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Investment Research — General Market Conditions

5 August 2010

Danske Daily
Key news
Market movers today: Today
Higher-than-forecasted ADP and service are pushing stocks higher worldwide.
SEK: Unemployment (09.30) [Tex
Finance Minster Yoda’s comments on the yen do little to curb strengthening.
NOK: Unemployment (10.00)
Wheat futures’ rally regains strength – up 71% since June low.
DEM: Factory orders (12.00CET)
GBP: BoE rate announcement
Markets Overnight (13.00CET)
US stocks climbed higher yesterday as investors got cheered by hints of an improving EUR: ECB announces interest
employment picture. The S&P500 index advanced 0.6% to 1127 as the ADP survey rates (13.45CET)
showed a better-than-expected 42,000 jobs in July, fuelled by hiring at small and
EUR: ECB press conference
medium-sized businesses. The data offered relief ahead of tomorrow's release of the non- (14.30CET)
farm payroll numbers. Meanwhile, the Institute for Supply Management's non-
Earnings: Novo Nordisk, Barclays,
manufacturing purchasing managers' index bucked forecasts to rise to 54.3 in July, from
Rio Tinto and Commerzbank
53.8 in June, indicating expanding activity.

Asian shares have gained overnight on the back of the rosy US data. Japanese Market overview
automakers were driving strong gains in the Tokyo market after Toyota posted stellar
07:30 1 day +/-,%
quarterly earnings and delivered a bullish outlook. Japan's Nikkei225 index was up 1.9%,
S&P500 (clo se) 1127,2  0,61
Australia's S&P/ASX 200 was up 0.6%, South Korea's Kospi index was flat and New S&P500 fut (chng fro m clo se) 1123,7  -0,08
Nikkei 9617,6  1,35
Zealand's NZX-50 was up 0.1%. In New Zealand, shares have given back some early Hang Seng 21540,0  -0,05
gains after data showed higher than expected unemployment in Q2.
17:00 07:30 +/-, bp

In bond markets, US treasury yields ended 2-6bp higher across the curve, with the 5Y US 2y gov 0,56 0,56  0,0
US 10y gov 2,94 2,95  0,4
leading the losses after a recent run of big outperformance. The Treasury announced a
USD74bn refunding package for auction next Tuesday to Thursday (34bn 3Y, 24bn 10Y iTraxx Europe (IG) 94 99  4,9
iTraxx Xover (Non IG) 375 463  88,0
and 16bn 30Y).
+/-, %
In FX markets, the solid US data have interrupted the yen’s gains, but only slightly. EUR/USD 1,315 1,316  0,07
USD/JPY 86,270 86,160  -0,13
Finance Minister Yoshihiko Noda strengthened the rhetoric yesterday, saying the yen's EUR/CHF 1,38 1,39  0,30
EUR/GBP 0,828 0,828  -0,01
"current movement is a little one-sided." He also promised to "monitor" yen exchange EUR/SEK 9,387 9,399  0,13
rates "more closely". USD/JPY is trading around 86 this morning. Other major pairs have EUR/NOK 7,88 7,88  0,04

been relatively quiet with EUR/USD a little lower and the Scandinavian currencies USD
Oil Brent, USD 82,6 81,8  -0,93
marginally stronger. EUR/CHF continues to edge higher after the low Swiss data on Gold, USD 1199,9 1193,9  -0,49
Tuesday. Note:
* The iTraxx Europe Index show the spread
In commodity markets, wheat futures' eight-week rally regained steam yesterday by development for the most liquid investment grade CDS
contracts in the euro credit market.
surging 6.7% to above USD7.25 a bushel on the Chicago Board of Trade, their highest
since September 2008. In total, gains for the grain are an astonishing 71% from a June **The iTraxx Europe Crossover show the spread
development of the most liquid non-investment grade
low. The price surge – fuelled by widespread crop failures in Russia – has now prompted CDS contracts in the euro credit market.
a range of companies, including breadmakers and owners of pizza chains, to voice cost Source: Bloomberg
concerns.

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 ECB meeting, which is generally expected to
German manufacturing orders
be a non-event and we thus do not look for any major market reactions. We expect the
ECB to keep its refi rate unchanged at 1.0% and do not expect it to announce any new 125
Index Index 125

liquidity or other emergency measures. Focus will be on the press conference, where 115 115

105 105
Trichet is likely to take comfort in the latest market developments and economic news
95 95
flow, which have been mainly positive. Elsewhere Bank of England is announcing its rate
85 85
decision, Germany is releasing factory order data and in the US initial jobless claims data 75
German manufacturing orders
75
are due. 00 01 02 03 04 05 06 07 08 09

Fixed income markets: Momentum in US and German bond markets remains bullish and Source: Reuters Ecowin

the marginally better-than-expected US data readings yesterday did little to change that.
Today all eyes will be on the ECB meeting, which we believe will have limited impact on
US S&P500 future
markets. Schatz yields have moved up from panic levels as peripherals have tightened and
liquidity draining has pushed EONIA higher. But with little new information expected 1124 1124

from the ECB and no major US data releases we believe that markets will trade more or 1114 1114

less sideways. Next big event is the payrolls report tomorrow. 1104 1104

1094 1094
FX markets: EUR/USD can as always be volatile around the press conference in ECB
1084 1084
and the euro can advance slightly against the dollar if Trichet acknowledges the recent Tue Wed Fri Mon Tue Thu

favourable data out of Euroland and the European bank stress tests. BoE’s rate Source: Danske Markets
announcement will most likely be a non-event, but risk is still for additional quantitative
easing, i.e. risks to the pound. The yen’s rally can run out of steam if US data get back on
US 10y gov yield
track and mutes talks on more stimuli from the Fed. We don’t see much downside in
USD/JPY and look for a consolidation in the pair before selling yen. EUR/CHF continues
to edge but 1.40 serves as a psychological support level. 3.02 3.02

2.92 2.92

Scandi Daily 2.82 2.82

In Sweden and Norway, unemployment data are on the agenda and will give investors a Tue Wed Fri Mon Tue Thu

hint where one of the most important inputs for the rate decisions is heading. Foreclosures Source: Danske Markets
and bankruptcies data out of Denmark; not likely to be much of a market mover.

