Investment Research — General Market Conditions

3 August 2010

Danske Daily
Key news
Market movers today: Today
S&P500 close at highest level in two-and-a-half months on strong earnings
US personal spending (14.30 [Tex
US 2-year yield at new low as Bernanke signals concern over economy
CET)
Commodity prices get boost from rise in sentiment
US pending home sales (16.00
EUR/USD reaches highest level since early May on positive risk appetite CET)
Danish currency reserve (16.00
CET)
Markets Overnight
Strong earnings reports continue to boost equity markets leading to the highest close of
Market overview
S&P500 in two-and-a-half months. Positive surprises from BNP Paribas and HSBC gave
07:30 1 day +/-,%
a further lift to sentiment as markets shrugged off weak PMI data out of China and the US
S&P500 (clo se) 1125.9  2.20
ISM where the forward-looking new orders index reached the lowest level in more than a S&P500 fut (chng fro m clo se) 1119.3  -0.22
year – see Flash Comment. Nikkei 9670.6  1.05
Hang Seng 21519.2  0.50

In Asian markets sentiment has weakened slightly with the S&P500 future slightly in 17:00 07:30 +/-, bp
red. Nikkei is higher while Chinese shares have traded a bit lower US 2y gov 0.55 0.55  -0.8
US 10y gov 2.94 2.94  0.7
Commodity prices have seen a significant rally on stronger sentiment. Oil prices rose
iTraxx Europe (IG) 95 101  5.5
USD2 per barrel yesterday to USD81.4 and the LME metal price index is now up close to iTraxx Xover (Non IG) 375 459  83.3
25% from the bottom reached in June. Wheat prices have continued to rise significantly
+/-, %
on severe droughts in Russia – see FT. EUR/USD 1.319 1.318  -0.08
USD/JPY 86.400 86.420  0.02
US 2-year bond yields reached a new low below 0.55% as Fed chairman Bernanke EUR/CHF 1.37 1.37  0.16
EUR/GBP 0.830 0.830  0.03
yesterday warned that the economy had “a considerable way to go” before making a full EUR/SEK 9.354 9.352  -0.02
EUR/NOK 7.87 7.88  0.07
recovery. An article in Wall Street Journal speculates the Fed might make a dovish twist
to its statement next week as it may indicate that proceeds from maturing bonds in the USD
Oil Brent, USD 80.6 80.8  0.26
asset purchases will be reinvested. The market now expects Fed to be on hold until Q4 Gold, USD 1185.1 1182.1  -0.25
Note:
2011. 10-year bond yields rose yesterday on the back of rising risk appetite but have
* The iTraxx Europe Index show the spread
slipped overnight to remain unchanged from the European close development for the most liquid investment grade CDS
contracts in the euro credit market.
In FX markets EUR/USD pushed higher again yesterday reaching the highest level since
**The iTraxx Europe Crossover show the spread
early May at just below 1.32. The pair is broadly unchanged overnight. SEK and NOK development of the most liquid non-investment grade
followed the same pattern as they also gained yesterday on higher risk appetite. NOK is CDS contracts in the euro credit market.

also getting support from the rise in oil prices. Source: Bloomberg

Chief Analyst
Allan von Mehren
+45 4512 8055
alvo@danskebank.dk

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Danske Daily

Global Daily
Focus today: Focus remains on incoming macro data and earnings reports. There is little
Pending home sales. Will it recover?
interesting news out of the Eurozone today. In the US personal spending data for June
will incorporate the information from the Q2 national account data, which included 125
Index Index 125

revisions both in consumption and savings rate. The core PCE inflation will print its 115 115

105 105
second 0.2% m/m reading, which is likely to help ease some of the deflation fears. The
95 95
most important number will be the US pending home sales report, which will provide Pending home sales
85 85
information about the pace of existing home sales after the collapse following the expiry 75 75
of the first time homebuyer tax credit. In the evening US vehicle sales will provide the 01 02 03 04 05 06 07 08 09 10

first piece of information about July spending. Source: Reuters Ecowin

Fixed income markets: US government bond yields remain decoupled from the rally in
equity and credit markets, as the Fed continues to communicate low rates for an very long
US S&P500 future
period and leading indicators continue to decline gradually. While today’s housing data
are likely to be important, we do not expect any change in the current trading patterns. US 1124 1124

bond yields are likely to remain gridlocked in a relatively narrow range – at least until 1114 1114

Friday’s payrolls release. In Europe a couple of bond auctions in the UK and Austria 1104 1104

could attract some attention, but with little news elsewhere German yields are likely to 1094 1094

trade sideways. 1084 1084

Fri Mon Wed Thu Fri Tue
FX markets: Buoyant equity markets and rising commodity prices sent EUR/USD Source: Danske Markets
through the important 1.3125 level yesterday, which opens for a test of our 1M target,
1.33. CHF is very much in the hands of stock markets and today’s CPI data are in our
US 10y gov yield
view not going to change this. GBP looks expensive according to our short-term models
but yesterday’s solid PMI data point towards sound economic expansion. Watch out for
3.04 3.04
heightened AUD volatility after the RBA once again kept rates unchanged.
2.94 2.94

