Investment Research General Market Conditions 15 September 2015 Danske Daily Market Movers US retail sales is the main market mover today. We expect another solid increase in the core retail sales measure (ex autos, gasoline and building materials) of 0.3% m/m (in line with consensus) as consumption is getting a boost from lower gasoline prices and solid job growth. Headline retail sales will be dragged down by falling gasoline sales (driven by lower prices) and we expect an increase of 0.1% m/m. The US also releases industrial production and Empire index today. We look for a further decline in the German ZEW expectations index. It has been declining moderately for five months and we expect it to fall again in September to 17 from 25 following the EM turmoil during August. We expect that UK CPI inflation declined to % y/y in August from 0.1% y/y in July. The fall in headline inflation is due to lower non-energy industrial goods inflation and services inflation while changes in energy and food prices are not expected to contribute to either higher or lower inflation. Core inflation surprised on the upside in July and increased to 1.2% y/y. We expect that core inflation declined to % y/y in August from 1.2% y/y in July. In Sweden Riksbank deputy governor Per Jansson gives a presentation on monetary policy and wage formation. Selected Market News The Chinese stock market continues to fall. The Shenzen index is down around 3%, hitting the lowest level since February last year. Otherwise markets have been fairly calm overnight with the US S&P future broadly flat and US bond yields and EUR/USD trading mostly sideways. The CNY is broadly flat since yesterday. Financial markets seem to be sidelined awaiting the important Fed meeting on Thursday. Market overview USD Oil Brent, USD 47.0 46.4-1.34 Gold, USD 1107.2 1107.7 5 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 07:30 1 day,% S&P500 (close) 1953.0-0.41 S&P500 fut (chng from close) 1945.7 9 Nikkei 18110.9 0.81 Hang Seng 21500.4-0.29 17:00 07:30, bp US 2y gov 0.71 0.73 1.2 US 10y gov 2.18 2.18-0.2 itraxx Europe (IG) 72 70-2.4 itraxx Xover (Non IG) 332 334 1.9, % EUR/USD 1.130 1.131 0.12 USD/JPY 1290 1240-4 EUR/CHF 1.10 1.10-3 EUR/GBP 0.734 0.733-0.11 EUR/SEK 9.344 9.347 3 EUR/NOK 9.27 9.27 6 Selected readings from Danske Bank Today Overall, there were no big surprises in the statement released by the Bank of Japan this morning, see statement. The JPY gained slightly as there were no signs of further easing. The central bank still expects the Japanese economy to continue to recover moderately despite a decline in GDP in Q2. BoJ notes that exports and production are affected by the slowdown in emerging economies. BoJ expects inflation to remain around 0 for the time being due to effects of the decline in energy prices. There are no comments on the risks to BoJ s inflation outlook and no comments on the likelihood of CPI rising to 2% in FY16 which according to most analysts appears to be almost impossible. Focus now turns to the Kuroda s press conference at 8:30 CET. Strategy: China shows its hand Weekly Focus: Feds to remain on hold [Tex Chief Analyst Allan von Mehren +45 45 12 80 55 alvo@danskebank.dk Important disclosures and certifications are contained from page 5 of this report. www.danskeresearch.com
