JUN 11 Weekly Focus

8/9/2019 JUN 11 Weekly Focus

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Investment Research

Market Movers Ahead

Developments in the European debt crisis will probably be the dominant theme in aweek with no major releases in the US or Euroland to steal the limelight.

Otherwise the week will see monetary policy meetings in Japan and Switzerland. Thelatter is the more hotly awaited, especially in terms of the SNBs take on the stronger

Swiss franc.

In Scandinavia, only Sweden has interesting releases scheduled, with the main focuson the labour market.

Global Update

Financial markets were not expecting much from the ECBs meeting, so there was nonegative market reaction when it failed to announce any new initiatives or disclose

further information about its government bond purchase programme.

Incoming data continue to point to progress in the global economy. This wasconfirmed during the week by strong Chinese figures, healthy order data from

Germany and signs that small businesses in the US are gradually getting back on

track.

Focus

This week we look more closely at the Danish labour market, which has surprised onthe positive side for months now. We have therefore revised our view of

unemployment, which we now believe has peaked.

11 June 2010

Editors

Allan von Mehren

+45 4512 8055

[email protected]

Steen Bocian

+45 45 12 85 31

[email protected]

Weekly FocusAnother week in the shadow of the debt crisis

Contents

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

Global update................................................................... 4

Scandi Update ................................................................ 6

Focus - Denmark: Unemployment has

peaked ..................................................................................... 8Equities: What could trigger a bearmarket? ............................................................................. 11

Fixed Income: ECB succeeds in calmingmarkets ............................................................................. 12

FX: More hiking cycles kicked off ............ 13

Commodities: Focus on oil disaster .... 14

Financial views........................................................... 15

Macroeconomic forecast .............................. 17

Financial forecast ................................................... 18

Calendar ........................................................................... 19

Business sentiment improves Danish unemployment has peaked

Source: Reuters EcoWin, Danske Markets Source: Statistics Denmark, Danske Markets

00 01 02 03 04 05 06 07 08 09

80

85

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65 Index Index

NFIB, small business optimism >>


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2 | 11 June 2010www.danskeresearch.com

Weekly Focus

Market movers ahead

Global

In the US, the schedule of economic releases in the coming week is dominated byhousing and inflation data. We expect core inflation to continue its downward trend,although input price pressures have been building for some time now. So far, the rise

in productivity has more than countered the upward pressure on core inflation.

Further, the disinflationary trend from housing is set to continue for some while yet.

The first time home buyer tax credit has made it extremely difficult to extract the true

underlying trend in housing data lately. This weeks releases are no exception. We

expect building permits to rebound from the tax credit induced plunge in April and

housing starts to reflect the weakness in Aprils building permits. We will have to

wait a couple more months before we get a better picture of the true underlying trend.

On Tuesday German ZEW is released. We expect to see a replay of previous reports lower expectations and an improved assessment of the current situation. Hence we

expect a decline in the German ZEW expectation due to the ongoing turmoil related tothe euro debt crisis. However, the surprise increase in the Sentix index may dent the

decline. Meanwhile, we expect to see another rise in the assessment of the current

situation, reflecting a robust recovery in Germany. Besides ZEW, we await May

inflation data. There are currently very limited inflationary pressures in the euro area.

Besides a potential push from energy prices and a weaker euro, we see a limited

number of factors that could lift inflation in the medium term. We look for unchanged

headline (1.6%) and core (0.8%) inflation in May. We expect inflation to remain

around these levels for the rest of the year.

UK CPI for May is expected to have fallen 0.3 percentage points to 3.4% still quitea high level, but not high enough to worry the Bank of England which held rates at a

record low in the past week. Inflation is set to come down in the UK and thereforerequires little action now. Confirmation that the unemployment rate has peaked and

good retail sales data could boost sentiment in UK markets in the coming week, but

negative headlines on the massive UK debt could occur ahead of the presentation of

austerity measures on 22 June. The pound has held up against the euro lately but we

see only limited scope for further appreciation in the current risk environment.

The absolutely most important event in Switzerland in the coming week will be themonetary policy meeting on Thursday. There is not much excitement about the

outcome of the rate decision, as the Swiss central bank is widely expected to keep

rates unchanged. On the other hand, it will be interesting to see how the central bank

responds to the recent strengthening of the Swiss franc. Also, we expect the central

bank to revise its GDP growth forecast for 2010 upwards and to revise its inflation

expectations slightly downwards on a three-year horizon.

