (USd/bushel) CBOT Soybeans (USd/bushel), April 206

12 Calendar week 7 During the week Period Danske Bank Consensus Previous Thu GBP Nationwide house prices m/m y/y Apr 0.8% 5.7% Sun 0 CNY PMI manufacturing Index Apr Sun 0 CNY PMI nonmanufacturing Index Apr 53.8 Mon 02 JPY Official reserves assets USD bn Apr 262. Monday, May 2, 206 Period Danske Bank Consensus Previous 0:0 EUR European Commission Economic Forecasts :5 USD Fed's Dudley (voter, dovish) speaks 3:30 AUD NAB Business Conditions Index Apr 2.0 4:00 JPY Nikkei Manufacturing PMI, final Index Apr :30 SEK PMI manufacturing Index Apr :00 NOK PMI manufacturing Index Apr :5 ESP PMI manufacturing Index Apr :5 CHF Retail sales y/y Mar 0.2% 9:30 CHF PMI manufacturing Index Apr :45 ITL PMI manufacturing Index Apr :50 FRF PMI manufacturing, final Index Apr :55 DEM PMI manufacturing, final Index Apr :00 EUR PMI manufacturing, final Index Apr :30 EUR ECB's Weidmann speaks in Leipzig 4:50 USD Fed's Lockhart (non.voter, neutral) speaks 5:45 USD Markit manufacturing PMI, final Index Apr :00 USD Construction spending m/m Mar 0.5% 0.5% 6:00 USD ISM manufacturing Index Apr :00 EUR ECB's Draghi speaks in Frankfurt 6:00 USD ISM prices paid Index Apr :00 EUR ECB's Lautenschlaeger speaks in Lucerne 23:30 USD Fed's Williams (nonvoter, neutral) speaks Tuesday, May 3, 206 Period Danske Bank Consensus Previous USD Total vechicle sales m Apr :45 CNY Caixin Manufacturing PMI Index Apr :30 AUD Reserve Bank of Australia rate decision % 2.0% 2.0% 2.0% 9:30 SEK Industrial production s.a. m/m y/y Mar 0.% 3.8% 9:30 SEK Service production m/m y/y Mar 0.5% 0.2% 9:30 SEK Industrial orders m/m y/y Mar 3.% 2.0% 0:30 GBP PMI manufacturing Index Apr :00 EUR PPI m/m y/y Mar 4.6% 0.% 4.2% 0.7% 6:00 DKK Currency reserves DKK bn Apr :30 USD Fed's Mester (voter, hawkish) speaks 7:30 EUR EUJapan summit 20:00 USD Fed's Williams (nonvoter, neutral) speaks Source: Danske Bank Markets 2 29 April 206

