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Investment Research — General Market Conditions

2 July 2010

Danske Daily
Key news
Market movers today: Today
Weak US economic data sends US equities, commodities and the dollar sliding ahead
of the labour market data today. US labour market report [Tex
DKK currency reserves
Mixed session in Asian markets this morning as Australia reaches an agreement on a
mining tax. Speech by ECB’s Stark

DKK currencies released this afternoon – are we in for a surprise given the recent
weakening of DKK against EUR? Market overview
07:30 1 day +/-,%

S&P500 (clo se) 1027.4  -0.32


Markets Overnight S&P500 fut (chng fro m clo se)
Nikkei
1025.3
9191.4


0.34
0.00
Weaker-than-expected US economic data sent US equity markets sliding yesterday with Hang Seng 19851.4  -1.38

the S&P500 declining some 0.9% as the ISM followed the pattern we saw in China and 17:00 07:30 +/-, bp

Euroland, while jobless claims rose more than expected and finally pending home sales in US 2y gov 0.61 0.63  2.4
US 10y gov 2.88 2.95  6.4
the US fell much more than expected. The weaker economic outlook also led to a decline
in commodity prices. iTraxx Europe (IG) 126 131  4.8
iTraxx Xover (Non IG) 497 587  90

However, it has been a mixed session in the Asian market as the Australian government +/-, %
has reached an agreement on a mining tax with the mining industry. This was the tax that EUR/USD 1.246 1.250  0.31
USD/JPY 87.090 87.920  0.95
ousted the Australian PM Rudd and led to the first female PM in Australia. This removes EUR/CHF 1.33 1.33  0.07
EUR/GBP 0.824 0.825  0.13
a lot of uncertainty on the growth prospects for Australia and we have seen the Aussie EUR/SEK 9.623 9.608  -0.15
dollar gain this morning and some modest gains in a range of stock market indices in the EUR/NOK 8.09 8.03  -0.66

region. Otherwise a number of indices have followed the US market as Goldman Sachs USD
Oil Brent, USD 71.6 72.7  1.61
cut its economic forecast for China and Bank of China will sell shares for up to USD9bn Gold, USD 1221.0 1207.0  -1.15
in order to replenish capital. This has led to the Hang Seng falling 1.3% this morning. Note:
* The iTraxx Europe Index shows the spread
Despite the weakness in the equity markets, US bond yields increased very modestly. development for the most liquid investment grade CDS
contracts in the euro credit market.
10Y Treasury yields rose 1bp but remained below the 3% level, but the curve continued
to flatten between 2Y and 10Y partly as the growth story loses momentum and investors **The iTraxx Europe Crossover shows the spread
development of the most liquid non-investment grade
are moving further out on the yield curve in order to get a higher yield. CDS contracts in the euro credit market.
Source: Bloomberg
In the FX markets the dollar weakened against the euro and yen on the back of the
economic data and a better-than-expected auction by the Spanish Debt Office yesterday.
EUR/USD moved all the way back above the 125 level yesterday, and has remained there
in Asian trading this morning. The dollar has rebounded modestly against the yen, but is
still below the 88 level this morning. SEK weakened against the euro and moved up to
8.62 after the Riksbank meeting as the tone in the monetary policy report was softer than
expected and as equities declined yesterday. This morning it has rebounded a little and is
trading at 8.60. The weakness in the SEK has spilled over to NOK, which is again above
8.00.

Chief Analyst
Jens Peter Sørensen
+45 45128517
Jenssr@Danskebank.dk

www.danskeresearch.com
Danske Daily

Global Daily
Focus today: The main event today is the US employment report for June. We estimate
Strong trend in Euro zone IP
that the headline is likely to show a decline of -100K as the recent months of positive
600 '000 m/m '000 m/m 600
impact from census hiring reverses. However, the market will focus on the private sector 400 400
employment, which we expect to increase by +150K versus +41K in previous month. 200 200
0 0
Some of this is likely to reflect a payback from previous months, when the census hiring -200 -200
most likely crowded out private job creation. The unemployment rate is expected to hold -400
Change in private nonfarm payrolls
-400
-600 -600
steady at 9.7% -800 -800
96 98 00 02 04 06 08 10
Fixed income markets: 2yr Schatz continued to underperform yesterday. Despite the
larger-than-expected allotment at the six-day fine-tuning operation, EONIA rates rose and Source: Reuters Ecowin