Next week will be a relatively quite one in Asia with no major economic releases duein either Japan or China. Most interesting is the monetary meeting in Bank of Japan

(BoJ) on Tuesday. It will probably prove to be one of the less eventful meetings.

Leading interest rates will remain unchanged until at least H2 11. In addition, the BoJ

is unlikely to introduce new non-conventional easing measures on Monday, as it

introduced a new lending facility at its previous meeting to ease some of the current

political pressure on the BoJ. However, it might start to express some concerns about

the strong and increasing downside risk from the European debt crisis.

Large tax credit induced distortions to

US housing data

Source: Reuters Ecowin and Danske Markets

ZEW expectations to decline slightly

Source: Reuters Ecowin

Strong JPY is a concern in Japan


Jun Sep Dec Mar Jun Sep Dec Mar

08 09 10

-25

-20

-15

-10

-5

0

5

10

15

20

-25

-20

-15

-10

-5

0

5

10

15

20% m/m % m/m

Housing starts

Building permits

0 0 0 1 0 2 0 3 0 4 05 0 6 0 7 0 8 0 9

-100

-75

-50

-25

0

25

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-100

-75

-50

-25

0

25

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75

100Expectations

German Zew...

Net balance

Current conditions

Jan

08

May Sep Jan

09

May Sep Jan

10

May

120

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170

120

130

140

150

160

170 Indice Indice

Appreciation

Effective JPY


3/21


Weekly Focus

Scandies

Denmark is heading for a very light data calendar in the week ahead. The key releasewill be new car registrations for May 2010. Car sales have improved over the past

year after plummeting, particularly in the second half of 2008. The recovery in car

sales reflects a muted improvement in consumer expectations for the future, which is

good news for overall consumer spending going forward. We expect car sales to have

maintained their momentum.

In Sweden, labour markets will be thoroughly dissected in the week ahead, with boththe Labour market board (AMS) measure and the official Statistics Sweden (AKU)

measure. We look for a seasonally normal downturn in the unemployment rate

towards the 9% mark and a continued stronger development in employment.

The Swedish National Debt Office (SNDO) will release its second forecast ofgovernment finances on 16 June, and we believe that the forecast might cause some

commotion. Looking back over the past few months, we can clearly see that outcomes

are on the strong side (SEK20-25bn better than forecast), which might very well be

enough for the SNDO to revise the auction size downwards, not just for 2010 but alsofor 2011.

Elsewhere, we will also receive some information on the state of the Swedish housingmarket, when April house prices are published.

We expect no important indicators out ofNorway in the coming week. However, itcould be interesting to see if the European debt crisis has had any impact on May

foreign trade numbers. We do not expect to see any impact yet. Add to this the signs

of improvement in export industry in the recent report from Norges Banks regional

network, and we expect exports of non-oil goods to have picked up in May.

Market movers ahead

Source: Bloomberg and Danske Markets

Global movers Event Period Danske Consensus Previous

Tue 15-Jun - JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10

10:30 GBP CPI Inflation m/m|y/y May 0.3%|3.5% 0.6%|3.7%

11:00 DEM ZEW economic sentiment Index Jun 44.0 48.0 45.8

11:00 DEM ZEW current situation Index Jun -10 -15 -21.6

Wed 16-Jun 10:30 GBP ILO Unemployment Rate % May 8.0% 8.0% 8.0%

11:00 EUR Inflation (CPI), final m/m|y/y Jun 0.1%|1.6% 0.1%|1.6% 0.5%|..

11:00 EUR Core Inflation y/y May 0.1%|0.8% ..|0.8% ..|0.8%

14:30 USD Housing starts 1000 (m/m) May 632 (-6.0%) 650 (-3.3%) 672 (5.8%)

16:00 USD Building Permits 1000 (m/m) May 623 (2.2%) 628 (-2.9%) 606 (-11.5%)

Thu 17-Jun 9:30 CHF Monetary policy decisions, 3-month libor target 2nd quarter 0.25% 0.25% 0.25%

14:30 USD CPI ex. food & energy m/m|y/y May 0.0%|0.8% 0.1%|0.9% 0.0%|0.9%

Scandi movers Event Period Danske Consensus Previous

Thu 17-Jun 9:30 DKK New car sales, s.a. (Private households) May 3.9%|-17.9%

9:30 SEK Statistics Sweden, Unemployment % May 9.1% 9.5%

Ons 18-Jun 9:30 SEK Nat ional Debt Office report, Central Gov. borrowing: Forecast & analysis