13 Calendar continued Wednesday, May 4, 206 Period Danske Bank Consensus Previous :00 USD Fed's Lockhart (non.voter, neutral) speaks 8:30 SEK PMI services Index Apr :00 DKK House and apartment prices Feb 9:00 DKK Forced sales (s.a.) Number Apr 9:00 DKK Bankruptcies (s.a.) Number Apr 9:5 ESP PMI services Index Apr :30 SEK Riksbank monetary minutes April 27th released 9:45 ITL PMI services Index Apr :50 FRF PMI services, final Index Apr :55 DEM PMI services, final Index Apr :00 EUR PMI composite, final Index Apr :00 EUR PMI services, final Index Apr :30 GBP PMI construction Index Apr :00 EUR Retail sales m/m y/y Mar 0.3% 0.0% 2.7% 0.2% 2.4% 2:5 EUR ECB's Weidmann speaks in Frankfurt 3:00 USD MBA Mortgage Applications % 4.% 4:5 USD ADP employment 000 Apr :30 USD Unit labour cost, preliminary q/q st quarter 2.5% 3.3% 4:30 USD Trade balance USD bn Mar :45 USD Markit service PMI, final Index Apr :45 USD Markit composite PMI, final Index Apr 5.7 6:00 USD Capital goods orders, nondefense ex air, final % Mar 0.0% 6:00 USD Factory orders m/m Mar 0.7%.7% 6:00 USD ISM nonmanufacturing Index Apr :00 USD Durable goods orders, final m/m Mar 0.8% 6:30 USD DOE U.S. crude oil inventories K 999 Thursday, May 5, 206 Period Danske Bank Consensus Previous 0:30 USD Fed's Kashkari (nonvoter, dovish) speaks 3:30 AUD Retail sales m/m Mar 0.3% 0.0% 3:30 AUD Trade balance AUD m Mar :45 CNY Service PMI Index Apr :30 GBP Halifax house prices m/m 3Ms/YoY Apr 0.4% 9.5% 2.6% 0.% 0:00 EUR ECB Publishes Economic Bulletin 0:30 GBP PMI services Index Apr :30 GBP PMI composite Index Apr :30 USD Initial jobless claims :30 USD Fed's Bullard (voter, hawkish) speaks Friday, May 6, 206 Period Danske Bank Consensus Previous USD Fed's Kaplan (nonvoter, dovish) speaks EUR Fitch may publish Netherlands's debt rating EUR Moody's may publish Portugal's debt rating PLN Polish central bank rate decision %.5%.5%.5% :5 USD Fed's Kaplan (nonvoter, dovish) speaks :5 USD Fed's Bullard (voter, hawkish) speaks :5 USD Fed's Williams (nonvoter, neutral) speaks :5 USD Fed's Lockhart (non.voter, neutral) speaks 4:00 JPY Markit PMI services Index Apr :00 DKK Industrial production m/m Mar 0.8% 0.% 4:30 CAD Net change in full time employment 000 Apr :30 USD Non farm payrolls 000 Apr :30 USD Private payrolls 000 Apr :30 USD Manufacturing payrolls 000 Apr :30 USD Unemployment % Apr 5.0% 5.0% 5.0% 4:30 USD Average hourly earnings, nonfarm m/m y/y Apr 0.3% 2.3% 0.3% 2.4% 0.3% 2.3% 4:30 USD Average weekly hours Hours Apr :00 USD Consumer credit USD bn Mar The editors do not guarantee the accurateness of figures, hours or dates stated above For furher information, call (+45 ) Source: Danske Bank Markets 3 29 April 206

14 Calendar week 8 During the week Period Danske Bank Consensus Previous Mon 02 JPY Official reserves assets USD bn Apr 262. Sat 07 CNY Foreign exchange reserves bn. USD Apr Sun 08 CNY Exports y/y Apr.3%.5% Sun 08 CNY Imports y/y Apr 4.0% 7.6% Sun 08 CNY Trade balance USD bn Apr Tue 0 5 CNY Aggregate financing bn CNY Apr 2336 Tue 0 5 CNY Money supply M2 y/y Apr 3.5% 3.4% Tue 0 5 CNY New Yuan loans CNY bn. Apr Monday, May 9, 206 Period Danske Bank Consensus Previous 2:00 JPY Labor cash earnings y/y Mar 0.7% 7:00 JPY Consumer confidence Index Apr 4.7 8:00 DEM Factory orders m/m y/y Mar 0.4%.2% 0.5% 9:5 CHF CPI m/m y/y Apr 0.3% 0.9% 9:30 SEK Budget balance SEK bn Apr 8.9 9:30 SEK Household consumption m/m y/y Mar 0.3% 2.3% 0:30 EUR Sentix Investor Confidence Index May :0 USD Fed's Evans (nonvoter, dovish) speaks 5:00 EUR Eurogroup meeting in Greece 6:00 USD Fed's LMCI m/m Apr 2. 9:00 USD Fed's Kashkari (nonvoter, dovish) speaks Tuesday, May 0, 206 Period Danske Bank Consensus Previous 3:30 CNY PPI y/y Apr 3.8% 4.3% 3:30 CNY CPI y/y Apr 2.3% 2.3% 7:45 CHF Unemployment % Apr 3.5% 8:00 DEM Industrial production m/m y/y Mar 0.2% 0.5%.3% 8:00 DEM Trade balance EUR bn Mar :45 FRF Industrial production m/m y/y Mar.0% 0.6% 9:00 DKK Current account (nsa sa) DKK bn Mar :00 DKK CPI m/m y/y Apr 0.3% 0.2% 0.% 0.0% 9:00 DKK Trade balance ex ships DKK bn Mar 3.7 9:00 DKK Exports m/m Mar 0:00 NOK Core inflation(cpiate) m/m y/y Apr 3.3% 0.3% 3.3% 0:00 ITL Industrial production m/m y/y Mar 0.6%.2% 0:00 NOK CPI m/m y/y Apr 0.5% 3.3% 0:00 NOK Manufacturing production m/m y/y Mar 0.3% 0.7% 6.0% 0:00 NOK Industrial production m/m y/y Mar 0.4%.8% 0:00 NOK PPI m/m y/y Apr.3% 4.9% 0:30 GBP Trade balance GBP mio. Mar :00 USD NFIB small business optimism Index Apr 92.6 Wednesday, May, 206 Period Danske Bank Consensus Previous 2:30 AUD Westpac Consumer Confidence Index (% m/m) May % 7:00 JPY Leading economic index, preliminary Index Mar :00 SEK Prospera inflation expectations 0:30 GBP Industrial production m/m y/y Mar 0.3% 0.5% 0:30 GBP Manufacturing production m/m y/y Mar.%.8% 20:00 USD Budget statement USD bn Apr Source: Danske Bank Markets 4 29 April 206

