Investment Research — General Market Conditions

20 July 2010

Danske Daily
Markets overnight
The bout of weak US data continues with the NAHB housing market index
Market movers today:
disappointing with a 14 reading (16 expected). Furthermore, the positive earnings surprises
appear to have lost some strength (e.g. Texas Instruments missing expectations slightly), USD: Housing starts and building
though overall Q2 earnings have so far come out above expectations – helping risky assets permits (14:30 CET)
perform against the backdrop of slowing global growth.
CAD: Bank of Canada meeting –
US stocks recovered; Asian markets are higher overnight. US stocks rebounded from 25bp hike expected (15:00 CET)
Friday’s big sell-off with the S&P500 index gaining 0.6%. Risk sentiment has improved
Q2 earnings (incl. Goldman Sachs,
further in Asia overnight where only the Japanese market is trading in red.
Apple, and Yahoo)
Longer dated US treasuries reversed past days’ bullish trend as rebounding stock
markets offset weak housing data. The 10-year yield is close to 5bp higher, while the 2-
year is broadly unchanged at 0.59%. Market overview
07:30 1 day +/-,%
HUF faced further pressure in late trading; EUR/USD is failing at 1.30. The
Hungarian Forint that came under pressure after the breakdown of EU/IMF loan S&P500 (clo se) 1071.3  0.60
S&P500 fut (chng fro m clo se) 1065.3  0.14
negotiations during the weekend, saw increased pressure from a strong EUR yesterday – Nikkei 9324.6  -0.89
EUR/HUF rising above 290. EUR/USD is still flirting with the 1.30 level. Hang Seng 20365.7  1.37

Reserve Bank of Australia minutes of the July meeting (when the cash rate was left 17:00 07:30 +/-, bp

unchanged at 4.50%) together with improved risk sentiment have boosted AUD overnight US 2y gov 0.58 0.59  0.8
– AUD/USD gaining more than 1% to trade close to 0.88. The minutes did raise concern US 10y gov 2.94 2.97  3.0

about the US/China slowdown however, which means that while the bank maintains its iTraxx Europe (IG) 117 121  4.5
tightening bias, further hikes are not right around the corner. The OIS market prices a 23% iTraxx Xover (Non IG) 442 543  ####

chance of an August hike. +/-, %

EUR/USD 1.297 1.297  0.00
USD/JPY 86.740 87.000  0.30

Global Daily EUR/CHF

EUR/GBP
1.36
0.853
1.37
0.850


0.12
-0.33
EUR/SEK 9.521 9.537  0.17
Today brings further insight into the state of the US housing market. Yesterday saw EUR/NOK 8.17 8.16  -0.07
the release of a weak sentiment indicator and today could bring further indications of a
slowdown, as the expiration of the home buyer tax credit in April is weighing on activity. USD
Oil Brent, USD 76.4 75.8  -0.90
We look for housing starts to have declined 4.6% m/m in June and for building permits to Gold, USD 1179.8 1183.7  0.33
have only moved marginally higher to 580k. Note:
* The iTraxx Europe Index show the spread development
Bank of Canada expected to hike by 25bp; watch out for a softer tone. A 25bp hike to
for the most liquid investment grade CDS contracts in
0.75% (the second since monetary policy was first tightened on 1 June) is widely expected the euro credit market.
in the market, whereby focus will be on the accompanying statement. With recent soft US
**The iTraxx Europe Crossover show the spread
data and increased macro uncertainty the risk is of a softer-than-expected statement, which
development of the most liquid non-investment grade
could weigh on CAD if indications are that the 109bp of expected tightening currently CDS contracts in the euro credit market.
priced on the 12-month horizon will not be met. Source: Bloomberg
JPY continues to frustrate the bears. Those looking for the yen to be the big loser as
global growth recovered (while Japan was once again left behind) have been sadly
disappointed this year. While USD/JPY moved back above 87 yesterday, persistently low
global rates imply that improved global growth expectations have not yet led to a JPY
depreciation. We maintain the view that higher rates in the US are needed to see JPY From 12-30 July Danske Daily will be
correct back lower, but that this is likely to be more of a theme for H1 2011. published in a reduced summer edition

Scandi Daily
No key data out of Scandinavia today apart from earnings (incl. TeliaSonera). Senior Analyst
Kasper Kirkegaard
+45 45 13 70 18
kaki@danskebank.com

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Key figures and events

Tuesday, July 20, 2010 Period Danske Bank Consensus Previous
- OTH Earnings - Whirlpool, Goldman Sachs, Apple, Yahoo
7:00 JPY Leading Economic Index, final Index May 98.7
8:00 DEM PPI m/m|y/y Jun 0.2%|1.2% 0.3%|0.9%
10:30 GBP Major banks mortgage approvals 1000 Jun 52 51
12:15 GBP CBI Industrial Trends Survey Index Jul -24 -23
14:30 USD Housing starts 1000 (m/m) Jun 565 (-4.6%) 577 (-2.8%) 593 (-10.0%)
14:30 USD Building Permits 1000 (m/m) Jun 580 (0.1%) 570 (-0.7%) 574 (-5.9%)
15:00 CAD Bank of Canada announce key policy interest rate 0.75% 0.75% 0.5%
16:00 USD Fed's Tarullo (voter, neutral) speaks

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