Danish car sales are picking up

Source: Statistics Denmark

Swedish employment on a positive

trend

Source: Statistics Sweden

00 02 04 06 08 10

7000

8000

9000

10000

11000

12000

13000

14000

15000

16000

7000

8000

9000

10000

11000

12000

13000

14000

15000

16000Total

Car sales

05 06 07 08 09 10

4.30

4.35

4.40

4.45

4.50

4.554.60

4.65

4.30

4.35

4.40

4.45

4.50

4.554.60

4.65millions

Employment (SA)


4/21


Weekly Focus

Global update

ECB unable to rattle the markets

The tug of war between fear and fundamentals continues, but it seems like fundamentalsgained the upper hand this week. Strong Chinese data, a surge in German industrial orders

and a reversal of the overreaction to last Fridays US employment report helped to lift

risk appetite. We had feared that inaction from the ECB would cause another blowout in

market stress, but expectations were low into the meeting and spreads continued to

decline across markets following the press release.

US small businesses catching up

It has been a quiet week in the US with the main market mover, retail sales, released after

the deadline of this publication. The general picture remains that the recovery in the US is

becoming more broad based and thereby increasingly robust.

Markets ended up disappointed after the May employment report, but we believe there is

still reason to be optimistic, as the guts of the labour market continue to improve.

Although private payrolls increased a meagre 41K in May, total private hours worked

increased a robust 0.4% m/m suggesting that the demand for labour input is increasing at

the same pace as in April. Further, the underlying trend in private payrolls is accelerating

with GDP growth remaining above trend, labour productivity is very stretched and

average weekly hours has recouped more than 2/3 of the pre-crisis level.

An encouraging sign is this weeks increase in small business confidence (NFIB) which

has been lagging behind the ISM index over the past year. Most notably, the percent of

firms expecting the economy to improve increased to 8% from 0% and 1% reported that

they had plans to hire new workers over the coming three months, the first positive valuesince September 2008.

Fed chairman Bernanke provided little news in his testimony to the House budget

committee. He continues to expect a moderate recovery. While he voiced relatively

positive views on consumption and business capital spending, he remained concerned on

housing and construction. Interestingly, he had a note on the euro crisis indicating that the

Fed is watching this closely. Overall he expected the impact to remain modest if markets

continue to stabilise, but said that the Fed will remain highly attentive to developments

abroad and to their potential effects on the US economy.

The ECB seems committed to the bond purchasing programme

At the ECB press conference Trichet gave little news about how the ECB will progress

with the government bond purchasing programme. The impression is that it is ready to

undertake bigger acquisitions if needed i.e. the rumours about a limit on the programme

seem indeed to have been just that. Trichet did also not give many new insights into the

decision to embark on the programme that famous Sunday night. He did say that it was a

reaction to the malfunctioning of some segments of the euro-area debt securities market,

which happened in an acute way in the afternoon of the Thursday following the last

Governing Council meeting and during early Friday.

US small business optimism improves


"[Heading 2]"

ECB government bond purchases


Strong German growth in Q2


US hours worked continue to surge


00 01 02 03 04 05 06 07 08 09

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65 Index Index

NFIB, small business optimism >>


5/21


Weekly Focus

Trichet told that the three regular scheduled 3-month long-term refinancing operations

during Q3 will be undertaken as fixed rate full allotment tenders. It is likely that full

allotment at one month operations will now be given at least until year-end. The quarterly

ECB staff projections included a minor upward revision of the 2010 GDP growth

estimate from 0.8% to 1.0% while the 2011 projection was revised lower from 1.5% to

1.2%. Financial markets had low expectations of the ECB meeting and thus reacted

positively to the outcome, partly because of the announcement of more auctions with full

allotment and the upward revision of the 2010 growth projection

We also continue to see a flow of positive macro data. German industrial orders increased

2.8% m/m in April. This is even better than the headline number might suggest as it

comes after a very strong March, with a 5.1% m/m increase. German industrial

production increased by 0.9% m/m in April and the outlook is now for very strong

German GDP growth in Q2.

Strong Chinese data suggest revaluation is not off the table

The economic data for May released in China suggest that so far there has been no majorimpact on the Chinese economy from either the European debt crisis or the governments

recent tightening measures targeting the real estate market. Although industrial

production was slightly weaker than expected, the overall picture still looks strong.

Industrial production increased 16.5% y/y in May and according to our own seasonal

adjusted figures is up a solid 4.2% 3m/3m. This suggests GDP growth in the current

quarter will remain double digit and will only slow marginally from around 12% q/q AR

compared to Q1 10. However, GDP should moderate further in H2 10. Property sales

dropped substantially in May and while there has been no major impact so far from the

governments targeting measures, it does suggest there will be later this year.

