Investment Research General Market Conditions 26 June 2015 Danske Daily Market Movers The ongoing negotiations between the Greek government and the creditor institutions continue to be in focus as no deal was reached yesterday. Today s EU leaders summit previously seemed to be the deadline for reaching a deal but another Eurogroup meeting has been confirmed on Saturday and the deadline has thus been moved into the weekend. In terms of data releases euro-area money supply and bank lending should continue to improve as the ECB s liquidity boost is finding its way through to private consumption and investments. The monetary easing is also reflected in lower cost of borrowing. The recent sell-off in the fixed income markets has not yet affected lending rates, hence the impact on economic activity should be limited. In the US the final June University of Michigan consumer confidence is likely to show a modest further improvement in the last weeks of June. Swedish figures and Riksbank board meeting today. For more on Scandi markets see page 2. Selected Market News With the new deadline for a Greek deal now set to be the Eurogroup meeting on Saturday we are in for a wait-and-see day where markets could stay nervous and, similar to yesterday, react erratically to the news flow and any headlines from the negotiations between Greece and the institutions. Outstanding issues now appear to centre on pension-reform issues, sales-tax increases and whether debt relief should be granted. We still believe an accord will be reached in time and it seems that the differences have narrowed recently. That said, the fact that a deal will likely not be reached until Saturday at the earliest makes it difficult for the Greek government to pass legislation before market open on Monday and thus for national parliaments to approve the deal before payments due by month end. This makes the ECB s decision on Emergency Liquidity Assistance (ELA) to Greek banks key in order to avoid bank runs and having to impose capital controls. That said, a missed IMF payment is unlikely to be characterised as a default by rating agencies and should thus not trigger a series of credit events as such. As a result, markets could start eyeing 20 July when Greece is due to pay EUR3.5bn to the ECB as a next deadline: if missed, this would most certainly imply ELA be withdrawn. Asian equities have extended losses seen in the US session and US Treasury yields are marginally higher tracking the uptick in the German Bund rate yesterday. Japanese data on inflation and household spending were mixed overnight but national CPI figures notably came in on the strong side and USD/JPY edged lower. 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 Selected readings from Danske Bank Today Nordic Outlook - June 2015 [Tex Senior Analyst Christin Tuxen +45 45 13 78 67 tux@danskebank.dk 07:30 1 day +/-,% S&P500 (close) 2102.3-0.30 S&P500 fut (chng from close) 2093.5-2 Nikkei 20744.6-0.13 Hang Seng 2674-1.49 17:00 07:30 +/-, bp US 2y gov 0.70 0.68-2.0 US 10y gov 2.42 2.40-2.0 itraxx Europe (IG) 67 68 itraxx Xover (Non IG) 290 292 1.8 +/-, % EUR/USD 1.119 1.119-5 USD/JPY 123.640 123.300-0.27 EUR/CHF 5 5-0.31 EUR/GBP 0.711 0.711-0.11 EUR/SEK 9.235 9.241 7 EUR/NOK 8.76 8.75-8 USD Oil Brent, USD 63.1 63.5 0.63 Gold, USD 1173.5 1174.7 0.11 Important disclosures and certifications are contained from page 6 of this report. www.danskeresearch.com
