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Investment Research — General Market Conditions

6 August 2010

Danske Daily
Key news
Market movers today:
 Disappointing weekly US job data sent stocks lower ahead of today’s US employment
report. Treasuries gain slightly. Very quiet FX markets.  USD: Non-farm payrolls (14.30
CET)
 Wheat prices surge to 2-year high after Russian export ban raises global food fears.
 NOK: Manufacturing production
 Nobel Prize winner Stiglitz says that the US needs another round of stimulus.
(10.00 CET)
 GBP: Industrial and manufacturing
Markets Overnight production (10.30 CET)
US stocks retreated slightly yesterday on concerns that the job market is recovering  DEM: Industrial production (12.00
slower than anticipated. Compared to a week ago, initial jobless claims rose instead of CET)
falling and continuing claims fell less than expected. The S&P500 index lost 0.1% after  Earnings: Dexia, RBS, AIG
having spent most of the trading session deeper in negative territory. Information-
technology shares led the losses. Investors sought safety in Treasuries, which rose Market overview
broadly. The increase in Treasuries pushed the yield on the 10-year note down to 2.90%.
07:30 1 day +/-,%

Equity markets in Asia have been mixed overnight with the MSCI Asia Pacific index S&P500 (clo se) 1125.8  -0.13
S&P500 fut (chng fro m clo se) 1124.7  0.11
little changed. Japan’s Nikkei225 index is 0.3% lower on concerns that the strong yen Nikkei 9632.9  -0.22
will hurt exporters. Hang Seng 21671.6  0.56

17:00 07:30 +/-, bp


FX markets have been extremely quiet overnight. EUR/USD has traded in a narrow
US 2y gov 0.54 0.54  0.0
range just below 1.32 while USD/JPY has climbed towards 86. The Scandinavian US 10y gov 2.90 2.91  1.0
currencies haven’t moved against the euro. EUR/CHF spiked to 40 pips 1.3840 in a thin
iTraxx Europe (IG) 99 102  3.3
Asian session but is now a little lower. iTraxx Xover (Non IG) 383 473  89.6

In commodity markets, wheat has soared to USD8.68 a bushel, the highest level since +/-, %
EUR/USD 1.314 1.318  0.27
August 2008. A heatwave in Russia, dry weather in Kazakhstan, Ukraine and the USD/JPY 85.870 86.080  0.24
EUR/CHF 1.38 1.38  0.44
European Union, and flooding in Canada have ruined crops and sent wheat prices up 94% EUR/GBP 0.830 0.830  -0.03
since 9 June. The Russian Prime Minister, Vladimir Putin, responded to his country’s EUR/SEK 9.398 9.394  -0.04
EUR/NOK 7.90 7.89  -0.14
crippling drought yesterday by banning grain exports from 15 August until the end of the
USD
year. Oil Brent, USD 81.5 81.6  0.06
Gold, USD 1192.6 1195.8  0.27
In a Bloomberg interview overnight, Nobel Prize-winning economist Joseph Stiglitz said Note:
the US economy faces an “anaemic recovery” and the government will need to enact * The iTraxx Europe Index show the spread
development for the most liquid investment grade CDS
another round of “better designed” stimulus measures. The Obama administration took contracts in the euro credit market.
“a big gamble and it doesn’t look like it’s paying off,” Stiglitz said who added that “It’s
**The iTraxx Europe Crossover show the spread
absolutely clear that you need a second round of stimulus”. Financial markets don’t even development of the most liquid non-investment grade
price a full hike from the Fed over the next 12 months now. CDS contracts in the euro credit market.
Source: Bloomberg

Senior Analyst
John Musaeus Hydeskov
+45 45 12 84 97
johy@danskebank.dk

www.danskeresearch.com
Danske Daily

Global Daily
Focus today: The main event today is the US employment report for July. Once again
Will private payrolls improve?
payroll data will be negatively affected by the continued layoff of Census workers, hence
focus will be on private hiring. We expect a moderate report with +80K in private
payrolls and an unchanged unemployment rate at 9.6%. Hence, the report should do little
to calm fears for H2. Earning reports from Dexia, RBS and AIG will probably make some
headlines as well.

