Investment Research — General Market Conditions

29 June 2010

Danske Daily
Key news
Market movers today: Today
US equity markets end the trading day slightly lower.
Focus on the roll-over of the 12m [Tex
Asian equity markets in the red as questions rise about the growth outlook for the
LTRO and non-farm payrolls later
region and the global economy.
this week
US yields drop to record lows. Two-year yield is at 0.61, while the 10-year yield is
Conference board US consumer
just below 3%.
confidence and Case-Shiller house
JPY and CHF have strengthened, while AUD, NZD and EUR have weakened. prices
Price of oil moves lower. Retail sales in Sweden and credit
indicator growth in Norway

Markets Overnight Market overview

On US equity markets commodity producers fell, weighing on the main indices in a 07:30 1 day +/-,%
reaction to lower oil prices yesterday. S&P500 fell 0.2%. S&P500 (clo se) 1074.6  -0.20
S&P500 fut (chng fro m clo se) 1065.3  -0.52
The negative sentiment has carried over into Asian trading where the leading indices are Nikkei 9567.4  -1.31
Hang Seng 20504.3  -1.07
in the red. Concerns surrounding the Chinese growth outlook as the eurozone debt crisis
lingers on and China tightens economic policy to avoid property bubbles also weighed on 17:00 07:30 +/-, bp

stocks in the region. Weak household spending and a rise in unemployment in Japan also US 2y gov 0.63 0.60  -3.2
US 10y gov 3.06 2.98  -7.7
contributed to sour the mood on Asian equity markets.
iTraxx Europe (IG) 119 125  5.4
US bond yields have continued lower on soft risk appetite and demand ahead of the end iTraxx Xover (Non IG) 448 547  99

of the quarter. Fed hikes are being pushed out into an ever-more distant future. The two- +/-, %
EUR/USD 1.234 1.226  -0.66
year Treasury yield is 2bp lower at 0.61% after briefly setting a new all-time low of USD/JPY 89.280 88.670  -0.68
0.601, taking out the previous record low from December 2008. EUR/CHF 1.34 1.33  -0.32
EUR/GBP 0.816 0.813  -0.45
EUR/SEK 9.533 9.518  -0.16
At the time for writing, the 10-year benchmark US yield is below 3% for the first time EUR/NOK 7.91 7.92  0.11
since April last year – a drop of 6bp compared with yesterday afternoon.
USD
Oil Brent, USD 77.6 77.2  -0.53
On FX markets the yen has strengthened on rising risk aversion and a weaker economic Gold, USD 1249.4 1240.2  -0.74
outlook. USD/JPY has moved from 89.3 yesterday afternoon to 88.92 this morning. This Note:
* The iTraxx Europe Index shows the spread
is the strongest yen in seven weeks. The Swiss franc has strengthened further during the development for the most liquid investment grade CDS
morning, taking EUR/CHF to 1.331. contracts in the euro credit market.

The euro has lost ground against the greenback with EUR/USD moving from 1.234 to **The iTraxx Europe Crossover shows the spread
development of the most liquid non-investment grade
1.226 this morning. The AUD has moved from 0.873 to 0.866 vis-à-vis the greenback, CDS contracts in the euro credit market.
with NZD falling from 0.708 to 0.703 against the US dollar. Source: Bloomberg

The price of oil is about half a dollar lower a barrel. Concerns about the global growth
outlook and a tropical storm avoiding the production areas in the Gulf of Mexico is
causing the move lower in the price of oil.

Senior Analyst
Jesper Fischer-Nielsen
+45 45 12 85 18
jfis@danskebank.dk

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Danske Daily

Global Daily
Focus today: Market focus will be on the potential fall-out from the expiry of the ECB’s
US consumer confidence to flatline
EUR442bn 12-month LTRO from June 2009 on Thursday. Concerns are that the weak
120 Index Index 120
banks will face intensified short-term funding pressures despite that ECB providing full
100 100
liquidity allotment on shorter maturities. There is a relatively thin calendar today. In the
80 80
US, the main event will be the US consumer confidence index from the Conference
60 60
Board for June, which we expect to post a flat reading following solid increases in March- Conference Board
40 Consumer confidence 40
May. Case-Shiller house prices for April are expected to show a minor decline on the 20 20
month, but remain above the level a year ago. 02 03 04 05 06 07 08 09 10

