Important disclosures and certifications are contained from page 14 of this report. www.danskeresearch.com

Investment Research — General Market Conditions

Market movers ahead

In the US, the FOMC meeting is the main event. In our view, the Fed will not raise the

federal funds target range this year, in light of sluggish growth and continued labour market

slack. We expect Markit manufacturing PMI to confirm this picture.

In Japan, we do not expect the Bank of Japan to ease monetary policy at next week’s

meeting but we expect it to abandon calendar-based communications and instead pursue 2%

inflation ‘at the earliest possible stage’.

In the Scandies, we expect focus to be on next week’s meeting at Norges Bank, when we

expect Norges Bank to keep interest rates unchanged but present an interest rate path that

indicates a 50% chance of a cut this year.

Global macro and market themes

Risk markets face a new headwind from a loss of momentum in the business cycle.

Weakness in US data supports our call that the Fed will stay on hold this year.

Bond yields in the US and Germany are set to stay at low levels for at least the rest of the

year.

Focus

We have a non-consensus view on the Fed of no hike this year. See Presentation US: 10

reasons why we believe the Fed will not hike this year, 14 September.

A strong Regional Network report from Norway has led us to rule out a September rate cut.

See Regional Network Survey: Better than expected and rules out September rate cut, 13

September.

PCE core inflation has been below 2%

target for 51 months in a row

Norwegian rate cut no longer as

necessary or desirable

Source: Macrobond Financial Source: Real Estate Norway, Bank of Norway

16 September 2016

Editor

Senior Analyst

Louise Aggerstrøm Hansen +45 45 12 85 31 louhan@danskebank.dk

Weekly Focus Sweden

Soft data will keep Fed on hold

Contents

Market movers ...................................................... 2

Global Macro and Market Themes ........... 5

Scandi update ........................................................ 8

Latest research from Danske Bank

Markets ..................................................................... 9

Macroeconomic forecast ........................... 10

Financial forecast ............................................ 11

Calendar ................................................................ 12

Financial views

Source: Danske Bank

Follow us on Twitter for the latest on

macroeconomic and financial market

developments:

@Danske_Research

Major indices

16-Sep 3M 12M

10yr EUR swap 0.37 0.30 0.70

EUR/USD 112 112 118

ICE Brent oil 46 49 54

16-Sep 6M 12-24M

S&P500 2147 -3 -+3% 0-5%

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Market movers

Global

The main event in the US next week is the September FOMC meeting, with the rate decision

announcement on Wednesday at 20:00 CEST. Note that this is one of the ‘big’ meetings

with updated ‘dots’ and a press conference (beginning at 20:30 CEST). We continue to

believe the Fed will not raise the federal funds target range this year. In Presentation US: 10

reasons why we believe the Fed will not hike this year, 14 September, we outline why we

have this non-consensus view on the Fed. Some of the main points are the following. Real

GDP growth has slowed markedly to around 1% q/q AR over the past three quarters,

suggesting the US economy has lost some momentum. Unemployment and

underemployment rates have moved sideways for some time, indicating there is still slack

left in the labour market. Wage growth is still subdued and PCE core inflation continues to

run somewhat below the 2% target (it has been at or above target for only five months since

2008). Hence, there is no strong indication of an upward inflation trend now. At the time of

writing, markets have priced in just a 10% probability of a hike in September and a 50%

probability of a hike in December. Although we would not rule out a December hike if we

saw a rebound in data, we still expect the Fed to be on hold until H1 17.

On Friday, the preliminary Markit PMI manufacturing index for September is due. Markit

and ISM PMIs declined in August but are sending mixed signals on the manufacturing

sector. Most notably the ISM index declined 3.2 index points and is now back below the 50

threshold again, suggesting a contraction in the manufacturing sector. Markit PMI in August

came out at 52.0, which is a low level but still indicates a growing manufacturing sector.

Regional indices (Empire and Philly) for September have sent mixed signals, as the headline

indices rose but details were very weak. The regional surveys are very volatile but if we

weight the subcomponents by the ISM weights, both Philly and Empire suggest further

weakness in the manufacturing sector. Hence, we estimate the Markit PMI manufacturing

index declined to 50.5 in September.

In the euro area, Thursday sees the release of consumer confidence figures for the euro

area. Consumer confidence has declined over the past three months from -7.0 in May to -8.5

in August but this is still a high level pointing to solid growth in private consumption. In

September, the oil price has increased, pointing towards lower consumer confidence, but the

labour market continues to improve, which supports solid consumer confidence.

Friday gives us the September PMI figures. Overall, we believe that PMI figures will

improve moderately, reflecting an ongoing recovery. The order-inventory balance for the

manufacturing PMI showed a promising increase in August, signalling an increase in

manufacturing PMI in September despite a moderate decline in figures for August.

However, we believe services PMIs have a more sluggish outlook for September. The

services PMI figures were revised down, led by the German services PMI being revised

down to 51.7 (from an initial estimate of 53.3). In addition, business expectations fell to a

20-month low in August supporting a weaker outlook for the services sector.

