Download - AUG 06 Danske Weekly Focus
-
8/9/2019 AUG 06 Danske Weekly Focus
1/18
1 | 06 August 2010www.danskeresearch.com
Investment Research
Market Movers ahead
In the US the FOMC meeting is the main event next week. We believe that thespeculations about further monetary easing are premature, but that the assessment of
the current economic situation will be downgraded. We expect US July retail sales
to increase 0.5% m/m after a weak H1 2010.
For the euro area, the key event next week is expected to be the release of Q2 GDPdata. We expect to see robust growth, but at a rather uneven pace. Germany isexpected to stand out as the top-performer.
UK inflation report on Wednesday is expected to weigh on GBP and support Gilts. In Scandinavia focus turns to inflation numbers out of Denmark, Sweden and
Norway. The monetary policy meeting in Norges Bank will not attract much attention.
Unchanged rates are widely expected.
Global Update
Over the past month the euro area has been the main provider of good news while USdata have disappointed. The German Ifo index, German factory orders and Euro PMI
all surprised to the upside, while US data covering housing, business and consumption
have all been weak.
The relative stronger numbers out of the euro area relative to the US and less PIIGSconcern have pushed EUR/USD above 1.32.
Wheat prices rise strongly on Russian drought and subsequent export ban. A new foodcrisis cannot be ruled out if the export ban spreads to other countries like we saw in
2008. However, global wheat stocks are in fact plenty and other grains prices are not
rising to the same degree.
06 August 2010
Editors
Allan von Mehren
+45 4512 8055
Steen Bocian
+45 45 12 85 31
Weekly FocusEurope strikes back
Contents
Market movers ahead ........................................... 2
Global update: Euro shining for now .... 5
Scandi update ................................................................. 8
Fixed income: Slowdown fears to keep
bond yields low ............................................................... 9FX: Dollar under pressure for now .... 10
Commodities: No summer lull .................. 11
Credit ................................................................................... 12
Financial views........................................................... 13
Macroeconomic forecast .............................. 14
Financial forecast ................................................... 15
Calendar ........................................................................... 16
Germany to show very strong growth US: ISM data still signal growth
Source: Reuters Ecowin and Danske Markets Source: Reuters Ecowin and Danske Markets
08 09 10
-4
-3
-2
-1
0
1
2
-4
-3
-2
-1
0
1
2% q/q
GDP growth in...
France
Germany
Euro area
*'WeightedISM = 0.15 *ISMmanu+ 0.85* ISMnon-manu
98 00 02 04 06 08 10
-6
-4
-2
0
2
4
6
8
35.0
40.0
45.0
50.0
55.0
60.0
65.0 Index Semi ann. chg, % AR
GDP >>
-
8/9/2019 AUG 06 Danske Weekly Focus
2/18
2 | 06 August 2010www.danskeresearch.com
Weekly Focus
Market movers ahead
Global
In the US the FOMC meeting is the main event next week. Recently, speculation offurther easing has intensified. However, we believe that it is premature for the Fed toannounce new easing measures at the upcoming meeting. That said, it is quite certain
that the assessment of the economic situation will be downgraded following a range
of disappointing economic data. Hence, the Fed will continue to communicate that
yields will remain exceptionally low for an extended period. It will be interesting to
see if Plosser votes against the extended period language again. If not, it will be a
dovish sign.
July retail sales will provide important information about the trend of consumer
spending after downward revisions and soft data in the first half of the year. We
expect improvement with a 0.5% m/m increase in overall sales. Car sales already
reported for July have been solid and rising gasoline prices will contribute positively
as well. The underlying pace of spending is likely to improve at a healthy 0.4% m/m
following a weak reading in April and May, but a better one in June. Michiganconsumer confidence is released Friday.
Finally, the July CPI data will be released. We expect core inflation to remain very
low with a 0.0% m/m reading consistent with an unchanged annual rate of inflation at
0.9%. The headline will be boosted slightly by higher gasoline prices to 0.2% m/m up
from -0.1% m/m.
For the euro area, the key event next week is expected to be the release of Q2 GDPdata. We expect to see robust growth, but at a rather uneven pace. Germany is
expected to stand out as the top performer. We expect German GDP to have expanded
1.3% q/q in Q2, up from 0.2% in Q1. French GDP is expected to have advanced 0.7%
q/q during Q2. PIIGS countries are expected to have seen very limited growth. For the
euro area we expect robust growth at 0.7% q/q, which compares with a mere 0.2% q/qin Q1. It is mainly exports that support increased activity while private demand
remains sluggish. Q2 is expected to mark a peak in growth and we expect momentum
to decline during H2 2010, although Q3 should produce growth above trend too.
In the UK, BoEs Inflation Report due Wednesday will be the one to watch nextweek. Despite CPI being at 3.2% y/y and annual price increases having been above
BoEs target of 2% in 41 of the past 50 months, the BoE isnt particularly worried
about price pressures at present. We think projections will show that inflation will
edge lower on the medium-term horizon and economic growth will be revised
downwards, i.e. the Report will be GBP negative. Nationwides consumer confidence
index is likely to edge lower on Tuesday night. GBP is expensive according to our
short-term models and we see only limited scope for additional gains against the euro.
In Asia there will be extra focus on the Chinese data for July given the recent signs ofslowdown. Industrial production is expected to weaken as signalled by the decline in
Chinese PMI in recent months. Retail sales should stay fairly robust though with
growth rates above 18% y/y. Next week also brings data on the trade balance, fixed
investments and house prices which should give a further clue of how much the
tightening measures of the Chinese authorities are cooling activity. In Japan focus is
on the Bank of Japan meeting. Data have softened somewhat recently and JPY is
trading at record strong levels against USD. This is not what you want to see when
you are dealing with deflation and it clearly puts Bank of Japan in a tight spot. We
could soon see further QE from Bank of Japan.
US: Retail sales set to improve
Source: Reuters Ecowin
Germany to show very strong growth
Source: Reuters Ecowin and Danske Markets
China slowing down
Source: Reuters Ecowin
09 10
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5 % m/m % m/m
Retail sales
Retail sales ex autos,gasoline and building materials
08 09 10
-4
-3
-2
-1
0
1
2
-4
-3
-2
-1
0
1
2% q/q
GDP growth in...
