Investment Research — General Market Conditions

10 August 2010

Danske Daily
Key news
Market movers today: Today
Equity markets gained in the US but lost steam in Asian trading
All eyes on the FOMC meeting [Tex
Bank of Japan kept its liquidity measures and the overnight rate unchanged
tonight
China’s trade surplus climbed to an 18-month high in July
Norwegian CPI

Markets Overnight Market overview

Investors returned to the US equity market after Friday’s employment report sent stock 07:30 1 day +/-,%

prices slightly lower, but trading was light. Speculations that the Fed might introduce new S&P500 (clo se) 1127.8  0.55
S&P500 fut (chng fro m clo se) 1120.4  -0.46
measures to support economic growth in the FOMC statement this evening lent the Nikkei 9532.2  -0.42
Hang Seng 21580.6  -1.01
market some support. The S&P 500 posted a gain of 0.6% on the day driven by broad
based gains with the energy sector in the lead. 17:00 07:30 +/-, bp

US 2y gov 0.53 0.52  -0.8

In Asia, equity markets are broadly lower this morning. In Japan, stocks initially got a lift US 10y gov 2.83 2.82  -0.6
from the weaker JPY and improved earnings, but the Nikkei is down at the time of
iTraxx Europe (IG) 97 103  5.5
writing. At its monetary policy meeting this morning, the Bank of Japan refrained from iTraxx Xover (Non IG) 383 470  87.4

adding measures to expand liquidity as it gauges the risks to the economy from the +/-, %
strengthening of JPY. The central bank maintained both the benchmark overnight rate and EUR/USD 1.325 1.315  -0.73
USD/JPY 85.770 85.830  0.07
its assessment of the economy. EUR/CHF 1.39 1.39  0.08
EUR/GBP 0.831 0.832  0.16
EUR/SEK 9.398 9.415  0.18
In China, the trade surplus beat market expectations and climbed to an 18-month high in EUR/NOK 7.89 7.92  0.30
July, as exports surged 38.1% y/y while imports grew a less than expected 22.7%. The
USD
data could add pressure on China to stimulate domestic demand and allow its currency to Oil Brent, USD 81.0 80.4  -0.64
Gold, USD 1202.2 1200.7  -0.12
appreciate faster than the modest rise in the yuan seen so far.
Note:
* The iTraxx Europe Index show the spread
In bond markets, US yields increased slightly yesterday as market participants took
development for the most liquid investment grade CDS
some profit ahead of the FOMC meeting tonight after last week’s rally. The 2-year note contracts in the euro credit market.

was up 3bp while the 10-year treasury yield was stable. **The iTraxx Europe Crossover show the spread
development of the most liquid non-investment grade
In FX markets, USD has strengthened since European close while JPY has weakened CDS contracts in the euro credit market.
against most major currencies after hitting its strongest level since November towards Source: Bloomberg
USD last week.

Wheat prices slid for a second day after prices surged to a 23-month high last week.
Stockpiles are considered sufficient to meet current demand and speculations that farmers
will plant more wheat is putting downward pressure on prices.

Senior Analyst
Signe Roed-Frederiksen
+45 4512 8229
sroe@danskebank.dk

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Danske Daily

Global Daily
Focus today: All eyes on the Fed today as the market is raising expectations that the Fed
Inflation in Norway still subdued
will add more fuel to underpin the recovery. Although we believe the Fed will twist the
6 % y/y 6
statement in a more dovish direction we don’t expect it will add new measures at this 5
% y/y
5
CPI
stage. This is likely to be a disappointment for the market and we see a risk of higher 4 4
3 3
yields on back of the statement – see also Fed preview released today. Earlier in the day 2 2
we get unit labour costs and productivity for Q2 where we look for an increase of 0.4% 1 1
0 0
q/q annualised, lower than consensus of 1.6% q/q annualised. -1
Core inflation (CPI-ATE)
-1
05 06 07 08 09 10
Fixed income markets: Speculation over additional measures from the Fed has been
widespread but we see the risk skewed toward higher yields on the statement. This will Source: Reuters Ecowin

not change the downward trend in yields, though, and with Fed still expected to be on
hold for a very long time carry is king and investors still move out on the yield curve
US S&P500 future
keeping longer yields down. This has also led to substantial flattening of the 2-5 and 2-10
yield curve. The 5-year point looks expensive now on the curve but with the attractive 1124 1124
carry this may not go away in the short run. 1114 1114

