Danske Daily. Market movers today. Selected market news

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1 Investment Research General Market Conditions 5 March 24 Danske Daily Market movers today As tensions in the Russia/Ukraine conflict are easing, economic data will likely get some more attention again. Service PMIs will be released in most countries today. In the euro area, Spain and Italy will be in focus as flash estimates have already been released for Germany and France. We look for a slight decline in both Spain and Italy. The UK services PMI is still at a high level and expected to only show a small decline from 58.3 to 58.. In the US, the ISM non-manufacturing is expected to fall slightly from 54. to Keep an eye on the employment index which is a good indicator of labour market developments in the service sector where 8% of the jobs are. Notably ADP employment is also released today: this has generally proven a more stable indicator than the official non-farm payrolls (due this Friday) and hence may be a better indicator of the true state of the labour market. Consensus looks for some moderation from 75k in January to 58k in February. Finally, Fed publishes the Beige Book tonight. Swedish services PMI and industrial production in focus. For more on Scandi markets see page 2. Selected market news Risk appetite has continued its recovery overnight after Ukraine-Russia tensions eased somewhat yesterday. US stock markets posted decent gains and the S&P5 in fact closed at a record high last night and Treasury yields rose close to 8bp higher in the long end. President Obama s fiscal budget proposal for 25 was laid out yesterday but should at this point be seen more as political communication rather than a guide to the US economy next year. Asian stocks are also generally higher in a further sign risk assets are recovering this morning albeit the potential default of Chaori, a Chinese solar energy company, on a corporate bond has spooked markets in China a bit. 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 shows 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 7:3 day +/-,% S&P5 (close) S&P5 fut (chng from close) Nikkei Hang Seng : 7:3 +/-, bp US 2y gov US y gov itraxx Europe (IG) itraxx Xover (Non IG) /-, % EUR/USD USD/JPY EUR/CHF EUR/GBP EUR/SEK EUR/NOK Otherwise in China annual meeting of the National People s Congress saw premier Li announce a 7.5% GDP growth target which is in fact identical to that of the past two years. This suggests that the reform agenda of Chinese policymakers should be less negative for short-term growth than may have been feared. In light of the recent slowdown in the Chinese economy, the growth target may however require more stimuli from the authorities and indeed, it has recently appeared that the People s Bank of China is starting to ease policy again after de-facto tightening late 23. Meanwhile Australian Q4 GDP came out at a healthy 2.8% y/y, some way above the Reserve Bank of Australia (RBA) forecast of 2.5%. While the economy is suffering from weaker Chinese demand and a deceleration in mining investment, past rate cuts from the RBA indeed seem to be working their way through the economy. Still, AUD/USD has seen only a limited move higher, underlining the risk that the RBA will be unwilling to accept any significant upside from current levels. Senior Analyst Christin Tuxen tux@danskebank.dk Important disclosures and certifications are contained from page Error! Bookmark not defined. this report.

2 Scandi markets today Danish currency reserves figures revealed no intervention by the central bank in February even as EUR/DKK has arguably been trading close to possible intervention levels. If we are right in expecting the ECB to add to eurozone liquidity by ceasing the sterilisation of the SMP programme this month, then some of the upward pressure on the cross may subside and make an independent Danish rate hike even less likely. Following last week s strong Q4 GDP report, Swedish industrial production figures for the month of January are due out this morning. We have been pleased to see the long-awaited recovery seemingly taking hold over the past two months. That said, we have a hard time reconciling the numbers with a more genuine recovery when analysing industrial data further; indeed, the numbers are pushed and pulled by a few sectors posting incredulous swings. Thus today we will look for signs of a more broad-based upturn in the first month of the year. Swedish January services production this morning is expected to take a leg up on the back of higher levels in services PMI. The latter is also out this morning, it has levelled off lately and the question is the direction going forward. Obviously, if the economy is to continue on a recovery track, it needs to go higher. Industrial production and orders is the main focus however. Orders surged 5% last month on the back of defence expenses being booked and this should reverse this month. Given the previous surge one might suspect that industrial production could very well surprise on the upside as only a % m/m rise = is expected. That said, numbers have shown great volatility lately, hence it is hard to get a grip on the underlying trend currently. Fixed income markets With some easing in the tensions in Ukraine yesterday, the global fixed income markets took back Monday s gains. So while Germany saw a not quite complete reversal of Monday s moves, with the Y bund yield rising 5bp after falling 7bp on Monday, the US more than reversed smaller moves, with the Y Treasury yield rising 8bp after Monday s decline of 5bp. Peripheral bonds also rebounded impressively with Spain and Italy setting new post-crisis lows in terms of spreads to Germany. If today brings no further escalation in the situation on the Crimea peninsula, focus in the fixed income market will be important releases in both Europe (service PMI, retail sales and GDP) and US (ADP and non-manufacturing ISM). We should, however, expect that only either very strong or very weak data today could change yields significantly as the market attention is focused on the ECB meeting tomorrow and the US labour market report on Friday. In terms of today s primary issuance, Germany is coming to the market in the 5Y segment (% Feb-5). FX markets US S&P5 future Mon Tue Thu Fri Mon Wed US y gov yield Mon Tue Thu Fri Mon Wed Global FX EUR/USD (LHS) USD/JPY (RHS) Mon Tue Thu Fri Mon Wed Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) Mon Tue Thu Fri Mon With Ukraine-Russia tensions easing yesterday, CHF and JPY have been retreating against notably EUR but FX markets will likely stay alert to any new developments on this front today. But in the absence of further escalation of events in Crimea, currency markets will start to zoom in on the key ECB meeting tomorrow. With some ECB easing already priced in it will be a disappointment (risk of EUR upside) if Draghi does not deliver something. This afternoon watch out for any changes to the Bank of Canada (BoC) statement to come out in relation to the rate decision (most certainly rates will be kept unchanged). Notably the BoC January statement was soft but it did not include an explicit easing bias, but it did however explicitly express concerns over the 2 5 March 24

