Investment Research — General Market Conditions

4 August 2010

Danske Daily
Key news
Market movers today: Today
Negative sentiment in equities driven by weaker than expected US data. US Bond
yields decline on the back of the sentiment in the equity market. US ISM non-manufacturing [Tex
The dollar continues to weaken against EUR and JPY. The yen has risen to an 8- US Treasury quarterly refunding
month high against the dollar, and 10Y Japanese yields are at an seven-year low. Results from Toyota, Lloyds and
Main event today is the US ISM non-manufacturing, where we expect a small decline. Soc Gen.
EU PMI service data

Markets Overnight
Market overview
The negative sentiment dominated the US equity markets as home sales, factory orders
07:30 1 day +/-,%
and consumer spending were weaker than expected, which supports the view of a fragile
S&P500 (clo se) 1120.5  -0.48
recovery in the US economy. S&P 500 fell 0.5% yesterday, while the Dow closed down S&P500 fut (chng fro m clo se) 1115.3  -0.27
0.3%. Nikkei 9493.4  -2.07
Hang Seng 21455.8  -0.01

The negative sentiment has continued in Asia this morning. It is mainly the exporters 17:00 07:30 +/-, bp
among Asian stocks that are seeing a decline due to the weak economic data from the US.
US 2y gov 0.52 0.52  0.0
The Nikkei is down more than 2% this morning, while other indices are down between US 10y gov 2.90 2.88  -2.5

0.2% to 1%. iTraxx Europe (IG) 93 98  5.3

iTraxx Xover (Non IG) 370 454  84.2
However, the weak economic data were positive for the US bond market as yields
+/-, %
declined across the curve. 10Y Treasury yields declined 5bp, while 2Y yields declined EUR/USD 1.323 1.322  -0.08
USD/JPY 85.790 85.430  -0.42
2bp. The Bund future held onto gains made earlier during the day and closed above the EUR/CHF 1.37 1.38  0.29
129-level. EUR/GBP 0.829 0.830  0.02
EUR/SEK 9.373 9.381  0.08
EUR/NOK 7.88 7.90  0.17
The negative sentiment has also been positive for Japanese bond yields as 10Y
government bond yields fell below 1% for the first time since August 2003. USD
Oil Brent, USD 82.1 82.4  0.38
Gold, USD 1187.3 1192.4  0.43
In the FX markets EUR has held onto gains made against the dollar and has remained Note:
above the 132-level. The dollar also lost against the yen and has remained below the 86- * The iTraxx Europe Index show the spread
development for the most liquid investment grade CDS
level, which it broke through yesterday. This marks an 8-month low against the yen. The contracts in the euro credit market.
euro continues to gain against the Swiss Franc, as it moved above the 137-level yesterday.
**The iTraxx Europe Crossover show the spread
The negative sentiment is also having a small negative impact on SEK and NOK against development of the most liquid non-investment grade
EUR. EUR/NOK still below 7.90-level, but is again testing this level this morning. CDS contracts in the euro credit market.

EUR/SEK is trading at the 9.38-level this morning. Source: Bloomberg

Chief Analyst
Jens Peter Sørensen
+45 45128517
jenssr@danskebank.dk

www.danskeresearch.com
Danske Daily

Global Daily
Focus today: There are some interesting earnings announcements on the agenda today,
Non-manufacturing ISM
but focus will be on the release of global service PMIs. Over the past weeks a string of
65 Index 65
weak US economic data has increased fears of a hard landing in H2. Hence, macro data 60
ISM non-manufacturing Index
60
are now key focus for the markets. We believe that the US non-manufacturing ISM will 55 55
50 50
post a second decline to 53.1 today. While this is not a disastrous level, it will add further 45 45
evidence of a slowdown in growth at a time when the recovery remains fragile due to soft 40 40
35 35
job growth. In that light the ADP report will provide some interesting information ahead 30
ISM manufacturing
30
of Friday’s payrolls release. 02 03 04 05 06 07 08 09 10

Fixed income markets: Another bunch of weak US data and news that the Fed is Source: Reuters Ecowin

considering to re-invest the proceeds from its portfolio on mortgages put downward
pressure on US yields. With intensifying focus on macro data today’s service PMI will be
US S&P500 future
the major event. Given our expectation of a further softening in the ISM, risks remain
1124 1124
tilted toward lower bond yields today. Note that tonight the US Treasury will announce
1114 1114
refunding estimates for the second half.
1104 1104
FX markets: In the FX market the dollar continues to suffer on risk appetite and worries 1094 1094
that the Fed next week will announce new bond purchases to pump more money into the 1084 1084
economy after a string of weak US numbers. The next target for EUR/USD is 1.33. Today Mon Tue Thu Fri Mon Wed
the market will focus on the ISM non-manufacturing indicator to see if the weakness in Source: Danske Markets
the manufacturing sector has spread to the service sector. We also keep an eye on the oil
price that seems to gain further momentum after the USD70-80 a barrel range was broken
US 10y gov yield
yesterday - a development that might add further to the current dollar weakness.