After a heavy week in the UK this week, with many important data releases and the

September Bank of England meeting, we have a relatively quiet week ahead of us. Focus

continues to be on the economic impact of the UK’s EU vote and UK politics. In terms of

data releases, we are due to get Rightmove house prices on Monday and the CBI industrial

survey on Thursday, both for September. In terms of political events, the UKIP conference

in Bournemouth begins today and the deadline for voting in Labour’s leadership election is

on Wednesday.

PCE core inflation has been below 2%

target for 51 months in a row

Source: BLS, BEA

What is going on in the manufacturing

sector?

Source: Markit Economics, ISM

Euro manufacturing PMI to increase

Source: Markit PMI, Danske Bank Markets

Consumer confidence supports

private consumption growth

Source: ECB, Eurostat

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Note that we have published two documents on the UK this week. In Post-Brexit Status-UK

may avoid a Brexit-recession as data have surprised positively, 13 September, we note that

soft economic indicators suggest the UK rebounded in August after the initial deceleration

in July, suggesting the UK economy may avoid a Brexit recession. As we expected, the Bank

of England kept monetary policy unchanged yesterday. We still expect a rate cut in

November from 0.25% to 0.10% but it is a close call due to the better-than-expected

economic data (see also Bank of England Review: Another rate cut later this year is a close

call as near-term indicators have been better than expected, 15 September).

In China, the only data release due is property prices for August. House prices have

increased at a fast pace but monthly momentum has started to fade following tightening in

the big cities, where signs of house price bubbles are evident. China is trying to manage a

very diverse picture in the housing market, with undersupply in tier-1 cities, rapid price

increases and still oversupply in tier-3 and tier-4 cities and still falling prices in some areas.

We look for the monthly momentum to fade further in August following the recent

tightening measures.

In Japan, we expect all eyes to be on the comprehensive assessment due to be conducted by

the Bank of Japan (BoJ) at the 20-21 September monetary policy meeting, for any

indications of a change in the monetary policy framework and/or additional monetary

easing. Communications from Governor Haruhiko Kuroda and Deputy Governor Hiroshi

Nakaso suggest the BoJ’s policy review will focus mainly on two issues: (1) factors that

have potentially hampered the achievement of the 2% price stability and (2) the cost and

benefits of negative interest rates. We do not expect the BoJ to ease monetary policy as such.

However, we expect it to adjust its policy framework by abandoning calendar-based

communications on when it expects to reach the 2% target and instead pursue 2% inflation

‘at the earliest possible stage’. We expect the BoJ to maintain its negative interest rate policy

and keep the door open for additional rate cuts in the future. In addition, we expect the BoJ

to adopt a more flexible approach with its quantitative target for annual increases in the

balance of JGB purchases, as it is likely to have to continue its asset purchases for a longer

period than it initially expected and needs to improve the sustainability of its asset purchases

in order to avoid premature tapering discussions. Moreover, adding more flexibility to its

purchase scheme will also help to address potential undesirable issues relating to the shape

of the yield curve. In our main scenario, we expect the BoJ to disappoint relative to the

market’s pricing, suggesting that USD/JPY is likely to trade lower in the very near term.

Given the market’s low expectations for further Fed rate hikes, short-term valuations and

positioning, we expect JPY appreciation pressure to lose momentum and, in the absence of

sharp deterioration in risk sentiment and/or substantial declines in crude oil prices, we do

not expect USD/JPY to break below significantly 100. We target 101 in 1M and 102 in 3M.

For more details, see Bank of Japan preview: focus on assessment: policy adjustments but

no easing, 16 September.

UK PMI’s have rebounded in August

suggesting that UK may avoid a Brexit-

related recession

Source: Markit Economics, ONS

Chinese fixed investment weak

despite more planned projects

Source: Macrobond Financial

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Scandi

In Denmark, Statistics Denmark is set to release its monthly employment figures for July

on Wednesday. Employment has continued to climb healthily and, although the data for July

are the first since Brexit, there is no immediate reason to anticipate any sudden slowdown.

Thursday brings retail sales for August and consumer confidence for September. Dankort

debit card usage suggests that spending fell in August, which may be reflected in retail sales.

Consumer confidence was not affected particularly by Brexit and, given the dearth of Earth-

shattering news over the past month, we see no reason for any major change in September.

Housing market statistics for Q2 are due for release on Tuesday. Statistics Denmark’s

seasonally adjusted figures point to low or even flat growth in house prices on a nationwide

basis but the apartment market still seems to have a bit more life in it.

In Sweden, the week ahead is void of interesting data.

In Norway, we now expect an unchanged key rate at the rate-setting meeting on

Thursday.Back in June, Norges Bank indicated an almost 100% probability of a cut in

September but the risk outlook has since changed significantly. For one thing, there are now

clear signs that growth in the Norwegian economy is picking up and that the risk of a deeper

and more protracted downturn has decreased greatly. Second, the housing market tightened

considerably over the summer, with big price increases, high turnover and limited supply.

This means that a further rate reduction is no longer necessary when it comes to growth and

is also less desirable when it comes to the housing market, given the risk to financial

stability. Inflation has also been much higher than expected. This points to an upward

revision of the central bank’s interest rate path relative to June but it will still probably show

an almost 50/50 chance of a cut before the end of the year. The reason is that, in isolation,

high NIBOR premiums and a relatively strong krone are pulling the path down and so

preventing a cut from being completely ruled out. We believe this is very much in line with

current market pricing, so we do not expect any major reaction. However, the risk is also

slightly asymmetrical, as Norges Bank is more likely to cut the key rate or soften its tone

than to start signalling a rate increase.