France
Germany
Euro area
110125
04 05 06 07 08 09 10
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
35
45
55
65
>
-
8/9/2019 AUG 06 Danske Weekly Focus
3/18
3 | 06 August 2010www.danskeresearch.com
Weekly Focus
Scandies
In Denmark attention will focus especially on June goods exports, due out Monday,as exports look likely to play an important part in the continued economic recovery,
given the generally weak consumption indicators in Q2 10. Monday will also see the
release of June current account numbers, which are expected to show a surplus ofDKK6bn and hence a continued record high 12-month accumulated surplus. Industrial
production data for June and inflation numbers for July will be released Tuesday. We
expect headline inflation to increase from 1.7% in June to 1.9% in July.
In Sweden, the release of inflation numbers for July will be a key event in the weekahead. We have taken a quick look at the possible impact from soaring wheat and
other agricultural commodity prices (AC prices for short) on Swedish inflation. Wheat
prices are up almost 60% over the past month and this is a potential inflation threat
via rising food prices. The data suggest that 20-25% of the rise in AC prices are
sipping through to the consumer. Hence, a rise in AC prices by 10% would raise
consumer food prices by about 2%. Other components worth considering are
mortgage costs, petrol and electricity prices. Mortgage costs are expected to rise on
the back of the Riksbanks coming rate hikes. There is no change to call here. Petrol
prices, however, are likely to show almost a 3% decline, which is new. Electricity
prices probably rose in July but now appear to be falling even faster going into
August. The overall revision to our inflation forecast is slightly downward. Upside
risks for the next couple of months probably stem from higher mortgage costs (which
may be underestimated) and soaring AC prices. The downside stems from the
appreciating SEK. We may not have seen the entire impact on CPI from that yet. We
forecast July CPI and CPIF (CPI with fixed mortgage rates) to print -0.1% m/m /
1.2% y/y and -0.3% m/m / 1.7% y/y, which means CPI is rising while CPIF is falling.
In Norway, the policy meeting at Norges Bank on 11 August is not expected to attractmuch attention. At its latest policy meeting, Norges Bank made it clear that interest
rate hikes would be paused. Although we have seen some improvement in the
financial markets over the past month and indicators, particularly in the eurozone and
to some extent in Norway, have surprised on the upside, we do not expect Norges
Bank to change its rhetoric much at the meeting anything else but unchanged rates
would be a major surprise. The coming week will also see the release of inflation
numbers. We expect underlying inflation to increase from 1.3% y/y to 1.5% y/y.
Headline inflation should edge up marginally from 1.9% to 2.0%. Retail sales have
generally shown a disappointing performance so far this year. However, we expect
some catching-up in June, with retail sales set to grow 0.6% m/m after falling 0.1% in
May.
Denmark: Goods exports rebounding
Source: Reuters EcoWin
Sweden: Inflation in agricultural
commodity prices a risk in autumn
Source: Statistics Sweden
Norway: Still low core inflation
Source: Reuters EcoWin
00 01 02 03 04 05 06 07 08 09 10
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5% y/y % y/y
CPI core
-
8/9/2019 AUG 06 Danske Weekly Focus
4/18
4 | 06 August 2010www.danskeresearch.com
Weekly Focus
Market movers ahead
Source: Bloomberg and Danske Markets
Global movers Event Period Danske Consensus Previous
Tue 10-Aug - CNY Trade balance USD bn Jul 19.60 20.02
- JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10
20:15 USD FOMC meeting % 0.25 0.25
Wed 11-Aug 1:01 GBP Nationwide Consumer Confidence Jul 63
4:00 CNY Retail sales value y/y Jul 18.5% 18.3%
4:00 CNY Industrial production y/y Jul 13.4% 13.7%
4:00 CNY Fixed assets investments y/y Jul 25.3% 25.5%
11:30 GBP Bank of England Quarterly Inflation Report
Fri 13-Aug 11:00 EUR GDP, s.a. q/q|y/y 2nd quarter 0.7%|1.4% 0.7%|1.4% 0.2%|0.6%
14:30 USD CPI m/m|y/y Jul 0.2%|1.2% 0.2%|1.2% -0.1%|1.1%
14:30 USD Retail sales m/m Jul 0.5% 0.4% -0.5%
15:55 USD University of Michigan Confidence Index Aug 69.0 69.8 67.8
Scandi movers Event Period Danske Consensus Previous
Mon 09-Aug 9:30 DKK Current account DKK bn Jun 6.0 6.7
Tue 10-Aug 9:30 DKK CPI m/m|y/y Jul -0.4%|1.9% -0.2%|1.7%
Wed 11-Aug 14:00 NOK Norwegian Deposit Rates % 2.0 2.0 2.0
Thurs 12-Aug 9:30 SEK CPI change m/m|y/y Jul 0.0%|0.9%
-
8/9/2019 AUG 06 Danske Weekly Focus
5/18
-
8/9/2019 AUG 06 Danske Weekly Focus
6/18
6 | 06 August 2010www.danskeresearch.com
Weekly Focus
In 2007-2008 food price inflation rose to 6-7% in both the US and the euro area. As food
weighs 15% in US and 20% in the euro area this had a considerable effect on inflation.
The impact is even higher in emerging markets where food has a much higher weight in
the consumption basket.
US recovery continues to lose pace
Over the past couple of months, incoming US economic data have been surprisingly
weak, a sign that the recovery is losing pace into H2. Overall the weakness has been
widespread: housing, business and consumption data. This trend has continued
throughout July, but with a few exceptions.
Housing data continue to be very soft as the effect from the expiration of the first time
home buyer tax credit ripples through the housing market. Recent evidence suggests that
the weakness continued into July, with June pending homes declining to a new record
low. While the current housing data probably seriously understate the true trend in
housing, the magnitude of the post tax-credit setback has surprised us. If home demand
does not begin to recover soon, home prices could face another setback, which could hitthe financial sector. In any case there is little doubt that residential construction will be a
negative for growth in Q3 and will probably not contribute much positive in Q4.