3.03 3.03
Scandi Daily
2.93 2.93
Denmark: No events in Denmark.
2.83 2.83
Sweden: No events in Sweden.
Mon Tue Wed Fri Mon Wed

Norway: The calendar is empty in Norway today. The fixed income market will follow Source: Danske Markets
Euroland, whereas NOK might benefit from the move above USD80 a barrel for the oil
price.
Global FX
EUR/USD (LHS) USD/JPY (RHS)

1.329 88

87.1
Key figures and events 1.309
86.2

Wednesday, August 4, 2010 Period Danske Bank Consensus Previous 1.289 85.3
- OTH Earnings: Societe Generale, Standard Chartered, Lloyds Banking, Toyota Mon Tue Thu Fri Mon Wed
9:15 ESP PMI Services Index Jul 52.1 51.8
9:45 ITL PMI Services Index Jul 52.1 51.4 51.5 Source: Danske Markets
9:50 FRF PMI Services, Final Index Jul 61.3 61.3 61.3
9:55 DEM PMI Services, Final Index Jul 57.3 57.3 57.3
10:00 EUR PMI Services, Final Index Jul 56.0 56.0 56.0
10:00 EUR PMI Composite, Final Index Jul 56.7 56.7 56.7
10:30 GBP PMI Services Jul 5450.00% 54.4
Scandi FX
11:00 EUR Retail sales m/m|y/y Jun -0.1%|-0.2% 0.1%|0.0% 0.1%|0.2%
EUR/SEK (LHS) EUR/NOK (RHS)
13:00 USD MBA Mortgage applications 9.54
16:00 USD ISM, non-manufacturing Index Jul 53.1 53.0 53.8 8.03
9.49
16:00 USD US Treasury quarterly refunding announcement
7.97
9.44
9.39 7.91

9.34 7.85
Mon Tue Thu Fri Mon

Source: Danske Markets

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Danske Daily

Today’s market data: 04 August 2010

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
132.6 132.6 USD 132.26 132.16  -0.10 07:30 1192.43 82.38
JP Y 113.46 112.90  -0.56 1day  6.28  -0.30
132.2Max ## 132.2 GB P 82.95 82.97  0.02 1mo nth  -19.17  10.73
Min ## NOK 788.19 789.56  1.37 Year-t-date  95.48  4.45
131.8 0.4 131.8 SEK 937.34 938.12  0.78
DKK 745.00 745.06  0.06 CRB C R B , R aw
131.4 131.4 P LN 400.30 400.70  0.40 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 276.63 489.07
JP Y 85.79 85.43  -0.36 1day  -0.22  2.11
1mo nth  6.78 GB P 159.45 159.29  -0.16 1mo nth  22.15  15.59
Year-to -date  -11.05 CHF 103.82 104.20  0.38 Year-t-date  -6.75  5.58

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
USD2Y USD10Y 2.95 USD 0.25 0.43 18 USD 10Y 2.90 2.88  -3
0.55
Max 0.6 Max 3.0 EUR 1.00 0.90 -10 USD 30Y 4.03 4.03  0
Min 0.5 Min 2.9 2.92 GB P 0.50 0.74 24 JP Y 10Y 1.04 1.01  -3

0.53
0 0 DKK 1.05 1.15 10
2.89 SEK 0.50 0.94 44 07:30(-1)* 17:00 +/-, bp
NOK 2.00 2.69 69 DEM 10Y 2.68 2.61  -7
0.51 2.86 P LN 3.50 3.71 21 DKK 10Y 2.76 2.71  -5
07 10 13 16 19 22 01 04 SEK 10Y 2.78 2.71  -6
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.34 3.34  0
P LN 10Y 5.88 5.87  -2
* As of closing previous trading day

10Y Yield Spread to Germany

US Yield Curve German Yield Curve
4.0 4.0 3.0 -0.1
3.27 3.0 -0.1
2.5 -1.1 -1.1
3.0 3.0 2.5
-2.1 -2.1
2.0
2.0 2.0 -3.1 2.0 -3.1
1.27 1.5 -4.1
-4.1
1.0 0.67 0.73
1.0
## M ax 0.000
-5.1
1.5 ## M ax # # # -5.1
0.27 0.28 1.0
0.100.10 ## M in -8.130 -6.1 1.0 ## M in # # # -6.1
0.0 0.0 0.5 -7.1
-7.1 0.5
-8.1
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 -8.1
-1.0 -1.0 0.0 -9.1
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.60 -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 -3 -4  -1
Euro pe (IG) 98  -3  -30 120 500 JP Y 10Y 4 7  4
100
HiVo l 144  -2  -45 400
80
Xo ver (N-IG) 454  -5  -114 300 07:30(-1)* 17:00 +/-
60
40 200 EUR 10Y 27 29  2
20 100 DKK 10Y 37 38  1
Finan. Sr. 105  -3  -49 0 0 SEK 10Y 33 33  0
Finan. Sub. 161  -5  -71 Aug Sep Nov Dec Feb Mar Apr Jun Jul NOK 10Y 70 68  -2
No n-finan. 161  -5  -71 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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