Global FX
EUR/USD (LHS) USD/JPY (RHS)
Key figures and events 1.335
88
Thursday, August 5, 2010 Period Danske Bank Consensus Previous
1.315 87.1
- OTH Earnings: Novo Nordisk, Barclays, Rio Tinto, Commerzbank
9:30 DKK Foreclosures (s.a.) Jul 457 86.2
9:30 DKK Bankruptcies (s.a.) Jul 539
1.295 85.3
9:30 SEK Statistics Sweden, Unemployment % Jun 9.6 8.8
10:00 NOK Unemployment s.a. (LFS) % May 3.7 3.7 Tue Wed Fri Mon Tue Thu
12:00 DEM Factory Orders m/m|y/y Jun 1.5%|21.9% 1.4%|21.6% -0.5%|24.8%
13:00 GBP BoE rate announcement Aug 0.5% 0.5% 0.5% Source: Danske Markets
13:00 GBP BoE Asset Purchase Target Bn Aug 200 200 200
13:45 EUR ECB Announces Interest Rates 1.00% 1.00% 1.00%
14:30 USD Initial jobless claims 1000 455 457
14:30 EUR ECB's Trichet Speaks at ECB Monthly News Conference Scandi FX
16:30 USD ICSC chain store sales
EUR/SEK (LHS) EUR/NOK (RHS)
9.54
8.03
9.49
7.97
9.44
9.39 7.91

9.34 7.85
Tue Wed Fri Mon Tue

Source: Danske Markets

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Today’s market data: 05 August 2010


FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
132,4 132,4 USD 131,47 131,56  0,09 07:30 1193,93 81,82
JP Y 113,42 113,35  -0,07 1day  -1,03  -0,38
132,0Max ## 132,0 GB P 82,81 82,81  0,00 1mo nth  -15,34  10,35
Min ## NOK 788,21 788,49  0,28 Year-t-date  96,98  3,89
131,6 0,4 131,6 SEK 938,67 939,85  1,18
DKK 745,08 745,06  -0,02 CRB C R B , R aw
131,2 131,2 P LN 399,20 398,57  -0,63 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 278,98 490,03
JP Y 86,27 86,16  -0,11 1day  2,35  0,96
1mo nth  6,18 GB P 158,74 158,87  0,13 1mo nth  24,50  16,55
Year-to -date  -11,65 CHF 105,05 105,29  0,24 Year-t-date  -4,40  6,54

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
0,57 USD2Y USD10Y USD 0,25 0,42 17 USD 10Y 2,94 2,95  0
2,95
Max 0,6 Max 3,0 EUR 1,00 0,90 -10 USD 30Y 4,07 4,07  1
0,55 Min 0,5 Min 2,9 2,92
GB P 0,50 0,75 25 JP Y 10Y 1,01 1,03  3
0 0 DKK 1,05 1,15 10
0,53 2,89 SEK 0,50 0,94 44 07:30(-1)* 17:00 +/-, bp
NOK 2,00 2,66 66 DEM 10Y 2,60 2,61  0
0,51 2,86 P LN 3,50 3,71 21 DKK 10Y 2,77 2,70  -7
07 10 13 16 19 22 01 04 SEK 10Y 2,70 2,70  0
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3,33 3,33  0
P LN 10Y 5,86 5,86  0
* As of closing previous trading day

10Y Yield Spread to Germany


US Yield Curve German Yield Curve
4,0 4,0 3,0
3,25 3,0
8,0
2,5 1,5
3,0 3,0 7,0 2,5
2,0 6,0
2,0 2,0 2,0 1,0
1,25 5,0
1,5
0,69 0,73 ## M ax 8,790 4,0 1,5 ## M ax 1,700
1,0 1,0 0,5
0,34 0,27 1,0 3,0
0,100,09 ## M in 0,000
2,0
1,0 ## M in # # #
0,0 0,0 0,5 0,0
1,0 0,5
USD JPYGBPFRF ITL DKKSEKNOKPLN 0,0 0,0
-1,0 -1,0 0,0 -0,5
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2,0 -1,57 -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 -2  0
Euro pe (IG) 99  1  -29 120 500 JP Y 10Y 7
100
HiVo l 146  2  -44 400
80
Xo ver (N-IG) 463  7  -107 300 07:30(-1)* 17:00 +/-
60
40 200 EUR 10Y 29 28  -1
20 100 DKK 10Y 38 37  -1
Finan. Sr. 108  3  -46 0 0 SEK 10Y 33 32  0
Finan. Sub. 166  5  -66 aug sep nov dec feb mar maj jun jul NOK 10Y 70 68  -2
No n-finan. 166  5  -66 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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