Scandi Markets Three figures out this morning in Sweden, all relating to May: 1) trade balance is expected to show a minor retracement - printing a surplus of SEK3.5bn - in a fairly strong upward trend, 2) household lending growth should continue to strike new highs, we estimate 6.6% y/y and 3) retail sales growth is likely to rebound somewhat to around 4.5% y/y. Overall, this should paint a nice picture of the most important sectors of the Swedish economy. Fixed Income Markets Fixed income markets continue to be caught in the Greek-deal-limbo and today is unlikely to be any different. We have experienced that timelines and deadlines are moving targets but it seems like a crescendo is building up for the Eurogroup meeting on Saturday. A lot has already been priced-in the periphery but the positive sentiment should extend further on a final agreement, even though some details are expected to remain open until an eventual implementation in parliaments. Nonetheless, we expect Bunds to test lows on an agreement before we expect it to edge a bit higher as technicals support the FI markets over the summer. Norges Bank will publish its Q3 issuance strategy today. We might see a downward revision of issuance in H2 15 after the revised budget showed a lower funding need of NOK23bn. We remain long NGB '21 against Germany. FX Markets EUR crosses have in general been remarkably stable in recent days considering the political turmoil in relation to Greece. EUR/USD has fallen below the 1.12 level again but overall it appears that FX markets are sidelined on the single currency with markets waiting for the imminent Greek issue to get out of the way in order to clear the way for policy differences to play out yet again. Indeed, we believe that any rally in EUR/USD on a Greek accord will prove short-lived as this would at the same time open the door for the Fed to hike rates. US S&P500 future 2121 2121 2111 2111 2101 2101 2091 2091 2081 2081 Wed Thu Fri Tue Wed US 10y gov yield 2.40 2.4 2.30 2.3 2.20 2.2 Wed Thu Mon Tue Wed Fri Global FX 1.154 EUR/USD (LHS) USD/JPY (RHS) 124.9 1.144 124.3 1.134 123.7 1.124 123.1 1.114 122.5 Wed Thu Mon Tue Wed Fri A batch of Swedish figures due out this morning but SEK will keep an eye on the Riksbank with an executive board meeting scheduled for today. However, with no solution for Greece likely ahead of the weekend, the Riksbank will probably be sidelined for now; that said, any drop in EUR/SEK on a Greek blow-up would certainly trigger a Riksbank reaction (rate cut and/or QE extension). Scandi FX EUR/SEK (LHS) 9.26 9.23 9.20 EUR/NOK (RHS) 8.84 8.78 8.72 9.17 8.66 Wed Thu Mon Tue Wed Fri 2 26 June 2015 www.danskeresearch.com
Key figures and events Friday, June 26, 2015 Period Danske Bank Consensus Previous - EUR Moody's may publish Belgium's debt rating - EUR Moody's may publish Germany's debt rating - EUR S&P may publish France's debt rating - EUR Moody's may publish Austria's debt rating - EUR EU summit in Brussels 0:45 NZD Trade balance NZD M May -50 123M 1:30 JPY CPI - national ex. fresh food y/y May 0.1% % 0.3% 1:30 JPY CPI - national ex. fresh food and energy y/y May 0.4% 0.4% 1:30 JPY CPI- Tokyo y/y Jun % % 1:30 JPY CPI - Tokyo ex fresh food y/y Jun 0.1% 0.2% 1:30 JPY Household spending y/y May 3.6% -1.3% 1:30 JPY Unemployment rate % May 3.3% 3.3% 3.3% 1:30 JPY Job-to-applicant ratio May 1.17 1.17 1:30 JPY CPI - national y/y May 0.4% 0.6% 9:00 SEK Sweden's Riksbank Executive Board meeting 9:30 SEK Retail sales s.a. m/m y/y May 0.3% 4.5% -0.2% 3.0% 9:30 SEK Household lending % May 6.6% 6.5% 9:30 SEK Trade balance SEK bn May 3.5 5.7 10:00 EUR Money supply (M3) y/y May 5.4% 5.4% 5.3% 10:00 EUR Loans to Households (adj. for sales and sec.) y/y May 1.5% 1.4% 1.3% 10:00 EUR Loans to NFCs (adj. for sales and sec.) y/y May 0.1% % 10:00 ITL Business confidence Index Jun 103.8 103.5 16:00 USD University of Michigan Confidence, final Index Jun 94.8 94.6 94.6 Source: Bloomberg, Danske Bank Markets 3 26 June 2015 www.danskeresearch.com
