Investment Research — General Market Conditions

6 July 2010

Danske Daily
Key news
Market movers today: Today
Equity markets continue to drift lower with bond yields following.
ECB weekly refinancing operation [Tex
Baltic Dry Index continues to decline, signalling weaker trade flows.
(MRO)
EUR/USD unchanged while upward pressure on EUR/SEK continues.
US ISM non-manufacturing
Service sector data in US today key for sentiment. (16:00 CET)

Market overview
Markets Overnight
07:30 1 day +/-,%
European equity markets lost further ground yesterday while the US was closed as
S&P500 (clo se) 1022.6  -0.47
sentiment continues to wane on double-dip fears. Fears over regional defaults in the US S&P500 fut (chng fro m clo se) 1014.5  0.02
Nikkei 9324.0 0.62
are also starting to get some attention – see FT article. In Asian trading, the S&P500 Hang Seng 19884.3

 0.21
future opened lower but recouped some of the losses. Asian stocks have climbed into
17:00 07:30 +/-, bp
positive territory.
US 2y gov 0.63 0.60  -2.4
The Baltic Dry index has declined further to the lowest level since September 2009, US 10y gov 2.97 2.94  -3.8

adding to fears that global trade flows are slowing. Oil prices also trade lower to iTraxx Europe (IG) 122 127  5.5
iTraxx Xover (Non IG) 481 568  86
USD71.50.
+/-, %
Bond yields have followed in the footsteps of risk appetite with further declines EUR/USD 1.253 1.255  0.18
USD/JPY 87.770 87.680  -0.10
yesterday in Germany and US bond yields opening lower in Asia after the holiday EUR/CHF 1.33 1.33  -0.16
EUR/GBP 0.829 0.828  -0.11
yesterday. Intra-euro bond markets were relatively quiet yesterday and while Euro libor EUR/SEK 9.623 9.628  0.05
rates rose further the increase was smaller than in previous days. EUR/NOK 8.07 8.09  0.20

USD
In FX markets EUR/USD traded lower overnight but has recovered a bit this morning. Oil Brent, USD 71.5 71.5  0.03
JPY has strengthened versus both EUR and USD. Upward pressure on EUR/SEK has Gold, USD 1206.3 1209.0  0.22
Note:
continued overnight, taking the pair to 9.64. EUR/DKK continues to push slightly higher, * The iTraxx Europe Index shows the spread
trading just above 7.45 this morning. 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.
Source: Bloomberg

Chief Analyst
Allan von Mehren
+45 4512 8055
alvo@danskebank.dk

www.danskeresearch.com
Danske Daily

Global Daily
Focus today: The main event today will be the US ISM non-manufacturing index. In
Can ISM non-manufacturing hold up?
particular, the forward-looking new orders index will be important for sentiment. There
65 Index 65
was a nasty surprise yesterday in the UK with service PMI business expectations falling 60
ISM service Index
60
sharply, which might indicate that the service sector is being hit the most by the rising 55 55
50 50
concerns over a double-dip scenario. The decline in the UK may be a reflection of the 45 45
austerity measures presented by the British government and hence due to local factors. 40 40
35 35
We look for a decline to 54.4 in US ISM non-manufacturing – slightly below consensus. 30
ISM manufacturing
30
02 03 04 05 06 07 08 09 10
Fixed income markets: The ECB’s weekly refinancing will be more interesting than
usual today as duration has shortened substantially on bank liquidity after the expiry of Source: Reuters Ecowin

the 1Y LTRO and limited demand on the three-month LTRO. Excess liquidity has been
reduced and the weekly roll of liquidity will be important going forward for money
US S&P500 future
market rates and Euro bond yields with shorter maturity.
1074 1074
Risk appetite continues to drive overall bond markets and with equities falling further, 1064 1064
German bond yields fell to 2.54% yesterday – close to the lows seen in June. The 1054
1044
1054
1044
downward trend in yields is thus intact and we need a turn in risk appetite to change this. 1034 1034
1024 1024
1014 1014
FX: Today, the FX market will be focusing on the non-manufacturing ISM. If we see 1004 1004
another disappointment today it could weigh further on the dollar. Over the past couple of Fri Mon Wed Thu Fri Tue
weeks the market has been selling the dollar on weak numbers instead of the safe-haven Source: Danske Markets
reaction (dollar buying) that prevailed earlier this year. The fear of slowing growth,falling
US rates and risk aversion continues to boost the yen. Over night, USD/JPY has dipped
below 88 - a level not seen since December 2009. From a technical perspective, the next US 10y gov yield
target is 86.17 - the 1 December 2009 low. Strong support is found at 85.86. For more on
support and resistance levels, see Danske Technical Update. 3.13 3.13