Fixed income markets: Fear of funding pressures continues to push Eonia rates higher in Source: Reuters Ecowin

the European money markets. This is adding some upward pressure on two-year Schatz
yields, which have been moving higher over the past week despite the souring risk
US S&P500 future
sentiment and significantly lower yields on Bunds and across the US Treasury curve. The
economic data due today is not likely to have any big impact. The fixed income markets 1123 1123
will be awaiting the events later this week including the expiry of the LTRO, the US ISM 1113 1113
1103 1103
and payrolls. In the meantime, risk appetite will be in the driving seat. 1093 1093
1083 1083
FX markets: The Swiss franc and Sterling have been the big EUR currency 1073 1073
1063 1063
outperformers in recent trading. Yesterday, EUR/CHF broke below 1.34 with franc Fri Mon Wed Thu Fri Tue
buying likely being fuelled by accelerated unwinding of CHF funding. The SNB remains Source: Danske Markets
sidelined (i.e. refrains from intervention) and signals by statements that deflationary risks
have practically disappeared. This means that the market will be allowed to set the price
US 10y gov yield
of the franc for now. We doubt that the SNB will re-enter the market unless volatility
becomes too high (i.e. the appreciation uncontrolled) and will publish updated CHF 3.31 3.31
forecasts today – pencilling in further strength. Renewed sovereign spread widening in
3.21 3.21
the PIIGS, and hawkish comments by BoE’s Sentance, have helped Sterling stronger and
3.11 3.11
EUR/GBP below 0.82. With risky assets under pressure, a stronger USD could drag
3.01 3.01
EUR/GBP even lower today.
Fri Mon Wed Thu Fri Tue
Scandi Daily Source: Danske Markets
Sweden: Swedish May retail sales will draw some attention especially as last month’s
outcome (-0.2% m/m/-1.2 % y/y) was considerably weaker than expected. We expect a
slight rebound in the year-on-year growth rate to about flat in May. Indeed, consumer Global FX
confidence has rebounded strongly over the past year, reflecting stronger sentiment about EUR/USD (LHS) USD/JPY (RHS)

both households’ own economy as well as the more general macro economic outlook. 1.251 91.3
Nonetheless, over the past month or so, a stabilisation is visible in both the consumer 1.241 90.4
micro index and retail trade sentiment, possibly signalling some further weakness in retail 1.231 89.5

sales. After all, Riksbank’s rate hikes are closing in (raising the repo rate later this week) 1.221 88.6
Fri Mon Wed Thu Fri Tue
and there is no more fiscal stimulus on the cards. This suggests consumers’ purchasing
power is now slowly withdrawing, eroding the spending outlook somewhat. Source: Danske Markets

Key figures and events

Tuesday, June 29, 2010 Period Danske Bank Consensus Previous Scandi FX
- NOK Credit indicator (C2) y/y May 4.1% 4.00% 4.0%
EUR/SEK (LHS) EUR/NOK (RHS)
8:00 CHF Consumption indicator May 1.763
8:45 FRF Consumer confidence Net bal. Jun -39 -38
9.61 8.01
9:00 ESP Inflation (HICP), Preliminary y/y Jun 1.8%
9:30 SEK Retail sales m/m|y/y May 1.0%|0.3% -0.2%|-1.2% 9.57 7.95
10:30 GBP Net Consumer Credit GBP bn Jun 0.1 -0.1 9.53 7.89
10:30 GBP Mortgage Approvals 1000 May 51 49.9
9.49 7.83
10:30 GBP Broad money M4 m/m|y/y Jun 0.0%|2.8%
11:00 EUR Business Climate Indicator Index Jun 0.32 0.34 Fri Mon Wed Thu Fri Tue
11:00 EUR Industrial Confidence Net balanc Jun -6 -6
11:00 EUR Consumer confidence Net balanc Jun -17 -17 Source: Danske Markets
11:00 EUR Services confidence Net balanc Jun 3 3
15:00 USD S&P Case Shiller house prices -0.15%|3.4% -0.05%|2.3%
16:00 USD Consumer confidence Index Jun 63.0 62.5 63.3

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Today’s market data: 29 June 2010

STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
0.60 0.60 1.50 1.5 DJSTOXX50 2431  1.3%
Max 0.8 Max 1.9 OM XC20 404  0.3%
0.20 Min -0.6 0.20 0.80 Min -0.6 0.8 OM XS30 1026  0.4%
0.4 0.7 OSE B X 345  0.0%
-0.20 -0.20 0.10 0.1