Scandi Markets Sweden. Riksbank deputy Per Jansson speaks at a seminar arranged by the Swedish Trade Union LO, about monetary policy and wage formation. Presentation slides are due for release at 08:20 CET. We expect him to emphasise the inflation target as a nominal anchor for wage formation and perhaps give a comment on the current strength of the SEK, as this may be considered in wage negotiations as well as being an important factor for the inflation outlook. Fixed Income Markets On Wednesday Germany will tap EUR2bn of long maturity bonds (2046) and this marks two weeks of heavy European government bond supply in the long end (Ireland, Italy, Belgium and Germany). Once this is out of the way, we see room for the long end to perform and hence stick to our flattener view as we approach Q4. There is close to no scarcity premium priced in the long end and room to perform on more QE from ECB (our expectation as the response to the inadequate inflation outlook). Furthermore, as the 30y Germany will be the last tap of the year in that maturity, we think the natural long-end selling pressure from issuers will diminish, making room for curves to flatten. FX Markets EUR/SEK has made a sustained move from above 9.60 just a few weeks ago to now trade in the lower end of the long-standing 9.30-9.60 interval. We think the range will hold for now and thus see limited further downside in the cross from here. Notwithstanding some deterioration in early September, the stream of Swedish data over the summer has largely surprised on the upside; however, we still look for negative inflation surprises over the autumn, which should keep EUR/SEK bid. The FX market will first chew on the BoJ decision but later today the US retail sales report has the potential to move expectations about the Fed: if we are right in seeing downside risks to the report this could prove the final blow to a September Fed hike, sending USD lower for now. US S&P500 future 1970 1960 1950 1940 1930 1920 1910 1900 Fri Thu Fri Mon Mon Tue US 10y gov yield 2.26 2.16 Global FX 1970 1960 1950 1940 1930 1920 1910 1900 2.26 2.16 2.06 2.06 Fri Tue Wed Thu Mon Tue 1.139 1.129 1.119 EUR/USD (LHS) USD/JPY (RHS) 121.2 120.4 119.6 1.109 118.8 Fri Mon Wed Thu Fri Tue Scandi FX 9.48 9.44 9.40 9.36 EUR/SEK (LHS) EUR/NOK (RHS) 9.30 9.25 9.20 9.32 Fri Mon Wed Thu Fri 9.15 2 15 September 2015 www.danskeresearch.com
Key figures and events Tuesday, September 15, 2015 Period Danske Bank Consensus Previous 8:45 FRF HICP m/m y/y Aug.. 0.2% 0.3% 0.2% -0.5% 0.2% 10:00 NOK Trade balance NOK bn Aug 23.8 10:30 GBP CPI m/m y/y Aug 0.2% % 0.2% % -0.2% 0.1% 10:30 GBP CPI core y/y Aug % % 1.2% 10:30 GBP PPI - input m/m y/y Aug -0.9% -12.4% 10:30 GBP PPI - output m/m y/y Aug -0.1% -1.6% -0.1% -1.6% 11:00 EUR Employment m/m y/y 2nd quarter 0.1% 0.8% 11:00 DEM ZEW current situation Index Sep 65.0 64.5 65.7 11:00 DEM ZEW expectations Index Sep 17.0 19.0 25.0 11:00 EUR Trade balance EUR bn Jul 21.9 14:30 USD Retail sales control group m/m Aug 0.3% 0.4% 0.3% 14:30 USD Retail sales less autos m/m Aug -0.1% 0.1% 0.4% 14:30 USD Retail sales less autos and gas m/m Aug 0.2% 0.4% 0.4% 14:30 USD Retail sales m/m Aug 0.1% 0.3% 0.6% 14:30 USD Empire Manufacturing PMI Index Sep 0.5-14.9 15:15 USD Industrial production m/m Aug -0.2% 0.6% 15:15 USD Manufacturing production m/m Aug -0.2% -0.3% 0.8% 15:15 USD Capacity utilization % Aug 77.8% 78.0% Source: Bloomberg, Danske Bank Markets 3 15 September 2015 www.danskeresearch.com