3 still overvalued CAD in stating that it remains strong despite recent depreciation. It thus seems evident that the BoC will lag the Fed in scaling back on stimuli. We are not convinced the BoC will go as far as cutting rates but dovish talk could lead the market to start pricing this in to an even greater extent (little priced in terms of easing at present). Key figures and events Wednesday, March 5, 24 Period Danske Bank Consensus Previous :3 AUD GDP q/q y/y 4th quarter.7% 2.5%.6% 2.3% 2:45 CNY HSBC/Markit PMI service Index Feb 5.7 8:3 SEK PMI service Index Feb : DKK House price index (Statistics Denmark) 3m/3m 3m/y Dec -.9%.7% -.7% 2.6% 9:5 ESP PMI Services Index :3 SEK Service production m/m y/y Jan -.5% -.5% 9:3 SEK Industrial production m/m y/y Jan -.%.% 9:3 SEK Industrial orders m/m y/y Jan 5.4% 4.7% 9:45 ITL PMI Services Index Feb :5 FRF PMI Services, final Index Feb :55 DEM PMI service, final Index Feb : EUR PMI composite, final Index Feb : EUR PMI services, final Index Feb :3 GBP PMI services Index Feb : EUR Retail sales m/m y/y Jan -.6% -.% : EUR GDP, preliminary q/q y/y 4th quarter.3%.5%.3%.5%.3%.5% 3: USD MBA Mortgage Applications % -8.5% 4:5 USD ADP employment Feb : USD ISM (NAPM) non-manufacturing Index Feb : CAD Bank of Canada rate decision %.%.%.% 2: USD Beige Book Source: Bloomberg and Danske Bank Markets 3 5 March 24

4 Today s market data: 5 March 24 AKTIER S&P5 intradag, % Eurostoxx intradag, % Lukkekurs +/-.5 Max 2..5 DJSTOXX %.6 Max OM XC %.9Min Min.4 OM XS %..6. OSE BX 559.% Lukkekurs +/ DOW JONES % Grå linie indikerer hvor det amerikanske marked åbner NASDAQ % Grå linie indikerer hvornår det danske marked lukker måned 7.% måned 5.5% S&P % År-til-dato.4% År-til-dato.3% NIKKEI (7:3) % EUR/USD intradag VALUTA & RÅVARER USD :3 JPY måned måned.98 GBP År-t-dato 26.8 År-til-dato -.2 CHF Guld, $ Olie, B rent, $ JPY dag Max ## GBP måned Min ## 37.5 NOK År-t-dato SEK C R B, M C R B, DKK future råindustri RENTER PLN : USD kurs 7: 7:3 +/- dag USD-renter intradag Ledende 3M Spænd, bp 7: 7:3 +/-, bp USD2Y USDY USD USD Y Max.4 Max 2.7 EUR USD 3Y Min.3 Min 2.6 GBP JPY Y DKK SEK :3(-)* 7: +/-, bp 2.64 NOK DEM Y.58.6 PLN DKK Y SEK Y NOK Y USD2Y (v.a.) USDY (h.a.) PLN Y * lukkekurs seneste handelsdag årigt rentespænd til Tyskland USD JPY GBP FRF ITL DKK SEK NOK PLN Rentekurve USA Rentekurve Tyskland ## M ax 6.5 ## M ax ## M in ## M in ### DEM2Y DEM5YR DEMY USD2Y USD5Y USDY D-t-D +/-, bp (højre akse) 7:3 (venstre akse) måned siden (venstre akse) D-t-D +/-, bp (højre akse) 7:3 (venstre akse) måned siden (venstre akse) EUR kurs 7: 7:3 +/- Kreditspænd it raxx s. * Kreditspænd Swapspænd, bp** 7: 7:3 +/- 7:3 dag måned USD Y Europe (IG) 72 - JPY Y 2 HiVol 8-8 Xover (N IG) :3(-)* 7: +/- EUR Y DKK Y Finan. Sr SEK Y Finan. Sub NOK Y Non-finan. itraxx Europe (IG) (venstre akse) itraxx Xover (Non IG) (højre akse) * lukkekurs seneste handelsdag * Ask pris ** Ask pris 4 5 March 24

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