Clo se +/-
-0.60 -0.60 -0.60 -0.6 DOW JONES 10139  -0.1%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2221  -0.1%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  -1.4% 1mo nth  1.7% S&P 500 1075  -0.2%
Year-to -date  -3.6% Year-to -date  -6.0% NIKKEI (07:30) 9567  1.3%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
124.0 124.0
USD 123.39 122.58  -0.81 07:30 1240.18 77.16
123.6 123.6 JP Y 110.16 108.70  -1.46 1day  1.23  -0.43
Max ## GB P 81.63 81.27  -0.37 1mo nth  25.80  3.14
123.2 123.2
Min ## NOK 790.66 791.54  0.88 Year-t-date  143.23  -0.77

122.8
0.4 122.8
SEK 953.32 951.76  -1.56
DKK 744.57 744.58  0.01 CRB C R B , R aw
122.4 122.4 P LN 413.62 414.97  1.35 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 263.53 482.67
JP Y 89.28 88.67  -0.61 1day  -2.08  1.67
1mo nth  -0.48 GB P 151.16 150.85  -0.31 1mo nth  8.73  -0.09
Year-to -date  -20.63 CHF 108.26 108.63  0.37 Year-t-date  -19.85  -0.82

YIELDS & INTEREST RATES

USD-Yields Intraday S pre a d,
P o lic y R a t e 3M bp 17:00 07:30 +/-, bp
0.68
USD2Y USD10Y USD 0.25 0.53 28 USD 10Y 3.06 2.98  -8
3.09
Max 0.7 Max 3.1 EUR 1.00 0.75 -25 USD 30Y 4.04 3.97  -6
0.65
Min 0.6 Min 3.0 GB P 0.50 0.73 23 JP Y 10Y 1.16 1.13  -3
3.05
0 0 DKK 1.05 1.12 7
0.62 SEK 0.25 0.76 51 07:30(-1)* 17:00 +/-, bp
3.01
NOK 2.00 2.73 73 DEM 10Y 2.62 2.59  -3
0.59 2.97 P LN 3.50 3.75 25 DKK 10Y 2.71 2.69  -1
07 10 13 16 19 22 01 04 SEK 10Y 2.66 2.64  -2
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.52 3.52  0
P LN 10Y 5.99 6.01  1
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 3.42 4.0 4.0
-0.8 3.0 0.0
3.5
3.0 3.0 2.5 -0.5
3.0 -2.8
2.5 -1.0
2.0 1.54 2.0 2.0
-4.8 -1.5
1.00 0.94 2.0
1.0
0.79
0.53 1.0 1.5
## M ax 0.000 -6.8
1.5 ## M ax # # # -2.0
0.40
0.05 1.0 ## M in -10.830 1.0 ## M in # # # -2.5
0.0 0.0 -8.8
0.5 0.5 -3.0
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -10.8
-1.0 -1.0 0.0 -3.5
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.45 -2.0 D-t-D +/-, bp (right axis)
07:30 (left axis) D-t-D +/-, bp (right axis)
1 month ago (left axis) 07:30 (left axis)
1 month ago (left axis)

C re dit s pre a d, iT ra xx Credit spreads S wa p S pre a d, bp**

160 900 17:00 07:30 +/-

07:30 1day 1mo nth 140 800 USD 10Y 7 6  -1
120 700
Euro pe (IG) 125  -2  7 JP Y 10Y 8 9  1
100 600
HiVo l 186  3  7 500
80
Xo ver (N-IG) 547  -4  -13 400 07:30(-1)* 17:00 +/-
60 300
40 EUR 10Y 31 33  3
200
20 100 DKK 10Y 35 38  3
Finan. Sr. 157  -2  -4 0 0 SEK 10Y 34 36  2
Finan. Sub. 243  -1  4 Jun Aug Sep Nov Dec Feb Mar May Jun NOK 10Y 56 54  -2
No n-finan. 243  -1  4 iTraxx Europe (IG) (left axis)
iTraxx Xover (Non IG) (right axis) * As of closing previous trading day
* Ask price ** Ask price

So urce: B lo o mberg 7:30(-1) o g 17:00 refers to the previo us (trade) day

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