The softening in both hard and soft business indicators had been expected, but has been
somewhat deeper than expected. We suspect that the financial turmoil in late spring and
early summer created by the euro debt jitters has led to extraordinary caution in the
business sector. Both orders and hiring have simultaneously slowed. However, the recent
ISM reading adds some comfort as the manufacturing index slowed much less than feared
and the non-manufacturing index surprisingly rose. In our view this might be the first sign
that some of the recent weakness has been amplified by the euro crisis and that this might
reverse in the coming months.
Until last Friday the available economic data showed that consumption had expanded by
3.0% q/q AR in Q1 and close to 2.5% q/q AR in Q2. However, with the release of the
advance national accounts, the picture changed dramatically. Q1 consumption growth was
revised lower to 1.9% q/q AR and Q2 consumption printed a much lower-than-expected
1.6%. The bad news is that the slower pace of consumption growth makes the US
recovery look less resilient, as we need final consumption to be strong enough to feed
investment and job creation.
The bottom line is that the flow of data in the recent month leaves us with a slower pace
of growth and lesser degree of resilience in the US economy. Hence, not only is our
current 3% H2 growth forecast probably a notch too high, but the risk of a sharperslowdown has also increased as the economy is more sensitive to adverse shocks. The
good news is that financial conditions have substantially improved given the sharp
decline in bond yields and the recent rebound in risky assets. This might reverse some of
the front-loaded slowing caused by the turmoil in the spring.
Clear signs of slowing in China
It is increasingly evident that the Chinese economy is slowing. The HSBC PMI new
orders index for July decreased again to 47.9 after falling below the 50-line already in
US: Very weak home sales data
Source: Reuters Ecowin and Danske Markets
US: ISM data still signal decent growth
Source: Reuters Ecowin and Danske Markets
"[Heading 2]"
US: A brand new consumption profile
Source: Reuters Ecowin and Danske Markets
00 01 02 03 04 05 06 07 08 09 10
75
85
95
105
115
125
135
4.5
5.0
5.5
6.0
6.5
7.0
7.5 ml units, SAAR Index, SA
>
*'WeightedISM = 0.15 *ISMmanu+ 0.85* ISMnon-manu
98 00 02 04 06 08 10
-6
-4
-2
0
2
4
6
8
35.0
40.0
45.0
50.0
55.0
60.0
65.0 Index Semi ann. chg, % AR
GDP >>
-
8/9/2019 AUG 06 Danske Weekly Focus
7/18
7 | 06 August 2010www.danskeresearch.com
Weekly Focus
June. Import growth has also shown some signs of moderation recently. Tightening
measures from the Chinese authorities are starting to take effect. The Chinese central
bank said on Sunday that it would stick to its credit target of CNY7500bn in new loans
this year and strictly implement the tight credit policies it adopted. A campaign to close
energy-inefficient businesses has also contributed to a slowdown in heavy industry.
Although the slowing in China should be watched closely, it is important to stress that
China still has fiscal and monetary room to manoeuvre. It can thus ease policy if needed
to sustain growth at robust growth levels. To some extent the slowing is also needed in
order to stem inflationary pressures.
There are other indications that growth in Asia is cooling off. Japanese industrial
production has stalled in recent months after seeing significant gains earlier in the year.
Japanese PMI also declined in July to 52.8 from 53.9 in June. It is still above the long
term average and thus signalling growth above trend.
Japanese production growth slowing
down
Kilde: Reuters Ecowin
02 03 04 05 06 07 08 09 10
-75
-50
-25
0
25
50
75
100
15
25
35
45
55
65
75
85
95
105 Index 3m chng, AR
Industrial production >>(green is production plans
for July and August)
-
8/9/2019 AUG 06 Danske Weekly Focus
8/18
8 | 06 August 2010www.danskeresearch.com
Weekly Focus
Scandi update
Denmark: Renewed doubt about the strength of consumption
Junes retail sales figures, which we received in the past week, were down 1.4%
compared to May. Retail sales have generally been a major disappointment throughout
2010. Q2 retail sales were down 1.7% on Q1, and in June this year sales were still
hovering around January levels. In other words, retail sales provide no sign of a budding
recovery in private consumption. This stands in stark contrast to the GDP data from
Statistics Denmark, which have in fact shown decent consumption growth since summer
2009 and where total private consumption up to and including Q1 this year rose by almost
3% i.e. quite substantial consumption growth.
We should therefore remember not to overinterpret the retail sales figures, as they are not
a perfect indicator for private consumption and have had considerable difficulty capturing
recent consumption developments. Nevertheless, despite our reservations about retail
sales usefulness as an indicator at the moment, there is no denying that the figures give
some idea about consumption developments. Given this, concern is growing that private
consumption will not keep up the pace in the coming quarters to the detriment of
economic activity and the current stabilisation of the labour market.
The notion that domestic demand never really picked up in Q2 is also reflected in the data
for corporate sales, which were released in the past week. Domestic sales fell by 2.2%
from May to June and by 0.6% in Q2 compared to Q1. In contrast, foreign sales did
surprisingly well, with a small increase coming on top of strong growth in May. This
bodes well for exports, which have now risen by 22.6% in current prices since hitting
bottom last year. Looking just at Q2, export growth was an impressive 5.8% relative to
Q1. Hence somewhat surprisingly it would seem that Danish economic growth is
currently being driven more by exports than by consumption.
Norway better indicators
Over the past week, Norwegian indicators have improved, following the disappointing
performance in the spring of 2010. The PMI rose to 54.9 in July from 52.0 in June.
During the first six months of 2010, the Norwegian PMI hovered around 50 in spite of the
recovery in the global economy. So, at long last, the global recovery appears to be feeding
through to Norways ailing manufacturing industry. Also, the credit indicator showed
renewed appetite for business borrowing. Meanwhile, Norwegian electricity prices have
declined significantly over the summer months, which, together with continued low
interest rates, should support retail sales going forward.
Who is right?
Source: Statistics Denmark and own calculations
Norway: Rebound in PMI
Source: Reuters EcoWin, Danske Markets
1009080706050403020100
190
180
170
160
150
110
105
100
95
90
85
80
DKK bn Index
>
04 05 06 07 08 09 10
30
35
40
45
50
55
60
65
70
30
35
40
45
50
55
60
65
70Diff.index Diff.index
PMI, New ordes
PMI
-
8/9/2019 AUG 06 Danske Weekly Focus
9/18
9 | 06 August 2010www.danskeresearch.com
Weekly Focus
Fixed income: Slowdown fears to keep bond yields low
Bond markets defer rally in risky assets
During July long bond yields in the US and Germany have been trading more or less
sideways. This is in sharp contrast to equity, commodity and credit markets where prices
have been boosted by the rebound in risk appetite.