Market movers ahead

Source: Bloomberg, Danske Bank Markets

Global movers Event Period Danske Consensus Previous

During the week

Mon 19-Sep 3:30 CNY Property prices y/y

Tue 20-Sep

Wed 21-Sep - JPY BoJ monetary policy announcement

- JPY BoJ annual rise in monetary base 80 80

- JPY BoJ policy rate % -0.1% -0.1%

20:00 USD FOMC updated projections % 0.50% 0.50% 0.50%

20:30 USD Fed Chair Yellen speaks

23:00 NZD Reserve Bank of New Zealand (cash rate decision) % 2.00% 2.00% 2.00%

Thurs 22-Sep 15:00 EUR ECB's Draghi speaks in Frankfurt

Fri 23-Sep 10:00 EUR PMI manufacturing, preliminary Index Sep 52.2 51.5 51.7

10:00 EUR PMI services, preliminary Index Sep 52.5 52.8 52.8

15:45 USD Markit manufacturing PMI, preliminary Index Sep 50.5 52.3 52.0

Scandi movers

During the week

Mon 19-Sep

Tue 20-Sep

Wed 21-Sep 10:00 NOK Unemployment (LFS) % Jul 4.8%

Thurs 22-Sep 10:00 NOK Norges Banks monetary policy meeting % 0.5% 0.5% 0.5%

Fri 23-Sep

Employment still climbing

Source: Statistics Denmark

Rate cut no longer as necessary or

desirable

Source: Real Estate Norway, Bank of Norway

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Global Macro and Market Themes

Autumn blues

Autumn blues has set in in risk markets, as more hawkish central banks, unexpected loss

of momentum in the business cycle and technically overbought Emerging Markets

triggered a correction. Markets that performed the best in the upturn have corrected the most.

Our MacroScope business cycle models updated this week suggest that we have moved into the

so-called Red Quadrant in the US, Europe and Japan. In this part of the business cycle growth

is losing momentum and the output gap is negative. It typically implies rising volatility and

lower - and often negative - returns on risk assets. As profit expectations for 2017 are also too

high in our view, it leaves a negative backdrop for equities; hence our equity team’s

recommendation of underweight equities. For Emerging Markets assets we still see support

from a positive Chinese business cycle but heading into 2017 things are likely to get murkier as

we expect China to lose some momentum again.

Adding to growth worries in the US was this week’s retail sales report, which disappointed

significantly. Core retail sales fell for the second month in a row and although it probably just

reflects a small pause following very strong sales during spring and early summer, it does throw

more uncertainty into the growth outlook on top of very weak ISM data. Especially because the

consumer is currently the main driver of US growth, as investments are still suffering from the

recession in the energy sector. On the positive side, weekly US jobless claims stayed very low

this week and do not suggest that the economy is heading for a deep downturn. However, the

recent negative retail sales number was likely the last nail in the coffin of a September hike.

We continue to look for the next hike next year, see 10 reasons why we believe the Fed will not

hike this year, 14 September.

Chart 1. Autumn blues in US and euro area

Source: Macrobond Financial

Key points

Risk markets face new headwind

from loss of momentum in

business cycle

Fed on hold this year as economy

slows again

Bond yields to stay very low

EUR/USD range to continue

Chart 2. MacroScope signals have

turned negative across G3 countries

Source: Macrobond Financial, Danske Bank

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Core bond yields to stay extremely low – EUR/USD in range

With the Fed expected to stay on hold until next year and loss of business cycle momentum,

core bond markets should be well supported. We look for bond yields in both the US and

Germany to stay at the current low yield levels for at least the rest of the year. The recent bond

market rout should calm down quickly in our view, as the Fed is set to continue to signal a

reduction in the neutral rate and a search for yield is pushing investors to buy longer dated bonds.

From time to time yields spike when the low volatility is broken and leveraged investors get

flushed out of long positions but once the positioning is more balanced and leverage reduced,

bond markets typically calm down again and demand picks up again.

Our view on EUR/USD continues to be one of range trading over the coming months

between 1.10 and 1.14 before we see a move higher driven by current account flows strongly in

favour of the EUR. The EUR is also fundamentally undervalued on our medium-term models.

Euro IP data disappointing, ZEW shows signs of stabilisation

Euro area industrial production for August surprised to the downside and the 3M/3M % rate has

been at the weakest levels since 2013 in the past months. It underpins our expectation of a

weak Q3 for GDP growth (Chart 5). The German ZEW confidence index was flat in September

at 0.5 close to the long-term average of 0. It has stabilised in recent months and overall points

to growth around trend in Germany in line with the IFO expectations index. It gives some

comfort that growth will not deteriorate further from Q3. We look for growth to be weak in

Q4 as well on subdued investment activity before recovering moderately in 2017 as

uncertainty from Brexit fades.

Chinese data support recovery but slowdown brewing in 2017

Chinse activity indicators this week surprised to the upside moving in line with the scenario

of moderate recovery. Industrial production increased to 6.3% y/y in August from 6.0% y/y in

July and retail sales moved up to 10.6% y/y from 10.2% y/y.