Chinas exports surged 48.5% y/y in May and its trade balance surplus soared as well

underlining that any talk of Chinas trade surplus disappearing in the wake of the global

financial crisis has been premature. Particularly exports to the US showed strong gains

suggesting that the global recovery is gradually becoming more broad based. On the other

hand, inflationary pressure is increasing. Consumer prices in May increased 3.1% y/y

following a 2.8% y/y increase in the previous month and we expect them to exceed 3.5%

by the end of Q3 10. This suggests increasing upside risk to the governments 3%

inflation target for 2010 as whole.

The bottom line on these numbers is that a Chinese revaluation is not off the table,

although recent volatility on financial markets has postponed it. Strong exports, an

increasing trade surplus, higher inflation and so far only a modest impact from the

governments tightening measures in our view all suggest we have a strong revaluationcase but financial markets need to calm down before it will happen. In our view a

resumption of appreciation is still possible in Q3.

China's exports soar in May


Inflationary pressure is increasing in

China


07 08 09 10

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120

Korea

Jan. 2008 =100

Taiwan

Japan

Jan. 2008 =100

China

05 06 07 08 09 10

-8

-6

-4

-2

0

2

4

6

8

10

12

-8

-6

-4

-2

0

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6

8

10

12 %

CPI, % 3m AR

%

CPI, % y/y


6/21


Weekly Focus

Scandi Update

Denmark current account sets new record

Statistics Denmark has published the April current account data in the past week.

The Danish current account has remained very strong during the crisis and the April

numbers were no exception, with a surplus of DKK7.8bn. Over the past 12 months, the

current account surplus has totalled a staggering DKK74.4bn.

The April numbers set a milestone for the current account, with the largest surplus ever.

In particular, the surplus on the merchandise trade account has improved over the past

year, surging by almost DKK50bn. However, the improvement is, not least, attributable

to a significant slowdown in consumer spending and investment during the crisis, which

has reduced the demand for foreign goods.

The good news is that this is not the only contributory factor to the current account

improvement. Exports have shifted up a gear recently, pushing the merchandise trade

account in the right direction.

Obviously, the pick-up in exports should be viewed against the background of the recent

recovery in Denmarks key export markets. In addition, exports have been supported by a

modest improvement in Denmarks international competitiveness in recent months. Wage

growth in Denmark is slowing, the Danish krone has weakened against the currencies of

some of the countrys key trading partners, and domestic productivity has improved.

Judging from current account movements, the Danish economy still appears to be

competitive in spite of the doubts some have expressed about Denmarks

competitiveness. However, this should not turn into an excuse for inaction in a dynamic

world of constant tough competition.

Sweden rolling with the international tides and turns

Not much to speak of this week. Inflation came in as widely expected, and we interpret

industrial data as being slightly on the positive side. Revised labour market data, inflation

expectations and the SNDO outcome for May borrowing needs also failed to stir markets.

The market reaction on domestic news has by and large been muted, but volatility has

remained on the high side, mainly driven by international events. From a Riksbank

perspective, and especially given its apparent unwillingness to acknowledge contagion

risks of any magnitude to Sweden from the problems of the PIIGS, this weeks data will

probably have passed by somewhat unnoticed. Indeed, both Ingves and Nyberg seemed to

confirm this in their (unpublished) speeches during the week.

Danish current account surplussurges to record high


Swedish industrial output is finally on

the rise

Source: Statistics Sweden

00 01 02 03 04 05 06 07 08 09

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115

80

85

90

95

100

105

110

115Index

Industrial Production, total (SA)

Industrial Production, ex energy (SA)


7/21


Weekly Focus

Norway signs of recovery at long last

As we have emphasised several times in recent weeks, indicators out of Norway so far

this year have surprised on the downside. However, the Q2 data from Norges Banks

regional network showed signs of slightly better times ahead. The aggregate production

index rose to 0.8, indicating annualised growth in mainland GDP of roughly 1.75% forQ2, according to Norges Bank. So, we are not looking at a bonanza in the Norwegian

economy, but it looks as if GDP is now growing more in line with our previous

expectations. The improvement in Q2 was particularly driven by a recovery in the

merchandise trade account and the export industry. Hence, consumer spending appears to

have begun to pick up after remaining in the doldrums for several months and after the

winters power bills had been paid. Note also that the market outlook has brightened

significantly for both oil-related industries and the building and construction industry.

Also, the recovery seems to have become more broadly based. In this context, the oil

industry investment survey was highly encouraging, and oil investment next year could

be up 7-8% on 2010.