Solid Q2 earning reports and receding fears of a southern European debt meltdown, partly
helped by the results of the European bank stress tests, have triggered a rally in risky
assets markets and southern European debt markets, as relative valuations had become
attractive following a painful spring. However, equity and bond markets have completely
decoupled as illustrated in the chart to the right. In fact, US 10-year yields have continued
to test new lows, as concerns about the economic outlook continue to mount on the back
of the disappointing flow of US and Chinese economic data.
With core inflation still on a downward path and leading indicators set to soften further,
we believe that bond yields in general will continue to trade in the current very low range.Indeed, long bond yields may even decline further, even though we are trading 50-60bp
below fair value in US 10-year Treasuries according to our model. In our view, the most
likely scenario is that 10-year US Treasury yields will trade in a narrow range between
2.75% and 3.25%.
German bond markets shift focus from euro to global outlook
The downward pressure on US long bond yields has effectively capped Bund yields,
which have crept only gradually higher despite extremely solid economic data out of
Germany and a significant relief rally in the (non-Greece) southern European sovereign
debt markets. Not even the run-up in 2-yr Schatz yields has been able to push the long
end much higher. Hence, it is clear that global economic data will remain the key driverof long bond yields in Germany as well.
With growth in both the US and Asia slowing, it is feared that it is only a matter of time
before weakness shows up in Europe and Germany. We believe the potential further
improvement in industrial indicators in Euroland is limited and that we are close to a peak
in growth momentum. Further, the ECB was relatively cautious at its meeting and did not
signal any imminent tightening.
On the back of the significant improvement in southern European debt markets and with
growth momentum to slow, it is difficult to argue for substantially higher long bond
yields in Germany. Going forward we expect 10-yr Bunds to trade in the range between
2.50 and 2.75%.
FOMC meeting to dominate bond markets next week
Next weeks Fed meeting will be the main event for global bond markets. A more dovish
Fed is likely to fundamentally support the current very low level of US 2-year bond
yields, but will probably not be able to push them lower. Following the announcement
there might even be a minor risk of disappointment given the recent talk about more QE,
which we find premature. It will also be important to see if Hoenig dissents again. If not it
would be a dovish sign.
Key events of the week ahead
German 2yr auction (Aug 9) FOMC meeting (Aug 10) US Tsy auction in nominal 3s,
10s and 30s
Euro area GDP (Aug13) US CPI (Aug 13) US retail sales (Aug 13) Earnings reports
Bond yields trade sideways
Source: Ecowin and Danske Markets
Bonds decouple from risk appetite
Source: Ecowin and Danske Markets
Senior AnalystPeter Possing Andersen
+45 45 13 70 19
Mar
10
Apr May Jun Jul
2.50
2.75
3.00
3.25
3.50
3.75
4.00
2.50
2.75
3.00
3.25
3.50
3.75
4.00
10yr German Bund yield
US 10yr Treasury yield% %
Apr
10
May Jun Jul Aug
2.8
3.0
3.2
3.4
3.6
3.8
4.0
1000
1050
1100
1150
1200
1250Index %
US 10-year Treasury yield>>
-
8/9/2019 AUG 06 Danske Weekly Focus
10/18
10 | 06 August 2010www.danskeresearch.com
Weekly Focus
FX: Dollar under pressure for now
The dollar has had a particularly rough summer, losing more than it gained in May.
There were several reasons for the turbulence. First, US data have been so miserable that
many market observers have begun to question the robustness of the US recovery andeven fear that the US central bank (Fed) might be forced to consider a new round of
quantitative easing, i.e. extraordinary purchases in the government and mortgage bond
markets. Second, US yields have hit new lows and the market has almost completely
given up on rate hikes from the Fed within the next year. In contrast, European data have
been surprising positively perhaps because analyst expectations were at rock bottom
and the European bank stress test at least did not make things any worse than they were.
Finally, equity and commodity prices have risen on the back of solid global corporate
earnings in Q2, and this has also helped floor the greenback.
The big question now is whether the dollars summer slump marks the start of an
extended period of dollar weakness or if what we have seen has simply been a
correction after the euros pronounced downturn in the early part of the year.
In our view the dollar is clearly heading lower in the short term but not necessarily on the
verge of chronic frailty. Even though the US economy faces a couple of challenging
quarters, and while private consumption has not picked up, the housing market still looks
rather depressed and improvements in the labour market are slow in coming, the outlook
nevertheless remains brighter for the US than for Europe, where a marked tightening of
fiscal policies will almost certainly drag growth considerably lower.
We expect the dollar to continue to weaken in the short term, driven by strong equity
markets and accommodative Fed rhetoric: USD/DKK at 5.50 is not impossible. As the
market adjusts its expectations on US data, the key numbers will begin to look better and
the Fed will be in a position to tighten its tone as some central bank members are
already urging. Another factor that could send the euro down and the dollar up is a
slightly more balanced risk environment where investors do not simply back pro-cyclical
assets. We see a strong probability of USD/DKK up around 6.20 within six months.
Strong yen a bugbear for Japan
An interesting FX cross worth following at the moment is USD/JPY, which continues to
drift lower. Disappointment over US data and hence declining US yields explains some of
the movement, but much of the yens recent strength is also due to Chinas aggressive
buying of Japanese government bonds. Chinas USD2.5trn currency reserve is continuing
to swell at a rapid pace and only a small share of it is assumed to be in yen. If China
carries on buying Japanese government bonds, the yen could strengthen further. Some
speculate that the yen could break below 79.75, the lowest level ever, reached in April
1995, but Japanese politicians are aware that an overly strong yen would harm exports
unnecessarily. We see the right place for USD/JPY as being between 90 and 100.
Swiss franc on the retreat
The Swiss franc has lost some of the strength gained when the European debt crisis was at
its height. Improved risk appetite and low Swiss inflation numbers can explain much of
the retreat. We would still urge caution with the franc, however, as it could easily pick up
a good tailwind if equity market sentiment were to turn.
