Investment Research — General Market Conditions

8 July 2010

Danske Daily
Key news
Market movers today: Today
US stocks post strong gains on increased earnings expectations.
ECB Governing Council meeting [Tex
Committee of European Banking supervisors overnight provided further information
on the EU-wide bank stress test exercise scheduled for announcement on 23 July. BoE announces interest rates
The IMF has raised global growth expectations this morning. US: Weekly initial jobless claims

Market overview
Markets Overnight
07:30 1 day +/-,%
There were no important data releases to drive the market yesterday. However, US
S&P500 (clo se) 1060.3  3.13
company, State Street, said in pre-market trading that its profits would beat expectations, S&P500 fut (chng fro m clo se) 1058.6  -0.07
Nikkei 9500.9  2.38
and this spurred a positive shift in sentiment as some investors raised broader Hang Seng 20148.4  1.47
expectations for the upcoming earnings season. US stocks were lifted around 3% during
17:00 07:30 +/-, bp
the trading sessions, and major global indexes gained the most in more than a month.
US 2y gov 0.60 0.63  2.4
US 10y gov 2.95 2.98  3.2
The increase in risk appetite led to a decline in US Treasuries, thus pushing ten-year
yields up from almost a 14-month low. In general, yields were higher across the curve last iTraxx Europe (IG) 119 123  3.9
iTraxx Xover (Non IG) 475 561  86
night. Yesterday, a Bloomberg News survey showed that the US Treasury may lower the
+/-, %
amount of securities it is selling for the second consecutive month. The Treasury will EUR/USD 1.263 1.266  0.26
announce amounts today. USD/JPY 87.280 88.310  1.18
EUR/CHF 1.33 1.33  0.02
EUR/GBP 0.830 0.833  0.34
In commodity markets oil prices took advantage of the rise in risk appetite and gained EUR/SEK 9.604 9.569  -0.36
more than 3%. EUR/NOK 8.09 8.07  -0.30

USD
Meanwhile in FX markets the dollar continues to be under pressure, and there are signs Oil Brent, USD 73.1 74.0  1.18
that investors have been pulling out of USD positions. Gold, USD 1193.3 1204.7  0.96
Note:
* The iTraxx Europe Index shows the spread
Most FX crosses have been fairly stable overnight – including the scandies. However, as
development for the most liquid investment grade CDS
risk appetite remained mainly positive in Asia, USD/JPY increased somewhat overnight. contracts in the euro credit market.

Japanese stocks have posted strong gains this morning, while Chinese stocks have tended **The iTraxx Europe Crossover shows the spread
development of the most liquid non-investment grade
to underperform. In general, Asian stocks have risen as the IMF raised its global growth CDS contracts in the euro credit market.
forecast and US trade group said that Japan’s retail grew the fastest in four years. Source: Bloomberg

Senior Analyst
Lars Tranberg Rasmussen
+45 4512 8534
laras@danskebank.dk

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Global Daily
Focus: Today’s main event is the ECB meeting. We do not expect any changes in rates
Swedish inflation to show decline
and the statement will probably be very similar to last month’s statement. The Q&A
5 % y/y 5
session will centre on the ECB’s bond purchase programme, what the ECB thinks about 4
% y/y
4
Underlying inflation
the tighter situation in the money markets, and the coming stress tests of European banks. 3 3
2 2
Markets will continue to be driven by risk appetite and focus today will be to see if 1 1
markets can hang on to the gains seen yesterday. On the data front, the UK is due to 0 0
-1 -1
release industrial production data and the Bank of England will announce rates although -2
Headline inflation
-2
no change is expected. 00 01 02 03 04 05 06 07 08 09 10

Fixed income: Bond markets continue to ride on the back of risk appetite and with equity Source: Reuters Ecowin

markets rallying bond yields crept higher. Although we do not expect any major changes
in signals from the ECB today, the market could be sensitive to comments on the liquidity
US S&P500 future
situation and the bond purchase programme. It is unclear whether the ECB is worried
about the rise in eonia and libor rates or whether it actually sees it as a positive sign that 1064 1064
1054 1054
markets have to work more on their own again. We suspect that the ECB is actually not 1044 1044
that unhappy about the development because it wants the markets to start working again 1034 1034
1024 1024
and not be too addicted to ECB liquidity for too long. If it signals this, it could put a bit of 1014 1014
upward pressure on short end rates. 1004 1004
Tue Wed Thu Mon Tue Thu
FX markets: The main event in the FX market will be the ECB meeting. For the FX Source: Danske Markets
market, the focal point will be ECB comments regarding further liquidity measures. The
market might also be looking for clues as to whether the ECB will be ready to move to
US 10y gov yield
outright quantitative easing like the Fed and BoE if the economy weakens further.
3.03 3.03
The market will also use the day to scrutinise the bank stress test methodology that was
released overnight ahead of the important 23 July stress test release – see link.
2.93 2.93

But risk is still the name of the game and if the positive sentiment in global equity
markets is sustained we could see further upside for EUR/USD today. The market is in 2.83 2.83
Tue Wed Thu Fri Tue Thu
our view currently more sensitive to positive news than negative. The next strong
resistance level in EUR/USD is found at 1.2740. Source: Danske Markets