Today s market data: 26 June 2015 0.70 STOCKS DJSTOXX50 3422-0.4% 0.40 0.40 0.40 0.4 Max 0.7 Max 0.8 OM XC20 969 0.1% Min - Min -1.1 OM XS30 1601-0.6% 0.10 0.10-0.10-0.1 0.3 OSE BX 644 -% -0.20 S&P500 Intraday, % -0-0 -1.10-1.1 DOW JONES 17890 15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 Grey line indicates closing of Danish markets NASDAQ 5112 Grey line indicates opening of US markets 1 month -0.1% 1 month -1.6% S&P500 2102 Year-to-date 2.1% Year-to-date 13.9% NIKKEI (07:30) 20745-0.4% EUR/USD Intraday FX & COMMODITIES EUR 17:00 07:30 +/- USD 111.91 111.85-6 07:30 JPY 138.37 137.90-0.47 1 day 1.44 112.0 Max ## 112.0 GBP 71.14 76-8 1 month -12.63 Min ## NOK 875.66 874.97-0.69 Year-t-date -10.17 111.7 0.3 111.7 SEK 923.48 924.13 0.65 111.4 07 10 13 16 19 22 01 04 DKK 746.02 746.01-1 PLN 416.90 417.07 0.17 JPY 123.64 123.30-0.34 1 day 0.30 1 month 3.12 GBP 157.31 157.39 8 1 month 2.62 Year-to-date -9.13 CHF 93.86 93.62-0.24 Year-t-date -5.61 YIELDS & INTEREST RATES Go ld, $ USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00 07:30 +/-, bp 0.72 USD2Y USD10Y 2.42 USD 0.25 0.28 3 USD 10Y 2.42 2.40-2 Max 0.7 Max 2.4 EUR 5-2 -7 USD 30Y 3.18 3.16-2 0.70 Min 0.7 Min 2.4 USD2Y 2.40 GBP 0 7 7 JPY 10Y 0.48 0.48 0 (lhs) 0 0 DKK 5-0.20-25 0.68 USD10Y (rhs) 2.38 SEK -0.25-0.21 4 07:30(-1)* 17:00 +/-, bp NOK 0 1.30 30 DEM 10Y 0.83 0.87 4 0.66 07 10 13 16 19 22 01 04 0.70-0.20 111.4 2.36-0.60 Eurostoxx Intraday, % -0.6 07:30 Close Close 1174.69 CRB 1M future 224.35 PLN 1.50 1.62 12 DKK 10Y 8 1.10 3 +/- +/- -0.4% -0.2% -0.3% Oil, B rent, $ 63.46 0.26-0.26 Industrials 466.24-8 -0.93-25.87 SEK 10Y 2 5 2 NOK 10Y 1.86 1.86 0 PLN 10Y 3.21 3.20 0 * As of closing previous trading day 6.13 C R B, R aw 10Y Yield Spread to Germany 2.5 2.34 2.5 2.0 1.53 1.5 1.28 1.23 2.0 1.5 0 0.37 0.24 0.18 USDJPYGBPFRF ITL DKKSEKNOKPLN - -0.38 - - - 3.0 2.5 2.0 1.5 US Yield Curve 1.8 1.6 1.4 1.2 0.8 ## M ax 1.830 ## M ax ### 0.6 0.4 ## M in 00 ## M in ### 0.4 0.3 0.2 0.2 0.1 USD2Y USD5Y USD10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) 0.9 0.8 0.7 0.6 German Yield Curve 3.3 2.8 2.3 1.8 1.3 0.8 0.3-0.2 DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) Non-finan. C redit spread, it raxx s. 11* 07:30 Source: Bloomberg, Danske Bank Markets 1 day 1 month 90 80 70 Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 68 0 4 60 300 JPY 10Y 10 10 1 HiVol 61 0-1 50 250 40 200 Xover (N-IG) 292 0 4 07:30(-1)* 17:00 +/- 30 150 20 100 EUR 10Y 0 19 19 10 50 DKK 10Y 33 35 2 Finan. Sr. 78 0 0 0 0 SEK 10Y 43 45 3 Finan. Sub. 163-1 0 Jun Aug Sep Nov Dec Feb Mar May Jun NOK 10Y 60 60 0 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 450 400 350 17:00 07:30 * As of closing previous trading day USD 17:00 07:30 +/- +/- 4 26 June 2015 www.danskeresearch.com
Disclosure This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). 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 upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates Danske Daily is updated on a daily basis. First date of publication Please see the front page of this research report for the first date of publication. Price-related data is calculated using the closing price from the day before publication. 5 26 June 2015 www.danskeresearch.com
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. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non- U.S. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission. 6 26 June 2015 www.danskeresearch.com