Credit growth was also stronger than expected in August but looking through the volatility credit

expansion has softened quite a bit from the policy-driven surge earlier in the year. Our credit

impulse indicator is pointing to risk of slower growth moving into 2017. This is also our

baseline scenario, as the boost from both infrastructure and strong growth in home sales will

likely fade further from here. Construction activity generally reacts with a lag of six months to

home sales and we thus look for some moderation in this sector again in 2017. However, we do

not look for the hard-landing scenario that was in place from 2013-2015, as inventory-to-sales

ratios are currently at a low level in contrast to the significant oversupply seen in 2013. China is

also experiencing a tailwind from a 10% weakening of the trade-weighted currency over the past

year.

CNH Hibor rates squeeze higher - temporarily

CNH Hibor money market rates moved sharply higher this week with the 1-week CNH Hibor

rate reaching 10.2% on Thursday, see FX Strategy: Spike in CNH money market rates set to be

temporary, 14 September. Last time this happened was when China was intervening

significantly in the offshore market to defend the CNY and CNH from weakening significantly.

However, there has been no apparent pressure on the CNY lately so the spike was a bit of a

surprise. We believe it is due to a couple of factors. The Mid-Autumn Festival holiday in China

and Hong Kong increases demand for liquidity and apparently China decided not to

accommodate this by increasing supply but instead let liquidity squeeze and allow CNH money

market rates to move up. It may have found it convenient to send a signal to the market that it

does not have any intention of weakening the CNY despite the fact that the G20 meeting was

Chart 3. EM stocks correct from

overbought levels on price momentum

Source: Bloomberg, Danske Bank

Chart 4. We look for yields to stay low

Source: Macrobond Financial, Danske Bank

Chart 5. Euro IP points to weak Q3 in

line with our forecast

Source: Macrobond Financial, Danske Bank

Chart 6. CNH offshore money market

rates spike higher

Source: Macrobond Financial, Danske Bank

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over - as has been the expectation among some market participants. We expect CNH money

market rates to come down again in the coming weeks as demand for liquidity fades again on

the other side of the Mid-Autumn Festival holiday Thursday and Friday.

Easing from BoE a close call - EUR/GBP still to trade higher

As expected, the Bank of England (BoE) kept its monetary policy unchanged after the launch of

the big easing package in early August, see Bank of England Review: another rate cut later this

year is a close call as near-term indicators have been better than expected, 15 September. As

this was one of the ‘small’ meetings without updated economic projections and a press

conference, the focus was on the minutes. The minutes showed that the BoE is still on an

easing bias although it recognises that ‘near-term economic activity has been somewhat

stronger than expected’. Most importantly, the minutes repeated that ‘a majority of members

expected to support a further cut in Bank Rate’ if the updated projections in November are

broadly consistent with the August projections.

Thursday data on UK retail sales surprised further to the upside reinforcing the picture of

positive surprises. Retail sales for August were up 6.2% y/y (consensus 5.4% y/y) and July was

revised higher as well to 6.3% y/y from 5.9% y/y.

Overall, the BoE left the door open for more easing later this year but is signalling that the

probability has declined. We maintain our view that the BoE will cut the Bank Rate by 15bp

from 0.25% to 0.10% in November, but it is a close call and will largely depend on economic

data in the coming months. It is noteworthy that the BoE focuses on activity indicators and not

inflation as it accepts that inflation may overshoot target to support economic activity in coming

years.

We still expect EUR/GBP to trade higher in the coming months. Our forecast of a weaker

GBP is driven not only by BoE easing but also by the considerable imbalances in the UK

economy, not least the significant current account deficit. In addition, net foreign debt

accumulated through several years of current account deficits has made the GBP very fragile.

The political uncertainty stemming from the forthcoming Brexit-negotiations will also weigh on

GBP.

Global market views

Source: Danske Bank Markets

Asset class Main factors

Equities The hunt for yield as a theme has led equity markets to bounce back after Brexit. Growth is above expectations but has still not

Short term (0-1 month): sell on rallies

M edium term (three-six months): underweight equities vs cash

of bond yields provides a cushion for a setback, hence, our structurally underweight position in equities vs cash. We have moved our short-term

stanc to sell-on-rallies.

Bond market

Core yields: low for even longer with risk of steeper curve 2y10y We expect the ECB to announce in Q4 that it will pro long the QE programme by another six months.

US-euro spread: wider but not before we see Fed hikes Fed on hold until 2017. Risk of earlier hike is evident. M arket priced too soft. Long end sell-off to impact long EUR rates.

Peripheral spreads: ECB support QE buying, bond scarcity and hunt for yield mean further tightening but politics remain an unknown.

Credit spreads: neutral ECB keeping spreads contained.

FX

EUR/USD - 1.10-114 range near term, then higher Valuations and CA differential support cross in the medium to long term; short-term downside risks from relative rates.

EUR/GBP - further GBP weakness in next few months BoE monetary easing and financial account flows to send cross higher.

USD/JPY - neutral with short-term risks skewed slightly to the downside Near-term risks are for a modest move lower towards 100 on BoJ disappointment, then stabilsation in the 102-105 range.