Weekly changes against EUR
Source: Danske Markets
EUR/USD vs. global equities still
some correlation, but not as solid
Source: Danske Markets
USD/JPY vs. relative rates very
close correlation
Source: Danske Markets
Senior Analyst
John Hydeskov
+45 45 12 84 97
-2% -1% 0% 1% 2%
CHF
NZD
USD
JPY
SEK
AUD
GBP
CAD
NOK
-
8/9/2019 AUG 06 Danske Weekly Focus
11/18
11 | 06 August 2010www.danskeresearch.com
Weekly Focus
Commodities: No summer lull
Recent developments: upsurge as growth outlook deteriorates
During July, commodities saw a remarkable rally in wheat (see details below) while
prices of base metals and oil also surged as market sentiment improved on better-than-feared Euroland data. Milling wheat has risen to above EUR200/t and oil prices passed
USD82 earlier this week. In the aluminium market, physical premiums have continued to
rise, suggesting that despite ample stocks, the spot market is in fact fairly tight. There are
also signs of tightness in the copper market, which recorded a deficit in the first four
months of the year. However, the growth picture in other regions notably China and the
US has in fact deteriorated somewhat of late. Crucially, US oil stocks have remained
stubbornly high and there have been few signs of the usual seasonal draw during the
summer period. Indeed, OECD forward demand cover is at a high 61 days, and the
improvement in manufacturing activity in H1 has entailed little inventory rundown. With
fundamentals in the oil market increasingly discouraging, we look for prices to head
below the USD80 mark again before moving more firmly into the USD80-90 rangetowards the end of the year.
Wheat rally looks overdone but could spur regulatory changes
Wheat prices have surged over the past month, recently touching highs not seen since
early December last year. The main reasons for the surge have been weather related:
notably an ongoing drought in Russia and very dry weather in Europe combined with
heavy rains in Canada have led to market fears that the harvest this season could be lower
than previously expected. As a result, some countries including Russia have said that they
will limit exports considerably in order to contain price rises at home. Further adding to
problems on the supply side is the fact that upcoming Indian monsoon rains could lead
the quality of existing stockpiles to deteriorate/rotten, which could lead to two very
different scenarios: either that India will flood the market with wheat and thus induce a
price slide in the near term, or that global inventories will decline rapidly and thus put
upward pressure on prices.
Looking at the broader fundamental picture, the story about wheat however remains one
of booming stocks on the back of some record harvests in recent years. The recent price
surge thus comes on the back of a long period of stalling prices. Global stocks are at
historically very high levels and consumption has not risen accordingly, leaving the
stocks-to-use ratio in e.g. the US at close to 50%, suggesting a very loose market (a
normal level for this ratio is 20-40%). Notably, speculators have been massively short
wheat at CBOT since the start of the year but lately there has been some reporting of
short covering as prices have risen, i.e. investors exiting bets that prices will fall.
From a structural perspective, the potential threat to crops from wheat rust in the longer
run is also looming. On the whole, the outlook for wheat prices thus seems extraordinarilyhigh at the moment. While the recent price rise looks a bit overdone in our view, we
cannot rule out further price rises in the short term. The next thing to look out for in the
market is the first estimates of crop yields soon to be published. The next WASDE report
from the US Department of Agriculture is due for release on 12 August.
In the longer term, the surge in grains such as wheat, soybeans and corn could lead the
authorities to re-consider regulation in the commodity sphere. Albeit the latest rally could
turn out to be little more than a bump on the road, policymakers may well decide that
time could is ripe for extending the recent overhaul of the financial sector in the US to
explicitly include trading in commodities as well.
Monthly changes
Source: Bloomberg, Danske Markets.
Week ahead
EIA Short-Term Energy (Tue) IEA Oil Market report (Wed) USDA WASDE report (Thu) OPEC monthly report (Fri)
Wheat: market tightness and prices
Source: EcoWin, Danske Markets
Senior Analyst
Christin Tuxen
+45 4513 7867
-5 5 15 25 35 45
ICE Brent
API2 coal
Aluminium
Copper
Gold
LIFFE Wheat
% m/m
-
8/9/2019 AUG 06 Danske Weekly Focus
12/18
12 | 06 August 2010www.danskeresearch.com
Weekly Focus
Credit
Market commentary
It has been a dull weak in the credit market with modest activity and limited newsflow. Abetter than expected ISM number supported credit spreads and indices continue to move
tighter. The investment grade index, iTraxx Europe, has tightened to 100bp whereas the
high yield index, iTraxx Crossover, has tightened to 460bp. The cash market is also in
fine shape with demand outpacing supply although turnover is limited. Cash spreads are
therefore likely to continue to grind tighter in the coming weeks in the absence of
significant new supply.
For banks the feel-good sentiment that emerged after the CEBS stress test and the easing
of the Basel III proposal has remained and has recently been further underpinned by
generally strong Q2 earnings statements from the large international banks.
The primary market
Summer is normally a quiet period when it comes to issuance of bonds and this one is no
exception. The changes to the Basel III proposal that were announced a few weeks ago
have somewhat alleviated the fears that banks would need to substantially increase their
issuance of bonds with long tenor as the sharp tightening of liquidity rules is postponed
until 2018. Still, we expect banks to be fairly active come end August and September as
the markets have been on hold for long periods during Q2 on the back of the southern
European debt crisis.
This week a new 5Y senior bond from Nordea was the most interesting transaction at a
swap spread +73bp.
Selected new issues during the week
Name Rating Coupon Maturity Currency Size
Bond spread on
issue date, (bp)*
Nordea Aa2/AA- Fixed 5Y EUR 1.25bn 73
BNP Paribas Aa2/AA- Fixed 5Y EUR 0.5bn 55
Note: Ratings are Moody's and S&P. * Mid-Swaps for Fixed, Discount Margin for floating
Source: Danske Markets & Bloomberg
iTraxx Crossover (5Y CDS)
Source: Markit
iTraxx Europe (5Y CDS)
Source: Markit
Senior Analyst
Henrik Arnt
+45 4512 8504
0
200
400
600
800
1,000
1,200
1,400
Jul/07 Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10
bp
0
50
100
150
200
250
Jul/07 Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10
bp
-
8/9/2019 AUG 06 Danske Weekly Focus
13/18
13 | 06 August 2010www.danskeresearch.com
Weekly Focus
Financial views
Equities Despite a rally in risky assets, the gap between the stock markets implied earnings
expectations and analysts expectations has yet to be closed. Although we are now
halfway through the Q2 earnings season with companies surprising on the positive
side, the double-dip fear among investors is still present. Both investors and
companies fear 2011, especially if a slowdown in ISM is not offset by expected job
creation and private consumption. Along with worsening signs in the US housing
market, this dampens the positive signals and guidance upgrades from the companies.