15 Calendar continued Thursday, May 2, 206 Period Danske Bank Consensus Previous JPY Eco Watchers Survey Outlook (Current) Index Apr :0 GBP RICS house price balance Index Apr 0.4 :50 JPY Bank lending y/y Apr 2.0% 8:00 SEK PES unemployment % Apr 4.0% 8:45 FRF HICP, final m/m y/y Apr 0.% 0.% 9:30 SEK Average house prices SEK m Apr :30 SEK CPI m/m y/y Apr 0.5% 0.8% 9:30 SEK Underlying inflation CPIF m/m y/y Apr 0.5%.5% 0:00 NOK GDP (total) q/q st quarter.2% 0:00 NOK Norges Banks monetary policy meeting % 0.5% 0.5% 0:00 NOK GDP (mainland) q/q st quarter 0.3% 0.% :00 EUR Industrial production m/m y/y Mar 0.2% 0.8% 0.8% 3:00 GBP BoE announces asset purchase target GBP bn May :00 GBP BoE rate announcement % 0.5% 0.5% 0.5% 3:00 GBP BoE minutes 3:00 GBP BoE Inflation report 4:30 USD Import prices m/m y/y Apr 0.2% 6.2% 7:00 USD Fed's Mester (voter, hawkish) speaks 9:30 USD Fed's George (voter, hawkish) speaks Friday, May 3, 206 Period Danske Bank Consensus Previous EUR S&P may publish Italy's debt rating EUR Moody's may publish Ireland's debt rating 0:45 NZD Retail sales q/q st quarter.2% :50 JPY Money supply M2 y/y Apr 3.2% 5:30 JPY BoJ Kuroda speaks in Tokyo 6:30 JPY Tertiary industry index m/m Mar 0.% 8:00 DEM HICP, final m/m y/y Apr 0.3% 0.% 8:00 DEM GDP, preliminary q/q y/y st quarter 0.3%.3% 9:00 ESP HICP, final m/m y/y Apr 0.4%.2% 9:30 SEK Capacity utilization, industry % st quarter 87.9% 0:00 ITL GDP, preliminary q/q y/y st quarter 0.%.0% 0:30 GBP Construction output m/m y/y Mar 0.3% 0.3% :00 ITL HICP, final m/m y/y Apr :00 EUR GDP, 2nd estimate, preliminary q/q y/y st quarter 0.6% 0.6%.6% 2:00 EUR Portugal, GDP, preliminary q/q y/y st quarter 0.2%.3% 4:30 USD Retail sales less autos m/m Apr 0.2% 4:30 USD Retail sales less autos and gas m/m Apr 0.% 4:30 USD Retail sales control group m/m Apr 0.% 4:30 USD PPI m/m y/y Apr 0.% 0.% 4:30 USD PPI core m/m y/y Apr 0.%.0% 4:30 USD Retail sales m/m Apr 0.3% 6:00 USD University of Michigan Confidence, preliminary Index May The editors do not guarantee the accurateness of figures, hours or dates stated above For furher information, call (+45 ) Source: Danske Bank Markets 5 29 April 206

16 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). The author of this research report is Mikael Olai Milhøj, Senior Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors on request. Risk warning Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. Date of first publication See the front page of this research report for the date of first publication. General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report April 206

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