pushed the yield on Schatz higher. With the downward pressure on long-bond from
weaker economic data and declining risk appetite continuing, the German 2-10 curve has
US S&P500 future
flattened dramatically. Further, 2yr Schatz yield is now trading above 2yr Treasuries,
which seems fundamentally wrong given the relative outlook for the ECB and the Fed.
1087 1087
Today focus will be on the labour market report. If the private payrolls either meets or 1067 1067
beats the consensus estimate, this should help to stabilise the markets and could even send 1047 1047
bond yields higher. 1027 1027

1007 1007
FX markets: Yesterday saw the EUR bounce back to trade at levels above 1.24 vs. the Wed Thu Mon Tue Wed Fri
USD, despite nervous trading, as the EUR received support from a decent Spanish debt Source: Danske Markets
auction and the ECB managing a reduction of its liquidity provision without adding to
market tensions. EUR/USD currently seems to be reacting to negative US data surprises
US 10y gov yield
(ISM, IJC, consumer confidence) through the outlook for relative interest rates (higher
EUR/USD) rather than the impact on risk appetite (lower EUR/USD). In that respect, an
3.15 3.15
upside surprise in today’s US employment report might reverse some of the EUR’s recent
3.05 3.05
gains.
2.95 2.95

2.85 2.85

Scandi Daily Wed Thu Mon Tue Wed Fri

Denmark: Currency reserves for June are due to be released in the afternoon. Here we Source: Danske Markets

look for a modest decline as we have seen DKK weaken against EUR on the back of all
the focus on lending in CHF by Danish corporate client and municipalities.
Global FX
Norway: Unemployment data released today. Not expected to have any impact on the EUR/USD (LHS) USD/JPY (RHS)
91
market. 1.255
90
89
1.235
88

Key figures and events 1.215 87


Wed Thu Mon Tue Wed Fri
Friday, July 2, 2010 Period Danske Bank Consensus Previous
9:00 NOK Unemployment nsa. (NAV) % Jun 2.8% 2.7% Source: Danske Markets
10:30 GBP PMI Construction Index Jun 58.5 58.5
11:00 EUR Euroland PPI m/m|y/y May 0.3%|3.1% 0.9%|2.8%
11:00 EUR Unemployment % May 10.1 10.1 10.1
12:00 ECB ECBs Stark is speaking
Scandi FX
14:30 USD Nonfarm payroll 1000 Jun -100 -125 431
14:30 USD Unemployment % Jun 9.7% 9.8% 9.7% EUR/SEK (LHS) EUR/NOK (RHS)
14:30 USD Private payrolls 1000 May 150 110 41
16:00 USD Factory Orders m/m May -0.5% 1.2% 9.64
8.06
16:00 DKK Currency reserves (Change) DKK bn Jun 435.5 440.5 (36.4) 9.59
8.00
9.54 7.94

9.49 7.88
Wed Thu Mon Tue Wed Fri

Source: Danske Markets

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Today’s market data: 02 July 2010


STOCKS
S&P500 Intraday, % Eurostoxx Intraday, %
-0.10 -0.1 Clo se +/-
DJSTOXX50 2305  -2.3%
0.00 0.00 -0.90 -0.9
Max 0.6 Max -0.1 OM XC20 384  -2.4%
-0.70 Min -2.1 -0.70 -1.70
Min -3.3 -1.7
OM XS30 982  -2.4%
0.7 0.8 OSE B X 318  0.0%
-1.40 -1.40 -2.50 -2.5
Clo se +/-
-2.10 -2.10 -3.30 -3.3 DOW JONES 9733  -0.4%
15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 NA SDA Q 2101  -0.4%
Grey line indicates closing of Danish markets
Grey line indicates opening of US markets
1mo nth  -6.5% 1mo nth  -3.6% S&P 500 1027  -0.3%
Year-to -date  -7.9% Year-to -date  -10.9% NIKKEI (07:30) 9191  -2.3%