The BoE is widely expected to keep rates unchanged at 0.5% and no market impact is
expected. Keep an eye on May industrial production numbers. Global FX
EUR/USD (LHS) USD/JPY (RHS)
1.275
Scandi Daily 89.1
1.255
88.4
Sweden: We expect inflation to decline to 1.0% in line with the consensus expectation.
1.235 87.7

Norway: There are no scheduled events in Norway today. If we take the latest rally in 1.215 87

global equity and oil prices into account, we believe that the NOK offers good value at Tue Wed Fri Mon Tue Thu

and think that one should seriously consider selling EUR/NOK at the current level. Source: Danske Markets

Key figures and events Scandi FX

EUR/SEK (LHS) EUR/NOK (RHS)
Thursday, July 8, 2010 Period Danske Bank Consensus Previous
8.14
9:30 SEK CPI m/m|y/y Jun 0.1%|1.0% 0.1%|1.0% 0.2%|1.2%
9.64
10:30 GBP Industrial Production m/m|y/y May 0.4%3.2% -0.4%|2.1% 8.08
12:00 DEM Industrial production mm/|y/y May 0.8%|9.2% 0.9%|13.3% 9.59 8.02
13:00 GBP BoE rate announcement Jul 0.5% 0.5%
13:45 EUR ECB Announces Interest Rates 1.0% 1.0% 1.0% 9.54 7.96
14:30 USD Initial jobless claims 1000 460 472
14:30 EUR ECB's Trichet Speaks at ECB Monthly News Conference 9.49 7.90
21:00 USD Consumer credit bn. USD May -2.0 1.0 Tue Wed Fri Mon Tue Thu

Source: Bloomberg and Danske Markets

Source: Danske Markets

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Today’s market data: 08 July 2010

STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
1.50 1.5 DJSTOXX50 2389  1.8%
2.70 2.70
Max 3.5 Max 2.3 OM XC20 404  0.7%
1.70 Min -0.3 1.70 0.40 Min -1.8 0.4 OM XS30 1020  1.1%
1.0 1.1 OSE B X 343  0.0%
0.70 0.70 -0.70 -0.7

Clo se +/-
-0.30 -0.30 -1.80 -1.8 DOW JONES 10018  2.8%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2159  3.1%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  -0.2% 1mo nth  2.2% S&P 500 1060  3.1%
Year-to -date  -4.9% Year-to -date  -7.6% NIKKEI (07:30) 9501  1.8%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
127.0 127.0
USD 126.26 126.59  0.33 07:30 1204.70 73.95
126.6 126.6 JP Y 110.21 111.79  1.58 1day  1.95  0.44
Max ## GB P 83.04 83.33  0.28 1mo nth  -31.85  1.65
126.2 126.2
Min ## NOK 809.09 806.65  -2.44 Year-t-date  107.75  -3.98

125.8
0.4 125.8
SEK 960.35 956.88  -3.47
DKK 745.35 745.36  0.01 CRB C R B , R aw
125.4 125.4 P LN 409.87 409.15  -0.72 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 258.24 474.18
JP Y 87.28 88.31  1.03 1day  4.44  0.70
1mo nth  6.86 GB P 152.05 151.92  -0.13 1mo nth  8.16  4.77
Year-to -date  -16.62 CHF 105.40 105.13  -0.27 Year-t-date  -25.14  -9.31

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
USD2Y USD10Y USD 0.25 0.53 28 USD 10Y 2.95 2.98  3
0.63 2.99
Max 0.6 Max 3.0 EUR 1.00 0.80 -20 USD 30Y 3.91 3.96  4
Min 0.6 Min 2.9 2.96
GB P 0.50 0.73 23 JP Y 10Y 1.15 1.16  1

0.61
0 0 DKK 1.05 1.13 8
2.93 SEK 0.50 0.84 34 07:30(-1)* 17:00 +/-, bp
NOK 2.00 2.71 71 DEM 10Y 2.58 2.60  2
0.59 2.90 P LN 3.50 3.75 25 DKK 10Y 2.65 2.69  3
07 10 13 16 19 22 01 04 SEK 10Y 2.64 2.63  -1
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.57 3.57  0
P LN 10Y 5.88 5.79  -9
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 4.0 4.0
3.20 4.5 3.0
3.5 4.0 3.5
3.0 3.0 2.5
3.0 3.5 3.0
2.5 3.0 2.0 2.5
2.0 1.49 2.0
2.0 2.5
0.97 2.0
1.0
0.76
1.0 1.5
## M ax 4.650 2.0 1.5 ## M ax # # #
0.38 0.37 1.5 1.5
0.000.04 1.0 ## M in 0.000 1.0 ## M in # # #
1.0 1.0
0.0 0.0 0.5 0.5
0.5 0.5
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 0.0
-1.0 -1.0 0.0 0.0
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.44 -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 6 6  0
120 700
Euro pe (IG) 123  -3  -17 JP Y 10Y 5 7  2
100 600
HiVo l 184  -3  -24 500
80
Xo ver (N-IG) 561  -3  -70 400 07:30(-1)* 17:00 +/-
60 300
40 EUR 10Y 29 28  -1
200
20 100 DKK 10Y 35 35  0
Finan. Sr. 148  0  -48 0 0 SEK 10Y 32 32  0
Finan. Sub. 225  -1  -71 Jul Aug Oct Nov Jan Feb Apr May Jul NOK 10Y 55 53  -2
No n-finan. 225  -1  -71 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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