As we believe the stock market to discount too low growth expectations, we see room
for performance of global equities. We reiterate our global market forecast of 10-15%
end-year 2010.
Fixed Income Global: Global bond markets are no longer trading on risk aversion, but on economic
data. Focus has shifted from fear of a European debt meltdown to fear of a hard
landing in the global economy, as both US and Chinese data have been consistently
weak. With the outlook for continued weakening global leading indicators, low
inflation and dovish central banks, bonds are likely to be range bound at the current
low levels in the coming months. We recommend to modestly overweight on duration
on a 3-6 month horizon.
Credit The constructive tone in the credit market continues with spreads moving tighter both
within cash and CDS. In the coming weeks we expect cash spreads to further tighten on
the back of more confidence within the banking sector as well as decent interest from
investors at a time where primary market activity is low. It should be stressed though that
turnover is limited.
As such we are positive on credit for the moment. Company credit metrics are soundand we thus consider the default risk in the short- to medium- term as very low. In the
longer term, however, it is inevitable that companies will feel the negative effect from
the austerity measures currently being undertaken around Europe.
FX outlook EUR/USD can edge higher in the short term, driven by a soft Fed and buoyant equity
markets. Feds tone will probably sharpen in autumn and winter, coinciding with
more euro turmoil, i.e. lower EUR/USD levels on the 3-6 month horizon. Chinese yen
buying has sent USD/JPY lower, which may continue for now. GBP is overbought
against EUR and is a sell. CHF has a decent chance of a comeback if risk appetite
abates.
SEK has performed on global risk appetite and strong growth momentum shouldwarrant lower levels of EUR/SEK going forward. NOK has benefitted from higher oil
price but is not backed by a central bank that raises rates here and now.
Commodities Wheat has rallied on weather-related supply concerns and oil has moved firmly above
USD80 per barrel. In our view, current market pricing looks a bit stretched given a
large stock overhang of both commodities globally. Base metals could be in for a
correction as focus turns to a likely bubble in the Chinese property sector.
Equities and US 10Y yield
Source: Reuters Ecowin
EUR/USD and USD/JPY
Source: Reuters Ecowin
Credit spreads
Source: Reuters Ecowin
Commodity prices
Source: Reuters Ecowin
Feb
10
Mar Apr May Jun Jul
2.8
3.0
3.2
3.4
3.6
3.8
4.0
925
975
1025
1075
1125
1175
1225
1275 Index %
US 10-year gov bond >>
07 08 09 10
1.5
2.5
3.5
4.5
5.5
6.5
2.5
7.5
12.5
17.5
22.5
27.5 % points % points
>
Aug
09
Oct Dec
10
Feb Apr Jun Aug
2700
2900
3100
3300
3500
3700
62.5
67.5
72.5
77.5
82.5
87.5USD/barrel Index
LME metal prices >>
-
8/9/2019 AUG 06 Danske Weekly Focus
14/18
14 | 06 August 2010www.danskeresearch.com
Weekly Focus
Macroeconomic forecast
Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.
Macro forecast, Scandinavia
Denmark 2009 -4.7 -4.6 3.4 -13.0 -1.7 -10.2 -13.2 1.3 3.6 -3.0 38.0 3.92010 1.5 2.8 1.6 -6.9 0.8 2.6 1.4 2.2 4.1 -5.6 42.1 4.12011 1.8 2.3 0.5 1.2 0.2 3.9 3.9 1.8 4.0 -4.5 46.5 4.1
Sweden 2009 -5.1 -0.8 1.7 -16.0 -1.5 -12.4 -13.2 -0.3 8.4 -2.1 38.9 7.22010 2.7 2.2 1.5 2.3 1.1 9.1 11.3 1.3 9.3 -3.5 43.6 6.32011 1.5 1.4 1.3 1.8 0.0 3.3 3.2 2.1 10.1 -4.1 47.2 6.6
Norway 2009 -1.6 0.2 4.8 -7.9 -2.1 -3.9 -10.3 2.1 3.1 8.0 26.0 19.02010 1.8 3.9 2.7 -7.2 0.8 1.1 1.9 2.5 3.3 12.0 26.0 24.92011 3.1 4.2 2.3 3.8 0.1 0.3 5.5 1.7 3.2 10.0 - 17.0
Macro forecast, Euroland
Euroland 2009 -4.0 -0.5 2.3 -10.8 -0.8 -12.6 -11.4 0.3 9.4 -6.3 78.7 -0.72010 1.3 0.1 1.4 -2.0 0.4 7.9 5.8 1.4 9.8 -6.7 84.8 -0.32011 2.1 1.2 1.1 3.8 0.0 5.4 4.6 1.6 9.5 -6.0 88.5 -0.2
Germany 2009 -4.9 -0.1 3.4 -13.5 0.4 -14.5 -9.5 0.2 7.5 -3.5 73.0 4.02010 1.9 -1.0 2.1 9.9 0.1 8.9 8.8 1.0 8.1 -5.0 76.5 3.72011 2.7 1.7 1.4 7.4 0.0 7.0 6.7 1.2 7.6 -3.0 79.0 3.2
France 2009 -2.6 0.7 2.8 -7.0 -1.6 -10.7 -9.8 0.1 9.4 -8.3 78.0 -2.32010 1.6 1.3 1.7 -1.0 0.3 7.9 5.9 1.2 10.0 -8.5 82.0 -2.52011 1.8 1.4 1.0 4.2 0.1 6.2 6.2 1.5 9.7 -7.0 87.0 -2.2
Italy 2009 -5.1 -1.6 1.6 -13.1 -0.3 -19.2 -15.2 0.7 7.8 -5.3 114.6 -2.22010 1.3 0.9 1.3 0.1 0.2 8.0 6.0 1.9 8.6 -5.0 116.0 -2.02011 2.0 1.0 1.0 5.2 0.1 8.4 7.2 2.0 8.3 -4.5 117.5 -1.7
Spain 2009 -3.7 -5.1 5.0 -15.5 0.0 -12.0 -18.2 -0.3 18.1 -11.2 54.3 -5.22010 -0.3 -0.5 1.8 -5.6 0.0 7.2 4.6 0.9 20.1 -10.0 66.0 -4.12011 1.0 0.7 0.2 0.2 0.0 6.1 4.1 1.9 19.8 -8.5 73.0 -3.2