1104 1104
FX markets: Focus will be on whether the Fed will address recent weeks’ weak US data
1094 1094
and perhaps open up for another round of monetary stimulus. The rate announcement will
1084 1084
probably not shake EUR/USD much, but a soft tone could send the dollar lower. Stock Fri Mon Wed Thu Fri Tue
performance remains the key driver of EUR/USD, but the relationship has been stronger Source: Danske Markets
than at present.
Scandi Daily US 10y gov yield
In Norway the market will focus on inflation numbers. We believe that core inflation will
jump from 1.3% y/y in June to 1.5% y/y in July. Even though our forecast is marginally
2.95 2.95
above the consensus forecast of 1.4% y/y which is also the Norges Bank forecast, we
2.85 2.85
doubt we will see any significant market reaction. The Norwegian market is also awaiting
the FOMC meeting tonight. 2.75 2.75
Fri Mon Wed Thu Fri Tue
Key figures and events
Source: Danske Markets
Tuesday, August 10, 2010 Period Danske Bank Consensus Previous
8:00 DEM Inflation (HICP) m/m|y/y Jul 0.3%|1.2% 0.3%|1.2% 0.3%|1.2%
8:45 FRF Industrial production m/m|y/y Jun -0.2%|7.3% 1.7%|8.2%
9:30
9:30
DKK
DKK
CPI
Industrial production
m/m|y/y
m/m
Jul
Jun
-0.4%|1.9% -0.2%|1.7%
4.4%
Global FX
10:00 NOK Consumer prices m/m|y/y Jul -0.1%|1.9%
10:00 NOK Core inflation(CPI-ATE) m/m|y/y Jul -0.4%|1.4% 0.2%|1.3% EUR/USD (LHS) USD/JPY (RHS)
87.4
10:00 NOK Producer prices, incl. Oil m/m|y/y Jul 2.3%|11.4% 1.338
10:30 GBP Trade balance GBP mln. Jun -3817 86.8
11:15 EUR ECB Announces Allotment in 7-Day Refinancing Tender EUR bn 154.8
11:15 EUR ECB Announces Allotment in 1-Month Refinancing Tender EUR bn 49.4 1.318 86.2
14:30 USD Unit labour cost q/q 2nd quarter 0.4% 1.6% -1.3%
85.6
20:15 USD FOMC meeting % 0.25 0.25
1.298 85
Source: Bloomberg and Danske Markets Fri Mon Wed Thu Fri Tue

Source: Danske Markets

Scandi FX
EUR/SEK (LHS) EUR/NOK (RHS)

9.46 7.97

9.42 7.93

9.38 7.89

9.34 7.85
Fri Mon Wed Thu Fri Tue

Source: Danske Markets

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Danske Daily

Today’s market data: 10 August 2010

STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
0.90 0.90
2.00 2 DJSTOXX50 2551  1.6%
Max 1.0 Max 2.3 OM XC20 425  1.4%
0.50 0.50
Min -0.3 1.50 Min 0.5 1.5 OM XS30 1074  0.8%
0.4 0.5 OSE B X 373  0.0%
0.10 0.10 1.00 1

Clo se +/-
-0.30 -0.30 0.50 0.5 DOW JONES 10699  0.4%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2306  0.8%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  4.6% 1mo nth  5.0% S&P 500 1128  0.5%
Year-to -date  1.1% Year-to -date  -1.3% NIKKEI (07:30) 9532  1.6%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
USD 132.47 131.50  -0.97 07:30 1200.65 80.44
132.8 132.8
JP Y 113.61 112.87  -0.74 1day  -0.70  -0.55
Max ## GB P 83.05 83.19  0.13 1mo nth  -10.95  5.02
132.3 132.3
Min ## NOK 789.23 791.63  2.40 Year-t-date  103.70  2.51
131.8
0.5 131.8
SEK 939.84 941.52  1.68
DKK 745.06 745.10  0.04 CRB C R B , R aw
131.3 131.3 P LN 397.41 398.24  0.83 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 274.59 479.74
JP Y 85.77 85.83  0.06 1day  -0.12  -17.11
1mo nth  5.54 GB P 159.49 158.09  -1.40 1mo nth  13.97  4.63
Year-to -date  -11.71 CHF 104.58 105.44  0.86 Year-t-date  -8.79  -3.75

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
0.55 2.85
USD2Y USD10Y USD 0.25 0.40 15 USD 10Y 2.83 2.82  -1
Max 0.6 Max 2.9 EUR 1.00 0.90 -10 USD 30Y 4.01 4.02  0
0.53 2.83
Min 0.5 Min 2.8 GB P 0.50 0.75 25 JP Y 10Y 1.03 1.03  0
0 0 DKK 1.05 1.15 10
0.51 2.81 SEK 0.50 0.96 46 07:30(-1)* 17:00 +/-, bp
NOK 2.00 2.69 69 DEM 10Y 2.53 2.53  0
0.49 2.79 P LN 3.50 3.71 21 DKK 10Y 2.65 2.61  -4
07 10 13 16 19 22 01 04 SEK 10Y 2.58 2.58  -1
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.34 3.34  0
P LN 10Y 5.81 5.82  1
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 4.0 4.0
3.29 3.0
3.5 0.6 -0.2
3.0 3.0 2.5
3.0 -0.7
0.4
2.0 2.0 2.5 2.0
1.25 -1.2
2.0 0.2
1.0
0.72 0.81
1.0 1.5
## M ax 0.790 1.5 ## M ax # # # -1.7
0.30 0.25 0.0
0.090.06 1.0 ## M in -0.360 1.0 ## M in # # # -2.2
0.0 0.0 -0.2
0.5 0.5 -2.7
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -0.4
-1.0 -1.0 0.0 -3.2
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 0 0  0
Euro pe (IG) 103  -1  -14 120 500 JP Y 10Y 5 7  2
100
HiVo l 150  -2  -26 400
80
Xo ver (N-IG) 470  -2  -65 300 07:30(-1)* 17:00 +/-
60
40 200 EUR 10Y 26 27  1
20 100 DKK 10Y 38 38  0
Finan. Sr. 114  0  -21 0 0 SEK 10Y 32 32  0
Finan. Sub. 172  -1  -31 Aug Sep Nov Dec Feb Mar May Jun Aug NOK 10Y 64 64  0
No n-finan. 172  -1  -31 iTraxx Europe (IG) (left axis)
iTraxx Xover (Non IG) (right axis) * As of closing previous trading day
* Ask price ** Ask price

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