EUR/SEK - to move gradually lower over coming months To move lower on relative fundamentals and valuation.

EUR/NOK - short-term risks skewed to the upside Global outlook, o il and Norges Bank to keep cross in range in coming months, then lower on valuation and fundamentals.

Commodities

Oil price – unease about outlook for demand OPEC has lost leverage over o il price; temporary supply disruptions adding short-term support.

M etal prices – recovery in Chinese construction fading in 2017 Consolidation in mining industry puts a floor under prices, awaiting support from higher global economic growth.

Gold price – bouncing on repricing of Fed and other major central banks Dovish major central banks support demand for gold.

Agriculturals – support from disruptive weather, higher o il price Attention has turned to La Niña weather risks in H2 16.

broken out of the range. Risk of setbacks is high due to stretched valuations and still fairly weak earnings but central banks' anchoring of

Chart 7. UK retail sales strong

Source: Macrobond Financial, Danske Bank

8 | 16 September 2016 www.danskeresearch.com

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Scandi update

Denmark – inflation lower than expected

Consumer prices in August were just 0.2% higher than in 2015, which means that inflation was

even lower than in July and lower than we had expected. The decrease was due mainly to

furniture and books but 27% lower mobile telephony prices than in 2015 also held back inflation.

Dankort debit card usage fell 1.1% seasonally adjusted from July to August, adjusted for

MobilePay transfers. Given that Dankort purchases also fell in July, this points to weak private

consumption in Q3.

The Nationalbank published its latest monetary review during the week, with an updated forecast

for the Danish economy. With GDP growth revised down just 0.1pp both this year and next, the

forecast was effectively unchanged. The central bank also warned that apartment prices in

Copenhagen are approaching bubble territory.

Sweden – Riksbank framing the discussion

During the past week, we received revised Q2 GDP, inflation expectations and the labour force

survey. GDP data were revised somewhat higher, which seems to be due to payments for

intellectual property. This does not materially change the overall impression of slowing

economic activity. On the contrary, this proposition was strengthened by another weakish

outcome of the labour force survey. It now seems safe to say that the labour market is losing

momentum. Note, however, that this does not necessarily herald an imminent recession but it

does sit well with our long-held view of a normalising Swedish economy. Inflation and wage

expectations were something of a non-event, as they continue to indicate low cost pressure.

Most interesting was, nonetheless, a Riksbank study published on the subject of Pros and cons

of various target variables and intervals, which discusses a possible change to the inflation

target. Our general impression is that a target range (with inflation anywhere within an interval

accepted) finds little support with the Riksbank, as does the idea of lowering the inflation target.

If anything, the Riksbank highlights that academic and policy discussions run in favour of higher

targets. However, it is contemplating a reintroduction of a tolerance band, as is a shift of the

formal target variable from CPI to CPIF (CPI with fixed interest rate costs) or, possibly, HICP.

Norway – worst is over

The results of Norges Bank’s regional network survey were very positive, with the aggregated

output index climbing from 0.28 to 0.75, the highest for two years. This points to growth in

mainland GDP of just over 0.5% q/q in H2 once the public sector is factored in, which is

somewhat higher than Norges Bank assumed in the June monetary policy report. All of the sub-

indices improved: oil-related sectors were less negative (especially when it comes to the

domestic market) and the other sectors were all more positive. The employment index rose from

-0.04 to 0.16, turning positive for the first time since January 2015. Wage growth expectations

edged up from 2.29% to 2.40%, while profitability is expected to improve for the first time since

January 2015. All in all, it is a highly encouraging report, which suggests that growth in Norway

is picking up and may already be back on trend. With reduced headwinds from oil-related

industries and acceleration elsewhere, we believe it is becoming less and less likely that we will

see any serious contagion effects from the oil downturn in the rest of the economy. The figures

also show that there is no longer a need for further stimulation of the Norwegian economy.

Together with the growing risk of spiralling housing prices, this means we no longer expect a

rate cut in September despite high NIBOR rates.

Fall in inflation from July to August

Source: Statistics Denmark

Labour markets are stabilising

Source: Macrobond Financial

Brighter outlook

Source: Bank of Norway

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Latest research from Danske Bank Markets

Yield Forecast Update - No bond sell-off this year

Monthly yield forecast update

16/9 Bank of Japan preview: focus on assessment: policy adjustments but no easing

Assessment to focus on factors that have potentially hampered achievement of the 2% price

stability and the cost and benefits of negative interest rates.

15/9 Bank of England Review: Another rate cut later this year is a close call as near-term

indicators have been better than expected

Today, the BoE kept its monetary policy unchanged as expected.

14/9 Presentation US: 10 reasons why we believe the Fed will not hike this year

GDP growth has slowed markedly to just around 1% q/q AR over the past three quarters - annual

GDP growth declined from 3.3% y/y in Q1 15 to 1.2% y/y in Q2 16.

13/9 Post-Brexit Status - UK may avoid a Brexit-recession as data have surprised positively

‘Soft’ economic indicators suggest that the UK has rebounded in August after the initial

deceleration in July, suggesting that the UK economy may avoid a Brexit-recession.