FX & COMMODITIES
O il,
EUR/USD Intraday E UR 17:00 07:30 +/- G o ld, $ B re nt , $
125.5 125.5
USD 124.59 124.98  0.39 07:30 1206.96 72.74
124.6 124.6 JP Y 108.52 109.89  1.37 1day  8.02  0.40
Max ## GB P 82.35 82.46  0.11 1mo nth  -16.49  -1.01
123.7 123.7
Min ## NOK 808.62 803.32  -5.30 Year-t-date  110.01  -5.19

122.8
0.9 122.8
SEK 962.29 960.83  -1.46
DKK 744.93 744.90  -0.03 CRB C R B , R aw
121.9 121.9 P LN 417.04 415.63  -1.41 1M f ut ure Indus t ria ls
07 10 13 16 19 22 01 04 US D 17:00 07:30 +/- 07:30 256.21 474.74
JP Y 87.09 87.92  0.83 1day  -2.31  -0.71
1mo nth  2.49 GB P 151.29 151.56  0.27 1mo nth  3.27  -2.02
Year-to -date  -18.23 CHF 106.39 106.13  -0.26 Year-t-date  -27.17  -8.75

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
0.65 USD2Y USD10Y USD 0.25 0.53 28 USD 10Y 2.88 2.95  6
2.96
Max 0.7 Max 3.0 EUR 1.00 0.78 -22 USD 30Y 3.83 3.90  7
0.63 Min 0.6 Min 2.9 2.93
GB P 0.50 0.73 23 JP Y 10Y 1.07 1.10  3
0 0 DKK 1.05 1.13 8
0.61 2.90 SEK 0.25 0.81 56 07:30(-1)* 17:00 +/-, bp
NOK 2.00 2.78 78 DEM 10Y 2.56 2.56  0
0.59 2.87 P LN 3.50 3.77 27 DKK 10Y 2.66 2.66  1
07 10 13 16 19 22 01 04 SEK 10Y 2.66 2.62  -4
USD2Y (lhs) USD10Y (rhs) NOK 10Y 3.53 3.53  0
P LN 10Y 6.01 5.97  -4
* As of closing previous trading day

10Y Yield Spread to Germany


US Yield Curve German Yield Curve
4.0 3.39 4.0 4.0 3.5 3.0
3.5 8.0
3.0 3.0 3.0
3.0 2.5 7.0
2.5 6.0
2.0 1.51 2.0 2.5 2.0
2.0 5.0
0.96 2.0
1.0
0.75
1.0 1.5
## M ax 3.590 1.5 1.5 ## M ax 8.410 4.0
0.38 0.43
0.000.06 ## M in 0.000 1.0 1.0 ## M in # # # 3.0
1.0
0.0 0.0 2.0
0.5 0.5 0.5
1.0
USD JPYGBPFRF ITL DKKSEKNOKPLN 0.0 0.0
-1.0 -1.0 0.0 0.0
USD2Y USD5Y USD10Y
DEM2Y DEM5YR DEM10Y
-2.0 -1.47 -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 Credit spreads S wa p S pre a d, bp**

160 900 17:00 07:30 +/-


07:30 1day 1mo nth 140 800 USD 10Y 8 8  0
120 700
Euro pe (IG) 131  2  8 JP Y 10Y 10 8  -1
100 600
HiVo l 196  3  9 500
80
Xo ver (N-IG) 587  11  8 400 07:30(-1)* 17:00 +/-
60 300
40 EUR 10Y 31 31  0
200
20 100 DKK 10Y 36 36  0
Finan. Sr. 162  1  -11 0 0 SEK 10Y 34 32  -2
Finan. Sub. 244  2  -14 Jul Aug Oct Nov Dec Feb Mar May Jun NOK 10Y 58 59  1
No n-finan. 244  2  -14 iTraxx Europe (IG) (left axis)
iTraxx Xover (Non IG) (right axis) * As of closing previous trading day
* Ask price ** Ask price

So urce: B lo o mberg 7:30(-1) o g 17:00 refers to the previo us (trade) day

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