Investment Research — General Market Conditions

23 July 2010

Danske Daily
Markets overnight
For a change we were flooded with encouraging news yesterday. Macroeconomic
Market movers today:
data were stronger than expected across the board. Most important, euro area
manufacturing PMI and service PMI both unexpectedly improved in July and German IFO-Business Climate
industrial new orders surged more than 3% m/m in May. If the euro area is indeed the (10:00 CET)
weakest link in the global economy, this bodes well for the global economy.
UK Q2 GDP (10:30 CET)
In addition Q2 earnings on balance continue to beat expectations. Yesterday
Release of European bank stress
cyclical companies like Caterpillar, UPS, Volvo and ABB not only beat expectations
tests by CEBS starts at 18:00
on their Q2 earnings, but also provided strong earnings guidance for the coming
CET. A press conference is
quarters. After market close Microsoft and American Express reported better
planned for 19:00 CET
than expected Q2 earnings with American Express saying that fewer customers
defaulted on credit card debt. However, Amazon.com missed its earnings estimate. Q2 earnings (incl. Ford and
Ericsson )
The US stock market rallied on the back of the strong cocktail of encouraging
macroeconomic data and strong earnings. S&P 500 closed up 2.3% but is largely
unchanged since market close in Europe. Asian stock markets are taking their lead Market overview
this morning mainly from the positive sessions in Europe and the US yesterday and
07:30 1 day +/-,%
Nikkei and Hang Seng are up 2.2% and 1.0% respectively.
S&P500 (clo se) 1093,7  2,25
US bond yields were higher and the yield curve steepened markedly on the back of S&P500 fut (chng fro m clo se) 1091,3  0,33
Nikkei 9468,2  2,68
the improved risk sentiment in the market. However, 2-year and 10-year US bond Hang Seng 20814,6  1,09
yields are largely unchanged since market close in Europe yesterday at 0.57% and
17:00 07:30 +/-, bp
2.94% respectively.
US 2y gov 0,58 0,56  -1,7
In the FX market USD and JPY weakened markedly on the back of the improved US 10y gov 2,92 2,94  1,6
risk sentiment in the market, but have strengthened marginally since market close in
iTraxx Europe (IG) 113 115  2,5
Europe. EUR/USD this morning is trading just below 1.290 and USD/JPY is trading iTraxx Xover (Non IG) 418 518  100,1
at 86.88. SEK and NOK have strengthened further against EUR.
+/-, %
EUR/USD 1,291 1,291  -0,01
USD/JPY 87,030 87,040  0,01
Global Daily EUR/CHF 1,34 1,35  0,18
EUR/GBP 0,846 0,844  -0,22
Today focus will be on the release of European bank stress tests by the EUR/SEK 9,444 9,407  -0,39
EUR/NOK 7,98 7,96  -0,24
Committee of European Bank Supervisors (CEBS). The results will be available
after market close in Europe. The impact on EUR sovereign markets depends on USD
Oil Brent, USD 77,3 77,6  0,40
whether investors perceive the stress scenarios as tough enough and the transparency Gold, USD 1195,8 1195,8  0,00
of the process. If too few banks fail the test investors will probably react negatively Note:
and risky assets should underperform. Further, if a country has an overrepresentation * The iTraxx Europe Index show the spread development
for the most liquid investment grade CDS contracts in
of failed bank this will increase the likelihood of government recapitalization of the euro credit market.
banks, which will hamper government budgets, increase debt ratios and increase
supply pressure. All in all we expect that the sovereign bonds of such countries will **The iTraxx Europe Crossover show the spread
development of the most liquid non-investment grade
underperform. CDS contracts in the euro credit market.

On the economic front focus will be on the release of Ifo business climate in Source: Bloomberg
Germany and Q2 GDP in the UK. Based on yesterday’s strong PMIs Germany still
appears to be roaring ahead and we expect Ifo to have improved further in July. From 12-30 July Danske Daily will be
published in a reduced summer edition

Scandi Daily
With no major economic releases today, focus in Scandinavia will again mainly be on
earnings reports from among others Ericsson, Scania and Skanska. Senior Analyst
Flemming J. Nielsen
+45 45 12 85 35
flemm@danskebank.com

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Danske Daily

Key figures and events

Friday, July 23, 2010 Period Danske Bank Consensus Previous
- OTH Earnings - Ford
- EUR European Banking Stress Test
9:15 EUR ECB's Gonzales-Paramo Speaks
9:30 ITL Consumer confidence Jul 104.4
10:00 ITL Retail Sales m/m|y/y May -0.3%|-0.5%
10:00 DEM IFO - Business Climate Index Jul 102.1 101.5 101.8
10:00 DEM IFO - Current Assesment Index Jul 102.4 101.7 101.1
10:00 DEM IFO - Expectations Index Jul 101.8 101.5 102.4
10:30 GBP GDP q/q|y/y 2nd quarter 0.6%|1.1% 0.3%|-0.2%
10:30 GBP BBA loans for house purchase Jun 37000 36709
13:00 CAD CPI m/m|y/y Jun 0.3%|1.4%
13:00 CAD CPI - BoC core rate m/m|y/y Jun 0.3%|1.8%

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Danske Daily

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