Finland 2009 -7.8 -2.1 0.7 -13.4 0.0 -24.3 -22.3 0.0 8.2 -2.2 44.0 1.42010 1.8 1.0 0.5 -3.0 0.0 4.0 3.5 1.4 9.0 -3.9 49.5 1.42011 2.5 1.5 0.0 4.0 0.0 8.0 5.0 2.0 8.6 -3.3 52.0 2.2
Macro forecast, Global
USA 2009 -2.4 -0.6 1.8 -18.3 -0.6 -9.6 -13.9 -0.3 9.3 -9.9 83.8 -2.92010 3.3 2.7 0.3 2.9 1.2 12.1 11.3 1.6 9.4 -10.2 91.6 -3.92011 3.2 2.7 9.4 2.8 -0.4 6.4 6.4 1.6 9.4 -8.8 96.8 -3.8
Japan 2009 -5.2 -1.1 1.6 -14.4 -0.3 -24.1 -16.9 -1.4 4.7 -8.0 220.0 2.82010 3.3 2.2 1.6 -1.1 -0.1 23.7 2.6 -1.0 4.3 -5.2 220.4 3.42011 2.1 1.7 1.0 2.5 0.0 5.4 5.4 0.1 - - - 3.0
China 2009 8.7 - - - - - - -0.7 4.3 -3.3 23.6 5.82010 10.2 - - - - - - 3.3 4.0 -2.2 20.5 4.82011 9.5 - - - - - - 3.5 4.0 -2.2 20.5 5.5
UK 2009 -4.9 -3.2 2.8 -14.9 -1.2 -10.6 -13.3 2.2 7.6 -10.4 68.6 -1.32010 1.3 0.9 3.0 -2.0 1.1 4.4 0.9 3.2 8.0 -10.7 80.3 -2.02011 2.3 2.6 2.2 2.2 1.3 6.9 5.0 2.1 8.1 -8.8 88.2 -1.2
2009 -1.5 1.2 2.5 -3.7 1.0 -9.3 -5.7 -0.5 3.7 1.4 38.8 8.3
2010 2.0 1.8 0.5 2.1 -0.7 7.0 5.0 1.0 3.8 -1.0 40.0 9.02011 1.7 1.6 1.0 1.5 -0.2 4.0 4.0 1.2 3.5 -0.5 39.0 10.0
Y ear GDP
1
Private
cons.
1
Public
cons.
1
Fixed
inv.
1
Stock
build.
2
Ex-
ports
1
Im -
ports
1
Infla-
tion
1
Unem-
ploym.
3
Public
budget
4
Current
acc.
4
Public
debt
4
Current
acc.4
Public
cons.1
Fixed
inv.1
Stock
build.2
Ex-
ports1
Current
acc.4
Im -
ports1
Public
debt4
Public
budget4
Ex-
ports1
Infla-
tion1
Unem-
ploym.3
Switzer-
land
Y ear GDP1
Private
cons.1
Im -
ports1
Public
debt4
Public
budget4
Y ear GDP1
Private
cons.1
Public
cons.1
Fixed
inv.1
Stock
build.2
Infla-
tion1
Unem-
ploym.3
-
8/9/2019 AUG 06 Danske Weekly Focus
15/18
-
8/9/2019 AUG 06 Danske Weekly Focus
16/18
16 | 06 August 2010www.danskeresearch.com
Weekly Focus
Calendar
Source: Danske Markets
Key Data and Events in Week 32
Period Danske Bank Consensus Previous
1:50 JPY Current account s.a. JPY bn Jun 1447.0 904.81:50 JPY Money supply M2+CD y/y Jul 2.9% 2.9%
1:50 JPY Bank Lending y/y Jul -1.9%
7:00 JPY Eco Watchers Survey: Current Index Jul 48.0 47.5
8:00 DEM Trade balance EUR bn Jun 13.0 12.0 9.7
9:30 DKK Current account DKK bn Jun 6.0 6.7
9:30 DKK Trade Balance DKK bn Jun 7.5
Period Danske Bank Consensus Previous
- CNY Trade balance USD bn Jul 19.60 20.02
- JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10
- JPY Cabinet Office Monthly Economic Report
1:01 GBP BRC Retail Sales Monitor Jul
1:01 GBP RICS House Price Balance Index Jul 9%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 Manufacturing production m/m|y/y Jun 0.5%|7.5%
8:45 FRF Industrial production m/m|y/y Jun -0.2%|7.3% 1.7%|8.2%
9:30 DKK CPI m/m|y/y Jul -0.4%|1.9% -0.2%|1.7%
9:30 DKK Industrial production m/m Jun 4.4%
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%
10:00 NOK Producer prices, incl. Oil m/m|y/y Jul 2.3%|11.4%
10:30 GBP Trade balance GBP mln. Jun -3817
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
14:30 USD Unit labour cost q/q 2nd quarter 0.4% 1.6% -1.3%
20:15 USD FOMC meeting % 0.25 0.25
Period Danske Bank Consensus Previous
- OTH Earnings: Nestle SA, Cisco Systems Inc
1:01 GBP Nationwide Consumer Confidence Jul 63
1:50 JPY Machine orders m/m|y/y Jun 5.4%|1.5% -9.1%|4.3%
1:50 JPY Domestic CGPI m/m|y/y Jul 0.0%|0.0% -0.4%|0.5%
4:00 CNY PPI y/y Jul 6.0% 6.4%
4:00 CNY CPI y/y Jul 3.3% 2.9%
4:00 CNY Retail sales value y/y Jul 18.5% 18.3%
4:00 CNY Industrial production y/y Jul 13.4% 13.7%
4:00 CNY Fixed assets investments y/y Jul 25.3% 25.5%
10:30 GBP Jobless Claims Change 1,000 Jul -18.0 -20.8
10:30 GBP Unemployment rate % Jun 7.8 7.8
11:30 GBP Bank of England Quarterly Inflation Report
13:00 USD MBA mortgage applications % 1.3
14:00 NOK Norwegian Deposit Rates % 2.0 2.0 2.0
14:30 USD Trade balance USD bn Jun -42.2 -42.3
20:00 USD Budget statement USD bn Jul -165.0 -180.7
Monday, August 9, 2010
Tuesday, August 10, 2010
Wednesday, August 11, 2010
-
8/9/2019 AUG 06 Danske Weekly Focus
17/18
17 | 06 August 2010www.danskeresearch.com
Weekly Focus
Calendar - continued
Source: Danske Markets
Period Danske Bank Consensus Previous
3:30 AUD Unemployment rate % Jul 5.1 5.1
6:30 JPY Industrial production, final m/m|y/y Jun -1.5%|17.0%
7:00 JPY Consumer sentiment survey Index Jul 43.9 43.69:00 ESP Inflation (HICP) m/m|y/y Jul 0.2%|1.9%
9:30 SEK CPI change m/m|y/y Jul 0.0%|0.9%
9:30 SEK SW CPI - CPIF m/m|y/y Jul 0.0%|1.9%
10:00 ITL Inflation (HICP) m/m|y/y Jun -0.9%|1.8% -0.9%|1.8%
10:00 SEK Statistics Sweden, Unemployment % Jul 4.8
10:00 NOK Retail sales, s.a. m/m|y/y Jun 0.6% -0.1%|-3.0%
11:00 EUR Industrial production m/m|y/y Jun 0.6%|9.3% 1.0%|9.6%
14:30 USD Initial jobless claims 1000 479
14:30 USD Import prices m/m|y/y Jul 0.4%|5.3% -1.3%|4.5%