Fixed income markets: Global bond markets will focus on the non-farm payrolls to
gauge the robustness of the economy into H2. A reading in the 50-150K range (including
net revisions) in private payrolls would probably be reasonably within expectations given Source: Reuters Ecowin

the usual volatility of the report. Hence, we do not expect any significant market reactions
to the release, as a reading around +80K would not provide much new information for the
US S&P500 future
markets about the H2 outlook, but as always caution is warranted.

FX markets: The dollar will be in the hands of payroll data and a weak outcome might 1124 1124

1114 1114
be another slap in the greenback’s face. It is important to emphasize that it is a matter of
1104 1104
balance however; a really dreadful number might send the dollar stronger as stock
1094 1094
markets will react negatively if the jobs report is really bad. One has to be careful today.
1084 1084
Also pay attention to EUR/CHF that seems like it can go somewhat higher on the short Wed Thu Mon Tue Wed Fri
horizon. We still see GBP as too expensive but today’s UK data will probably not cause Source: Danske Markets
any correction.

US 10y gov yield


Scandi Daily
Norway: We expect a decent pick-up in Norwegian manufacturing production in June 3.02 3.02
after a weak reading in May (-0.9% m/m). However, with all eyes on non-farm payrolls
2.92 2.92
we do not expect any significant market impact.
2.82 2.82
No economic data out of Sweden and Denmark today.
Wed Thu Fri Tue Wed Fri

Source: Danske Markets

Key figures and events


Friday, August 6, 2010 Period Danske Bank Consensus Previous Global FX
- OTH Earnings: Dexia, RBS, AIG
EUR/USD (LHS) USD/JPY (RHS)
10:00 ITL Industrial production m/m|y/y Jun 0.1%|.. 1.0%|10.5%
10:00 NOK Manufacturing Production, sa. m/m|y/y Jun 0.6%|.. -0.9%|2.2% 88
1.327
10:30 GBP PPI - Input m/m|y/y Jul -0.5%|11.4% -0.2%|10.7%
1.317 87.1
10:30 GBP PPI - Output m/m|y/y Jul 0.1%|4.9% -0.3%|5.1%
10:30 GBP Industrial Production m/m|y/y Jun 0.2%|2.0% 0.7%|2.6% 1.307 86.2
10:30 GBP Manufacturing production m/m|y/y Jun 0.5%|4.3% 0.3%|4.3%
1.297 85.3
11:00 ITL GDP, Preliminary q/q|y/y 2nd quarter 0.4%|1.2% 0.4%|0.5%
12:00 DEM Industrial production mm/|y/y Jun 1.1%|.. 1.0%|11.4% 2.6%|12.4% Wed Thu Mon Tue Wed Fri
13:00 CAD Unemployment rate Jul 7.9% 7.9%
13:00 CAD Net change in employment Jul 10000 93200 Source: Danske Markets
14:30 USD Nonfarm payrolls 1000 Jul -70 -60 -125
14:30 USD Private payrolls 1000 Jul 80 90 83
14:30 USD Average Weekly Hours m/m Jul 34.1 34.1
14:30 USD Average hourly earnings m/m|y/y Jul 0.1%|1.7% -0.1%|1.7% Scandi FX
14:30 USD Unemployment % Jul 9.60% 9.6% 9.5%
16:00 CAD Ivey PMI index Jul 56.0 58.9 EUR/SEK (LHS) EUR/NOK (RHS)
21:00 USD Consumer credit bn. USD Jun -6.0 -9.1 9.54
8.03
9.49
7.97
9.44
9.39 7.91

9.34 7.85
Wed Thu Mon Tue Wed Fri

Source: Danske Markets

2| 6 August 2010
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Danske Daily