13/9 Regional Network Survey - Survey-Better-than-expected and rules out September rate cut

The Norges Bank Regional Network Survey (RNS) has just been published. The key aggregate

output index for the next six months rose to 0.75 (from 0.28 in June) indicating a further

improvement in the private sector outlook.

12/9 Flash Comment: CBR rate decision preview - time to deliver

We expect the CBR to deliver a 50bp rate cut on 16 September. · Spiking global market volatility

poses risks to CBR’s delivery. We expect the CBR to deliver another 50bp cut in Q4 16.

10 | 16 September 2016 www.danskeresearch.com

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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 2015 1.0 2.3 -0.7 1.1 -0.3 0.3 0.0 0.5 4.6 -2.1 40.2 7.02016 0.7 1.9 0.5 1.1 0.1 0.7 1.7 0.4 4.3 -1.7 39.3 6.82017 1.0 1.9 0.5 0.9 0.1 2.6 3.5 1.2 4.3 -1.4 39.2 6.9

Sweden 2015 4.2 2.7 2.6 7.0 0.1 5.9 5.5 0.0 7.4 -0.3 43.4 4.92016 2.6 3.0 3.2 4.6 0.0 1.4 4.1 0.8 7.1 -0.4 41.5 5.02017 1.4 1.6 2.0 -0.3 -0.1 2.0 2.3 0.6 7.2 -1.5 41.7 5.2

Norway 2015 1.0 2.0 1.9 -4.2 0.3 3.4 1.1 2.1 3.0 - - -2016 0.9 1.5 3.0 -1.6 0.0 0.8 0.9 3.1 3.4 - - -2017 1.9 2.2 3.1 0.9 -0.2 0.9 2.2 2.8 3.5 - - -

Macro forecast, Euroland

Euroland 2015 1.9 1.7 1.4 2.9 - 6.1 6.1 0.0 10.9 -2.1 90.7 3.62016 1.5 1.5 1.7 1.8 - 2.4 2.5 0.2 10.1 -2.0 90.2 3.72017 1.1 0.9 1.1 0.9 - 3.3 3.1 1.3 9.8 -1.8 89.8 3.6

Germany 2015 1.5 1.9 2.8 1.1 - 4.6 5.0 0.1 4.6 0.7 71.2 8.82016 1.7 1.3 3.6 1.8 - 3.0 2.9 0.3 4.3 0.2 68.6 8.52017 1.4 1.2 1.4 0.9 - 3.4 3.3 1.5 4.2 0.0 66.5 8.3

France 2015 1.2 1.5 1.4 0.9 - 6.0 6.4 0.1 10.4 -3.5 95.8 -1.52016 1.2 1.6 1.3 1.8 - 1.9 4.6 0.5 10.2 -3.5 96.5 -1.12017 0.3 0.7 1.0 -0.8 - 3.0 3.3 1.4 10.3 -3.4 97.5 -1.0

Italy 2015 0.6 0.9 -0.7 0.6 - 4.1 5.8 0.1 11.9 -2.6 132.7 2.22016 0.6 1.1 0.9 0.8 - 0.1 1.3 0.1 11.8 -2.6 132.9 2.42017 0.4 0.6 0.7 -0.6 - 3.2 3.3 1.4 11.5 -2.3 132.5 2.3

Spain 2015 3.2 3.1 2.7 6.4 - 5.4 7.5 -0.6 22.1 -5.1 99.2 1.42016 2.4 2.8 2.1 2.8 - 2.4 4.0 -0.2 20.3 -4.0 100.5 1.52017 1.1 1.4 1.3 0.3 - 2.9 3.2 1.7 19.0 -3.5 100.0 1.3

Finland 2015 0.7 1.4 -0.9 -1.4 - 0.6 -0.4 -0.2 9.4 -2.8 63.0 0.12016 0.8 1.1 0.0 2.5 - -1.0 0.0 0.4 9.2 -2.9 65.9 0.22017 0.5 0.5 -0.5 1.5 - 2.0 1.5 0.5 9.0 -2.8 68.6 0.2

Macro forecast, Global

USA 2015 2.4 3.1 0.7 4.0 0.2 1.1 4.9 0.1 5.3 -2.6 105 -2.72016 1.7 2.7 0.9 0.6 -0.2 0.3 0.9 1.4 4.8 -2.9 105 -2.92017 1.9 2.3 0.8 2.3 0.0 2.4 2.8 2.5 4.6 -2.8 103 -3.3

China 2015 6.8 - - - - - - 1.7 4.2 -0.8 41.8 2.42016 6.7 - - - - - - 2.3 4.2 -0.8 42.8 2.32017 6.6 - - - - - - 2.0 4.3 -1.0 43.5 2.5

UK 2015 2.2 2.6 1.4 3.3 0.3 4.8 5.8 0.1 5.4 -5.0 87.4 -5.22016 1.1 2.3 1.2 -2.9 0.2 2.6 3.0 0.8 5.2 -3.9 88.9 -5.52017 -0.4 0.5 0.2 -3.4 0.0 2.0 2.4 2.4 5.6 -2.9 88.3 -5.2