3.03 3.03

2.93 2.93

2.83 2.83
Fri Mon Tue Wed Fri Tue

Source: Danske Markets

Key figures and events
Tuesday, July 6, 2010 Period Danske Bank Consensus Previous
9:15 CHF CPI m/m|y/y Jun -0.2%|0.8% -0.1%|1.1%
9:30 DKK Industrial production m/m May -0.8% Global FX
9:30 DKK Business Sales May
9:30 DKK Enforced sales (s.a.) Jun 455 EUR/USD (LHS) USD/JPY (RHS)
11:15 EUR ECB's weekly Main Refinancing Operation (MRO)
16:00 USD ISM (NAPM) non-manufacturing Index Jun 54.4 55.0 55.4 89.7
1.255
Source: Bloomberg and Danske Markets 88.8
1.235
87.9

1.215 87
Fri Mon Wed Thu Fri Tue

Source: Danske Markets

Scandi FX
EUR/SEK (LHS) EUR/NOK (RHS)
8.12
9.64
8.06
9.59 8.00
9.54 7.94
9.49 7.88
Fri Mon Wed Thu Fri Tue

Source: Danske Markets

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Today’s market data: 06 July 2010

STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
0.20 0.20
DJSTOXX50 2288  -0.4%
0.70 0.7
Max 0.3 Max 1.1 OM XC20 391  0.3%
-0.10 -0.10
Min -0.7 0.20 Min -0.8 0.2 OM XS30 981  -0.2%
0.3 0.5 OSE B X 324  0.0%
-0.40 -0.40
-0.30 -0.3

Clo se +/-
-0.70 -0.70 -0.80 -0.8 DOW JONES 9686  -0.5%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2092  -0.5%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  -4.0% 1mo nth  -3.7% S&P 500 1023  -0.5%
Year-to -date  -8.3% Year-to -date  -11.5% NIKKEI (07:30) 9324  -0.4%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
125.6 125.6 USD 125.28 125.51  0.23 07:30 1208.95 71.47
JP Y 109.96 110.04  0.08 1day  -0.33  0.00
125.3Max ## 125.3 GB P 82.93 82.83  -0.09 1mo nth  -10.95  -0.62
Min ## NOK 807.14 808.79  1.65 Year-t-date  112.00  -6.46
125.0 0.3 125.0 SEK 962.30 962.80  0.50
DKK 745.20 745.25  0.05 CRB C R B , R aw
124.7 124.7 P LN 411.62 412.07  0.45 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 254.48 473.39
JP Y 87.77 87.68  -0.09 1day  0.00  -0.74
1mo nth  6.28 GB P 151.08 151.53  0.45 1mo nth  5.54  -2.51
Year-to -date  -17.70 CHF 106.41 106.04  -0.37 Year-t-date  -28.90  -10.10

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
0.64 2.99
USD2Y USD10Y USD 0.25 0.53 28 USD 10Y 2.97 2.94  -4
Max 0.6 Max 3.0 EUR 1.00 0.79 -21 USD 30Y 3.94 3.91  -4
0.62 2.96
Min 0.6 Min 2.9 GB P 0.50 0.73 23 JP Y 10Y 1.12 1.12  1
0 0 DKK 1.05 1.13 8
0.60 2.93 SEK 0.25 0.83 58 07:30(-1)* 17:00 +/-, bp
NOK 2.00 2.81 81 DEM 10Y 2.57 2.55  -2
0.58 2.90 P LN 3.50 3.75 25 DKK 10Y 2.68 2.65  -3
07 10 13 16 19 22 01 04 SEK 10Y 2.61 2.60  -1
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.53 3.53  0
P LN 10Y 5.96 5.88  -8
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 3.33 4.0 4.0 -0.1 3.0
3.5 -0.1
-0.6
3.0 3.0 2.5 -0.6
3.0 -1.1
-1.6 -1.1
2.0 1.47 2.0 2.5 2.0
-2.1 -1.6
0.98 2.0
1.0
0.78
1.0 1.5
## M ax 0.000 -2.6 1.5 ## M ax # # # -2.1
0.39 0.38 -3.1 -2.6
0.000.06 1.0 ## M in -4.610 1.0 ## M in # # #
-3.6 -3.1
0.0 0.0 0.5 0.5
-4.1 -3.6
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -4.6
-1.0 -1.0 0.0 -4.1
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.42 -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 9 8  0
120 700
Euro pe (IG) 127  0  -8 JP Y 10Y 6 7  2
100 600
HiVo l 188  4  -14 500
80
Xo ver (N-IG) 568  -1  -56 400 07:30(-1)* 17:00 +/-
60 300
40 EUR 10Y 30 30  1
200
20 100 DKK 10Y 37 36  0
Finan. Sr. 153  -1  -36 0 0 SEK 10Y 33 33  -1
Finan. Sub. 232  -3  -52 Jul Aug Oct Nov Jan Feb Apr May Jun NOK 10Y 58 55  -3
No n-finan. 232  -3  -52 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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