Investment Research — General Market Conditions

16 July 2010

Danske Daily
Markets overnight
US Congress approves financial bill, marking the biggest change to government
Market movers today:
financial regulation since the Depression. The 2,300-page bill, touching everything
from credit cards to derivatives trading, now hands off to regulatory agencies the USD: CPI (14:30 CET)
discretion to determine the „details‟ of the new regulation.
USD: Uni. of Michigan confidence
By and large weak US data with PPI, Empire, and Philadelphia Fed to the low side (15:55 CET)
of expectations, while June industrial production and initial jobless claims came out
Q2 earnings (incl. Citigroup,
slightly better. On balance, yesterday‟s releases point to a continued, and possibly
General Electric and Bank of
fast, slowdown in the US manufacturing sector, as well as generally declining price
America)
pressures - although we will have to wait for more data to draw a firm conclusion.
US equities reversed early losses to close broadly unchanged as especially energy
and financials posted a late session recovery. The S&P500 index closed 0.12% higher. Market overview
07:30 1 day +/-,%
Asian stocks are down for a second day with the Japanese market once again
leading the slump. S&P500 (clo se) 1096.5  0.12
S&P500 fut (chng fro m clo se) 1087.0  -0.31
US Treasuries posted a second day of strong gains with yields once again mainly Nikkei 9404.3  -2.90
Hang Seng 20241.3  -0.07
coming lower in the long end of the curve. Treasuries have now regained most of the
their early July losses – the 2-year yield touching an all-time low. Implied (expected) 17:00 07:30 +/-, bp

volatility continues lower as do inflation expectations priced in the TIPS market. US 2y gov 0.58 0.59  1.6
US 10y gov 2.97 2.97  0.5
EUR/USD looks set to test 1.30 after the pair accelerated higher to trade above
iTraxx Europe (IG) 111 116  4.5
1.2950 for the first time in two months. USD/JPY is flirting with the 1 July 86.97 low. iTraxx Xover (Non IG) 445 528  83.0

Global Daily EUR/USD 1.291 1.291 

+/-, %
0.04
USD/JPY 87.340 87.020  -0.37
Thin calendar ahead of US inflation and consumer confidence data. Focus EUR/CHF 1.34 1.35  0.26
remains on Q2 earnings reports, which have so far beaten expectations. EUR/GBP 0.840 0.838  -0.26
EUR/SEK 9.438 9.430  -0.08
US inflation is expected to show some easing, with a slight drop of 0.1% in CPI EUR/NOK 8.00 7.99  -0.13

from May to June, reflecting the declining gasoline prices. University of Michigan USD
confidence is likely to show a decline in consumer confidence, primarily driven by Oil Brent, USD 75.3 75.8  0.77
Gold, USD 1210.4 1207.3  -0.26
recent soft equities, causing consumers to be increasingly cautious.
Note:
* The iTraxx Europe Index show the spread development
Rebound takes EUR away from oversold territory. Yesterday‟s move above 1.29
for the most liquid investment grade CDS contracts in
implies that EUR/USD is no longer significantly oversold according to our short-term the euro credit market.
model. I.e., the EUR is no longer trading with a very stretched risk premium, as is
**The iTraxx Europe Crossover show the spread
also reflected in the reduced option market skew, and yesterday‟s successful Spanish
development of the most liquid non-investment grade
bond auction. This indicates that the bulk of the EUR rebound is likely behind us. CDS contracts in the euro credit market.
Source: Bloomberg
Scandi Daily
Yesterday’s Riksbank minutes turned out to be a non-event. Nothing in the very
long (26p) text implied that the members were revising their opinions (some
becoming even more entrenched) and a September hike is becoming increasingly
likely. EUR/SEK saw a violent move higher yesterday in very thin trading, but has
corrected lower again – liquidity is becoming an issue in the Scandies. There are no
key data releases out of Scandinavia today.
Senior Analyst
Kasper Kirkegaard
+45 45 13 70 18
kaki@danskebank.com

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Danske Daily

Key figures and events

Friday, July 16, 2010 Period Danske Bank Consensus Previous
- OTH Earnings: Mattel, Citigroup, LG Displayy, General Electric, Bank of America
0:45 NZD CPI q/q|y/y 2nd quarter 0.4%|2.0%
1:15 USD Fed's Lacker (non-voter, hawk) speaks
1:50 JPY Tertiary Industry Index m/m May -0.7% 2.1%
11:00 EUR Trade Balance (s.a.) EUR bn May 1.6
14:30 USD CPI m/m|y/y Jun -0.1%|1.1% 0.0%|1.2% -0.2%|2.0%
14:30 USD CPI ex. food & energy m/m|y/y Jun 0.1%|0.9% 0.1%|0.9% 0.1%|0.9%
14:30 CAD Leading indicator m/m Jun 0.9%
15:55 USD University of Michigan Confidence Index Jul 73.2 74.0 76.0

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