Current

acc.4GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3Public

budget4

Public

debt4Year

Year GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3Public

budget4

Current

acc.4Public

debt4

Current

acc.4Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Infla-

tion1

Unem-

ploym.3Year GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2

11 | 16 September 2016 www.danskeresearch.com

Weekly Focus Sweden

Financial forecast

Source: Danske Bank Markets

Bond and money marketsCurrency

vs USDCurrency

vsSEK

USD 16-Sep - 848.4

+3m - 830.4

+6m - 815.8+12m - 771.2

EUR 16-Sep 112.4 953.5

+3m 112.0 930.0

+6m 114.0 930.0+12m 118.0 910.0

JPY 16-Sep 101.9 8.32

+3m 102.0 8.14

+6m 104.0 7.84+12m 104.0 7.42

GBP 16-Sep 132.4 1122.9

+3m 127.3 1056.8

+6m 123.9 1010.9+12m 131.1 1011.1

CHF 16-Sep 97.2 872.7

+3m 97.3 853.2

+6m 98.2 830.4+12m 97.5 791.3

DKK 16-Sep 662.6 128.1

+3m 664.5 125.0

+6m 652.9 125.0+12m 630.7 122.3

SEK 16-Sep 848.4 100.0

+3m 830.4 -

+6m 815.8 -+12m 771.2 -

NOK 16-Sep 823.3 103.0

+3m 830.4 100.0

+6m 798.2 102.2+12m 754.2 102.2

Equity markets

Regional

Pris trend12 mdr.

Regionale rekommen-dationer

USA (USD) Strong domestic demand, USD weakening 0-5% Overweight

Emerging markets (lokal valuta) Commodities and China stabilising 0-5% Overweight

Japan Stronger JPY, weak earnings outlook 0-3% Underweight

Europa (ex. Norden) ECB monetary easing, weaker GDP growth 0-3% UnderweightNorden Earnings growth, expensive valutaion 0-5% Overweight

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017

NYMEX WTI 34 46 49 50 52 54 56 58 45 55

ICE Brent 35 47 49 50 52 54 56 58 45 55

Copper 4,672 4,731 5,000 5,100 5,200 5,300 5,400 5,500 4,876 5,350

Zinc 1,687 1,930 2,150 2,150 2,150 2,150 2,100 2,100 1,979 2,125

Nickel 8,537 8,885 10,500 ### 10,900 11,100 11,300 11,500 9,655 11,200

Aluminium 1,516 1,584 1,650 1,750 1,800 1,850 1,900 1,950 1,625 1,875

Gold 1,183 1,260 1,325 1,325 1,300 1,275 1,250 1,225 1,273 1,263

Matif Mill Wheat 157 159 154 158 161 159 159 159 157 160

Rapeseed 359 370 380 390 400 400 400 400 375 400

CBOT Wheat 466 470 450 475 500 510 520 530 465 515CBOT Corn 363 391 380 390 400 410 415 420 381 411

CBOT Soybeans 881 1,059 1,175 1,175 1,175 1,150 1,125 1,100 1,072 1,138

Medium -3 -+3%

Medium -3 -+3%

High -3 -+3%

High -5 -+5%

High -5 -+5%

398329

951

44

46

4,781

2,231

9,715

1,572

372

2016 2017 Average

16-Sep

1,315

159

Risiko profil3 mdr.

Pris trend3 mdr.

0.50 0.90 1.30 1.70 890.0

0.50 1.00 1.20 1.40 930.0

0.50 0.90 1.20 1.50 910.0

-0.50 -0.50 -0.50 0.85 910.0

0.50 1.08 1.20 1.52 925.4

-0.50 -0.55 -0.50 0.60 930.0

-0.50 -0.50 -0.50 0.65 930.0

0.05 -0.20 0.05 1.00 744.3

-0.50 -0.46 -0.40 0.76 953.5

0.05 -0.20 -0.02 0.55 744.3

0.05 -0.20 0.00 0.70 744.3

-0.75 - - - 115.0

0.05 -0.19 -0.02 0.66 744.6

-0.75 - - - 109.0

-0.75 - - - 112.0

0.10 0.20 0.45 1.20 90.0

-0.75 -0.74 -0.64 -0.17 109.3

0.10 0.19 0.40 0.80 88.0

0.10 0.19 0.40 0.95 92.0

-0.10 - - - 122.7

0.25 0.38 0.45 0.89 84.9

-0.10 - - - 114.2

-0.10 - - - 118.6

0.00 -0.30 -0.15 0.70 -

-0.10 -0.04 -0.11 0.10 114.6

0.00 -0.30 -0.22 0.30 -

0.00 -0.30 -0.20 0.40 -

0.75 1.05 1.45 1.85 118.0

0.00 -0.30 -0.22 0.37 -

0.50 0.80 0.95 1.40 112.0

0.50 0.95 1.05 1.60 114.0

Key int.rate

3m interest rate 2-yr swap yield 10-yr swap yieldCurrency

vs EUR

0.50 0.85 0.99 1.52 112.4

12 | 16 September 2016 www.danskeresearch.com

Weekly Fo

cus

Weekly Focus

Calendar

Source: Danske Bank Markets

Key Data and Events in Week 38

During the week Period Danske Bank Consensus Previous

Monday, September 19, 2016 Period Danske Bank Consensus Previous

1:01 GBP Rightmove House Prices m/m|y/y Sep -1.2%|4.1%

3:30 CNY Property prices y/y

10:00 EUR Current account EUR bn Jul 28.2

16:00 USD NAHB Housing Market Index Index Sep 60.0 60.0

Tuesday, September 20, 2016 Period Danske Bank Consensus Previous

8:00 CHF Trade balance CHF bn Aug 2.93

9:00 DKK House prices (Association of Danish Mortgage Banks) q/q|y/y 2nd quarter

13:45 SEK Riksbank's Ingves speech

14:00 HUF Central Bank of Hungary rate decision % 0.9% 0.9% 0.9%

14:30 USD Building permits 1000 (m/m) Aug 1170 1144.0 (-0.8%)