Today s market data: 15 September 2015 STOCKS S&P500 Intraday, % Eurostoxx Intraday, % 0.30 0.30 Close 0 0 1 DJSTOXX50 3019-0.5% 0 Max 0.3 Max 1.5 OMXC20 942-1.1% -0.30 Min -0.9-0.30 0.30 Min -1.1 0.3 OMXS30 1468-1.4% -0.60 0.3-0.60-0.40 0.7-0.4 OSE BX 575-0.7% Close -0.90-0.90-1.10-1.1 DOW JONES 16371-0.4% 15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 Grey line indicates closing of Danish markets Grey line indicates opening of US markets NASDAQ 4806-0.3% 1 month -6.6% 1 month -9.2% S&P500 1953-0.4% Year-to-date -5.1% Year-to-date 0.5% NIKKEI (07:30) 18111-0.5% FX & COMMODITIES EUR/USD Intraday EUR 17:00 07:30 Gold, $ USD 112.99 113.12 0.13 07:30 1107.68 113.6 113.6 JPY 135.69 135.79 0.10 1 day -1.42 Max 114 GBP 73.40 73.32-8 1 month -7.41 113.3 113.3 Min 113 NOK 926.54 927.05 0.51 Year-t-date -77.18 113.0 0.3 113.0 SEK 934.41 934.67 0.26 DKK 746.08 746.06-2 CRB Oil, Brent, $ 46.36-1 -2.67-10.97 CRB, Raw Industrials 443.90-1.12-4.19-48.21 YIELDS & INTEREST RATES USD-Yields Intraday Spread, 0.74 2.21 Policy Rate 3M bp 17:00 07:30, bp USD2Y USD10Y USD 0.25 0.34 9 USD 10Y 2.18 2.18 0 Max 0.7 Max 2.2 EUR 5-4 -9 USD 30Y 2.94 2.95 1 0.72 2.19 Min 0.7 Min 2.2 USD2Y GBP 0.50 0.59 9 JPY 10Y 0.36 0.38 2 (lhs) 0 0 DKK 5-1 -6 0.70 USD102.17 Y (rhs) SEK -0.35-0.29 6 07:30(-1)* 17:00, bp 0.68 07 10 13 16 19 22 01 04 2.15 NOK 0 1.19 19 DEM 10Y 0.66 0.65-1 PLN 1.50 1.62 12 DKK 10Y 0.95 0.91-4 SEK 10Y 0.66 0.67 1 NOK 10Y 1.57 1.57 0 PLN 10Y 2.97 2.97-1 * As of closing previous trading day 2.5 2.0 1.52 1.5 0.5-0.5 10Y Yield Spread to Germany 2.31-0.27 1.20 0.41 1.20 0.26 1 0.92 USD JPY GBP FRF ITL DKKSEKNOKPLN 2.5 2.0 1.5 0.5-0.5 US Yield Curve German Yield Curve 3.0 1.8 2.5 1.3 0.9 0.8 2.0 0.8 0.7 1.5 0.6 3.00 Max 1.810 0.3 0.5 0 Max 00 0.4 0 Min -0.700 0 Min #### 0.5-0.2 0.3 0.2-0.7 0.1 USD2Y USD5Y USD10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) -0.1-0.2-0.3-0.4-0.5-0.6-0.7-0.8-0.9 - Non-finan. Credit spread, itraxx s. 11* 07:30 1 day 1 month 90 80 70 Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 70-3 2 60 300 JPY 10Y 3 3 1 HiVol 70 1 7 50 250 40 200 Xover (N-IG) 334 0 21 07:30(-1)* 17:00 30 150 EUR 10Y 0 18 18 20 100 10 50 DKK 10Y 34 34 0 Finan. Sr. 83 0 7 0 0 SEK 10Y 42 45 3 Sep Oct Dec Jan Mar Apr Jun Jul Sep Finan. Sub. 167 1 8 NOK 10Y 65 64-1 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 450 400 350 17:00 * As of closing previous trading day 07:30 112.7 112.7 PLN 420.91 420.87-4 1M future 07 10 13 16 19 22 01 04 USD 17:00 07:30 07:30 195.80 JPY 129 124-5 1 day -0.92 1 month 2.34 GBP 153.94 154.29 0.35 1 month -2.17 Year-to-date -7.86 CHF 96.97 96.82-0.15 Year-t-date -34.16 Source: Bloomberg, Danske Bank Markets 4 15 September 2015 www.danskeresearch.com
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