Period Danske Bank Consensus Previous
8:00 DEM GDP, s.a. q/q|y/y 2nd quarter 1.3%|2.4% 1.3%|2.4%
8:45 FRF Inflation (HICP) m/m|y/y Jul -0.4%|1.8% 0.0%|1.7%8:45 FRF GDP, s.a. q/q|y/y 2nd quarter 0.6%|1.6% 0.4%|1.4% 0.1%|1.2%
9:00 ESP GDP, s.a. q/q|y/y 2nd quarter 0.2%|1.5% 0.1%|-1.3%
9:30 SEK Industrial production m/m|y/y Jun 2.3%|12.4%
9:30 SEK Industrial orders m/m|y/y Jun 2.1%|20.4%
11:00 EUR Trade Balance, s.a. EUR bn Jun -3.0
11:00 EUR GDP, s.a. q/q|y/y 2nd quarter 0.7%|1.4% 0.7%|1.4% 0.2%|0.6%
14:30 USD CPI m/m|y/y Jul 0.2%|1.2% 0.2%|1.2% -0.1%|1.1%
14:30 USD CPI ex. food & energy m/m|y/y Jul 0.0%|0.9% 0.1%|0.9% 0.2%|0.9%
14:30 USD Retail sales less autos m/m Jul 0.3% 0.3% -0.1
14:30 USD Retail sales m/m Jul 0.5% 0.4% -0.5%
14:30 USD Retail sales less autos & gas m/m Jul 0.2% 0.3% 0.1%
15:55 USD University of Michigan Confidence Index Aug 69.0 69.8 67.8
Period Danske Bank Consensus Previous
Tue 10 - 13 CNY Money supply M2 y/y Jul 18.5% 18.5%
Friday, August 13, 2010
During the week
Thursday, August 12, 2010
-
8/9/2019 AUG 06 Danske Weekly Focus
18/18
Weekly Focus
DisclosureThis report has been prepared by Danske Research, which is part of Danske Markets, a division of Danske Bank.
Danske Bank is under supervision by the Danish Financial Supervisory Authority.
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high
quality research based on research objectivity and independence. These procedures are documented in the Danske
Bank Research Policy. Employees within the Danske Bank Research Departments have been instructed that any
request that might impair the objectivity and independence of research shall be referred to Research Management
and to the Compliance Officer. Danske Bank Research departments are organised independently from and do not
report to other Danske Bank business areas. Research analysts are remunerated in part based on the over-all
profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other
remuneration linked to specific corporate finance or dept capital transactions.
Danske Bank research reports are prepared in accordance with the Danish Society of Investment Professionals
Ethical rules and the Recommendations of the Danish Securities Dealers Associations.
Financial models and/or methodology used in this report
Calculations and presentations in this report are based on standard econometric tools and methodology.
Risk warning
Major risks connected with recommendations or opinions in this report, including as sensitivity analysis of
relevant assumptions, are stated throughout the text.
First date of publication
Please see the front page of this research report.
Expected updates
This report is updated on a weekly basis
DisclaimerThis publication has been prepared by Danske Markets for information purposes only. It has been prepared
independently, solely from publicly available information and does not take into account the views of Danske
Banks internal credit department. It is not an offer or solicitation of any offer to purchase or sell any financial
instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no
representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from
reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or
short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned
herein. The Equity and Corporate Bonds analysts are not permitted to invest in securities under coverage in their
research sector. This publication is not intended for retail customers in the UK or any person in the US. Danske
Markets is a division of Danske Bank A/S. Danske Bank A/S is authorized by the Danish Financial Supervisory
Authority and is subject to provisions of relevant regulators in all other jurisdictions where Danske Bank A/S
conducts operations. Moreover Danske Bank A/S is subject to limited regulation by the Financial Services
Authority (UK). Details on the extent of our regulation by the Financial Services Authority are available from us
on request. Copyright (C) Danske Bank A/S. All rights reserved. This publication is protected by copyright and
may not be reproduced in whole or in part without permission.
This publication has been prepared by the correspondent of Auerbach Grayson & Company Incorporated(AGC) named above on the date listed above.
We are distributing this publication in the U.S. and any U.S. person receiving this report and wishing to effect
transactions in any security discussed herein, should do so only with a representative of Auerbach Grayson &
Company Incorporated. Additional information on recommended securities is available on request.