Scandi Daily 2.84 2.84

We expect the Danish currency reserve to have decreased DKK10-12bn in July due to Fri Mon Tue Thu Fri Tue

intervention to support DKK. If our estimate is correct, the currency reserve will amount Source: Danske Markets
to around DKK428bn, more than enough to sustain any potential pressure on DKK. We
don’t expect the Danish Central Bank to consider changing its rates at present and believe
we will have to see currency outflow of at least 20-40bn before official rates are raised. Global FX
EUR/USD (LHS) USD/JPY (RHS)

1.32 88.1

87.4
Key figures and events 1.3
86.7
Tuesday, August 3, 2010 Period Danske Bank Consensus Previous
1.28 86
- OTH Earnings: Dow Chemical, BMW, UniCredit, P&G, Mastercard
9:15 CHF CPI m/m|y/y Jul -0.5%|0.7% -0.4%|0.5% Fri Mon Wed Thu Fri Tue
10:30 GBP PMI Construction Jul 58.0 58.4
14:30 USD Personal income m/m Jun 0.2% 0.2% 0.4% Source: Danske Markets
14:30 USD Personal spending m/m Jun 0.2% 0.1% 0.2%
14:30 USD PCE core inflation m/m|y/y May 0.2%|1.3% 0.1%|1.3% 0.2%|1.3%
16:00 USD Factory Orders m/m Jun 0.0% -1.4%
16:00 USD Pending home sales m/m|y/y Jun 4.0%|.. -30.0%|-15.6% Scandi FX
16:00 DKK Currency reserves (Change) DKK bn Jul 438.4 (-2.2)
23:00 USD Total Vehicle Sales m Jul 11.6 11.08 EUR/SEK (LHS) EUR/NOK (RHS)
9.54
Source: Bloomberg and Danske Markets 8.03
9.49
7.97
9.44
9.39 7.91

9.34 7.85
Fri Mon Wed Thu Fri

Source: Danske Markets

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Today’s market data: 03 August 2010

STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
Clo se +/-
2.10 2.10 2.70 2.7
DJSTOXX50 2545  2.8%
Max 2.6 Max 3.3 OM XC20 421  2.4%
1.30 Min -0.3 1.30 1.90 Min 0.3 1.9 OM XS30 1075  2.6%
0.8 0.8 OSE B X 370  0.0%
0.50 0.50 1.10 1.1

Clo se +/-
-0.30 -0.30 0.30 0.3 DOW JONES 10674  2.0%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2295  1.8%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  10.1% 1mo nth  10.8% S&P 500 1126  2.2%
Year-to -date  1.0% Year-to -date  -1.6% NIKKEI (07:30) 9671  2.8%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
131.9 131.9 USD 131.86 131.75  -0.11 07:30 1182.05 80.83
JP Y 113.93 113.85  -0.08 1day  -0.80  0.01
131.4Max ## 131.4 GB P 82.96 82.98  0.02 1mo nth  -29.55  9.18
Min ## NOK 787.01 787.57  0.56 Year-t-date  85.10  2.90
130.9 0.5 130.9 SEK 935.36 935.20  -0.16
DKK 745.03 745.05  0.02 CRB C R B , R aw
130.4 130.4 P LN 398.26 398.12  -0.14 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 276.85 481.44
JP Y 86.40 86.42  0.02 1day  2.50  -4.36
1mo nth  6.37 GB P 158.96 158.77  -0.19 1mo nth  22.37  5.99
Year-to -date  -11.46 CHF 103.53 103.79  0.26 Year-t-date  -6.53  -2.05

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
2.98
USD2Y USD10Y USD 0.25 0.44 19 USD 10Y 2.94 2.94  1
0.57
Max 0.6 Max 3.0 2.96 EUR 1.00 0.90 -10 USD 30Y 4.04 4.05  1
Min 0.5 Min 2.9 GB P 0.50 0.75 25 JP Y 10Y 1.06 1.05  0
2.94
0.55
0 0 DKK 1.05 1.15 10
SEK 0.50 0.93 43 07:30(-1)* 17:00 +/-, bp
2.92
NOK 2.00 2.65 65 DEM 10Y 2.68 2.70  2
0.53 2.90 P LN 3.50 3.71 21 DKK 10Y 2.80 2.79  -1
07 10 13 16 19 22 01 04 SEK 10Y 2.75 2.77  2
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.36 3.36  0
P LN 10Y 5.84 5.82  -1
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 4.0 3.0
3.16 2.2 3.0 1.7
3.0 3.0 2.5
1.7 2.5 1.2
2.0
2.0 2.0 1.2 2.0 0.7
1.22 1.5
## M ax 2.500 0.7 1.5 ## M ax 1.800 0.2
1.0 0.65 0.66 1.0
0.25 0.27 1.0 0.2
0.090.08 ## M in -0.790 1.0 ## M in # # # -0.3
0.0 0.0 0.5 -0.3 0.5 -0.8
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -0.8
-1.0 -1.0 0.0 -1.3
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.65 -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 -4 -3  1
Euro pe (IG) 101  -5  -27 120 500 JP Y 10Y 7
100
HiVo l 146  -7  -43 400
80
Xo ver (N-IG) 459  -23  -110 300 07:30(-1)* 17:00 +/-
60
40 200 EUR 10Y 28 28  0
20 100 DKK 10Y 39 38  -1
Finan. Sr. 108  -5  -45 0 0 SEK 10Y 33 33  0
Finan. Sub. 166  -6  -66 Aug Sep Nov Dec Jan Mar Apr Jun Jul NOK 10Y 70 70  0
No n-finan. 166  -6  -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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