14:30 USD Housing starts 1000 (m/m) Aug 1192 1211.0 (2.1%)

Wednesday, September 21, 2016 Period Danske Bank Consensus Previous

- JPY BoJ monetary policy announcement

- JPY BoJ annual rise in monetary base 80 80

- JPY BoJ policy rate % -0.1% -0.1%

- JPY BoJ basic balance rate % 0.1%

- JPY BoJ macro add-on balance rate % 0.0%

1:50 JPY Exports y/y (%) Aug -4.5 -14.0

1:50 JPY Import y/y (%) Aug -17.2 -24.7

1:50 JPY Trade balance, s.a. JPY bn Aug 500 317.6

9:30 SEK Riksbank minutes from policy meeting

10:00 NOK Unemployment (LFS) % Jul 4.8%

11:00 USD OECD interim economic outlook

11:00 SEK Riksbank's Skingsley speech

13:00 USD MBA Mortgage Applications % 4.2%

16:30 USD DOE U.S. crude oil inventories K -559

20:00 USD FOMC updated projections % 0.50% 0.50% 0.50%

20:30 USD Fed Chair Yellen speaks

23:00 NZD Reserve Bank of New Zealand (cash rate decision) % 2.00% 2.00% 2.00%

Thursday, September 22, 2016 Period Danske Bank Consensus Previous

8:45 FRF Business confidence Index Sep 101.0

9:00 DKK Retail sales m/m|y/y Aug -0.6%|-2.0%

9:00 DKK Consumer confidence Net. bal. Sep 5.0 4.8

10:00 NOK Norges Banks monetary policy meeting % 0.5% 0.5% 0.5%

10:00 EUR ECB Publishes Economic Bulletin

12:00 GBP CBI survey

13:00 TRY Central Bank of Turkey rate decision % 7.50% 7.50%

14:30 USD Initial jobless claims 1000 260

15:00 EUR ECB's Draghi speaks in Frankfurt

15:00 USD FHFA house price index m/m Jul 0.3% 0.2%

16:00 EUR Consumer confidence, preliminary Net bal. Sep -8.7 -8.1 -8.5

16:00 USD Existing home sales m (m/m) Aug 5.45 5.39|-3.2%

13 | 16 September 2016 www.danskeresearch.com

Weekly Fo

cus

Weekly Focus

Calendar — continued

Source: Danske Bank Markets

Friday, September 23, 2016 Period Danske Bank Consensus Previous

- EUR Moody's may publish ESM's debt rating

- EUR Fitch may publish Germany's debt rating

2:30 JPY Nikkei Manufacturing PMI, preliminary Index Sep 49.5

6:30 JPY All industry activity index m/m Jul 0.2% 1.0%

8:10 SEK Riksbank Ingves speech

8:45 FRF GDP, final q/q|y/y 2nd quarter 0.0%|1.4% 0.0%|1.4%

8:45 EUR ECB's Constancio speaks in Frankfurt

9:00 FRF PMI manufacturing, preliminary Index Sep 48.2 48.5 48.3

9:00 FRF PMI services, preliminary Index Sep 52.1 52.5 52.3

9:30 DEM PMI manufacturing, preliminary Index Sep 54.0 53.2 53.6

9:30 DEM PMI services, preliminary Index Sep 51.5 52.1 51.7

10:00 EUR PMI manufacturing, preliminary Index Sep 52.2 51.5 51.7

10:00 EUR PMI composite, preliminary Index Sep 53.1 52.8 52.9

10:00 EUR PMI services, preliminary Index Sep 52.5 52.8 52.8

10:15 SEK Riksbank's Ohlsson speech

14:30 CAD CPI m/m|y/y Aug ...|1.4% 0.0%|1.3%

14:30 CAD Retail sales m/m Jul 0.2% -0.1%

15:45 USD Markit manufacturing PMI, preliminary Index Sep 50.5 52.3 52.0

18:00 USD Fed's Harker, Mester, Lockhart speaking

18:00 USD Fed's Mester (voter, hawkish) speaks

18:00 USD Fed's Lockhart (non-voter, neutral) speaks

The editors do not guarantee the accurateness of figures, hours or dates stated above

For furher information, call (+45 ) 45 12 85 22.

14 | 16 September 2016 www.danskeresearch.com

Weekly Fo

cus

Weekly Focus

Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’).

The author of the research report is Louise Aggerstrøm Hansen, Senior Analyst.

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15 | 16 September 2016 www.danskeresearch.com

Weekly Fo

cus

Weekly Focus

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