Today’s market data: 06 August 2010


STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
0.20 0.20
DJSTOXX50 2536  -0.3%
0.60 0.6
Max 0.3 Max 1.0 OM XC20 425  0.3%
-0.20 -0.20
Min -1.0 0.10 Min -0.9 0.1 OM XS30 1074  0.3%
0.4 0.5 OSE B X 374  0.0%
-0.60 -0.60
-0.40 -0.4
Clo se +/-
-1.00 -1.00 -0.90 -0.9 DOW JONES 10675  -0.1%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2293  -0.5%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  9.5% 1mo nth  8.0% S&P 500 1126  -0.1%
Year-to -date  1.0% Year-to -date  -1.9% NIKKEI (07:30) 9633  -0.3%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
132.3 132.3 USD 131.43 131.79  0.36 07:30 1195.80 81.57
JP Y 112.86 113.44  0.58 1day  0.85  -0.04
131.9Max ## 131.9 GB P 83.02 82.99  -0.03 1mo nth  3.17  10.12
Min ## NOK 789.77 788.67  -1.10 Year-t-date  98.85  3.64
131.5 0.4 131.5 SEK 939.77 939.37  -0.40
DKK 745.13 745.15  0.02 CRB C R B , R aw
131.1 131.1 P LN 399.06 399.16  0.10 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 277.67 491.97
JP Y 85.87 86.08  0.21 1day  -1.31  1.94
1mo nth  5.53 GB P 158.33 158.80  0.47 1mo nth  24.17  18.49
Year-to -date  -11.42 CHF 104.71 104.88  0.17 Year-t-date  -5.71  8.48

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
0.59 2.97
USD2Y USD10Y USD 0.25 0.42 17 USD 10Y 2.90 2.91  1
0.57 Max 0.6 Max 3.0 EUR 1.00 0.90 -10 USD 30Y 4.03 4.06  3
2.94
Min 0.5 Min 2.9 GB P 0.50 0.74 24 JP Y 10Y 1.04 1.06  2
0.55
0 0 DKK 1.05 1.15 10
2.91 SEK 0.50 0.95 45 07:30(-1)* 17:00 +/-, bp
0.53
NOK 2.00 2.68 68 DEM 10Y 2.60 2.56  -4
0.51 2.88 P LN 3.50 3.71 21 DKK 10Y 2.70 2.66  -4
07 10 13 16 19 22 01 04 SEK 10Y 2.69 2.62  -7
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.33 3.33  0
P LN 10Y 5.88 5.82  -5
* As of closing previous t rading day

10Y Yield Spread to Germany


US Yield Curve German Yield Curve
4.0 4.0 3.0
3.25 3.0
-0.4 1.9
3.0 3.0 2.5
2.5 0.9
2.0 -0.9
2.0 2.0 2.0 -0.1
1.27 1.5 -1.4
1.0 0.67 0.77
1.0
## M ax 0.000 1.5 ## M ax # # # -1.1
0.35 0.26 1.0 -1.9
0.090.07 ## M in -2.920 1.0 ## M in # # # -2.1
0.0 0.0 0.5 -2.4
0.5 -3.1
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -2.9
-1.0 -1.0 0.0 -4.1
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.50 -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 s . 11* Credit spreads S wa p S pre a d, bp**

160 700 17:00 07:30 +/-


07:30 1day 1mo nth 140 600 USD 10Y -2 0  2
Euro pe (IG) 102  3  -23 120 500 JP Y 10Y 6 7  1
100
HiVo l 151  5  -36 400
80
Xo ver (N-IG) 473  11  -91 300 07:30(-1)* 17:00 +/-
60
40 200 EUR 10Y 28 29  0
20 100 DKK 10Y 37 38  2
Finan. Sr. 112  4  -37 0 0 SEK 10Y 32 31  -1
Finan. Sub. 171  5  -55 Aug Sep Nov Dec Feb Mar May Jun Aug NOK 10Y 69 66  -2
No n-finan. 171  5  -55 iTraxx Europe (IG) (left axis)
iTraxx Xover (Non IG) (right axis) * As of closing previous t rading day
* Ask price ** Ask price

3| 6 August 2010
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Financial models and/or methodology used in this research report


Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors upon request.

Risk warning
Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis
of relevant assumptions, are stated throughout the text.

Expected updates
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First date of publication


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