Norwegian GDP growth is picking up

Source: SSB and Norges Bank

02 03 04 05 06 07 08 09

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

-7,5

-5,0

-2,5

0,0

2,5

5,0

7,5

10,0

12,5

15,0% q/q ann. Index

>


8/21


Weekly Focus

Focus - Denmark: Unemployment has peaked

Solid numbers scupper unemployment forecast

Economic data out of Denmark are increasingly beginning to surprise positively,

suggesting that the fragile economic upswing is gaining traction. This also appears to be

benefiting the labour market, with unemployment numbers, in particular, surprising us in

recent months. Since November last year official unemployment numbers have fallen by

3,900, while gross unemployment i.e. including various government activation

schemes has remained more or less stable in recent months (see figure 1). Official

unemployment figures are supported by the Labour Force Survey, which in Q1 also

showed unchanged unemployment.

Denmark has haemorrhaged jobs during the economic crisis, with employment falling by

more than 160,000 in 2009 alone though this has been far from fully reflected in the

unemployment numbers. Official unemployment has risen by a mere 70,000 or so since

bottoming out. Naturally this has stoked fears that the relatively stable level of

unemployment primarily reflects a still shrinking labour force, which is why we continue

to see jobs disappear. Thus it was pleasing to note that it is not just the unemployment

figures that are improving both the Labour Force Survey and the National Accounts

numbers showed approximately unchanged employment in Q1 (see figure 2). Hence, the

employment numbers underpin the recent positive developments in unemployment data.

We have been sceptical in recent months about whether we were seeing a nascent

turnaround in the labour market. Clearly our scepticism is being increasingly challenged

by the one positive number after the other for the labour market. We can at any rate

doubtless acknowledge that our latest unemployment forecast from April has been

scuppered, as indeed have forecasts from Nationalbanken (Danish central bank) and the

government (see figure 3). Looking at our April forecast, in simple terms it would requirean average increase in unemployment of 4,500 per month from May to December to hit

our forecast average unemployment level of just under 130,000 for 2010.

Nationalbankens unemployment forecast for this year being met would require a very

substantial 12,500 additional workers joining the ranks of the unemployed every month

for the rest of the year. Even the forecast of the Economic Council (the so-called

Wisemen), which was released the other day, appears rather extreme, requiring a monthly

rise of 3,000 in the number of unemployed for the rest of the year. It is worth noting at

this point that the number of jobless has only risen by just under 2,000 per month over

the past year and has in fact remained stable over the past six months.

The big question

is this the turnaround?

The big question at the moment is whether the latest trends mark a turnaround in the

labour market, or if companies still need to make major adjustments to staffing levels

especially when taking into account both the brutal downturn in growth in 2008 and 2009,

when the Danish economy shrank by around 6.5% from its peak in late 2007, and the

period preceding the crisis, when companies jogged along for a number of years with a

remarkably low level of productivity growth. All else being equal, companies may need

some time to restore productivity and may thus have a reduced need for new workers.

Key points

Unemployment numbers have for several months been

heralding an improvement in

the labour market, and this

good news is being supported

by other benchmark indicators.

One joker in the labour market isproductivity. Several years of

sluggish productivity growth could

suggest a recovery in productivity

and thus a jobless upswing.

However, there is nothing to

indicate this outcome when one

looks more closely at corporate

employment expectations.

Likewise, staffing levels nowseem to be on track in terms of

adjusting to the dramatic

downturn in growth that the

Danish economy has

experienced.

The overall result of this is thatwe have changed our

unemployment forecast in a

significantly more positive

direction. While we previously

saw unemployment peaking at

just over 140,000, we now

expect that unemployment has

already peaked.

Figure1: Unemployment stabilising


Senior Economist

Christian Hilligse Heinig

+45 45 12 82 64

[email protected]

100908

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Thousands Thousands

Unemployment

Gross unemployment


9/21


Weekly Focus

Danish companies have in fact managed to improve productivity substantially in recent

quarters. Employment fell dramatically in the second half of 2009, while the Danish

economy at the same time experienced economic growth. This means the latest recession

no longer stands out negatively compared with earlier recessions in terms of companies

getting their employee numbers sufficiently adjusted.

Measured in terms of GDP per person in work, we are again approaching the levels

prevailing before the crisis struck (see figure 4). For the first many quarters after the

downturn arrived productivity fell markedly mainly due to the extreme intensity of the

economic downturn. This made it difficult for companies to implement a quick and

precise adjustment of staff numbers.

The extreme nature of the downturn in both the labour market and activity is also

apparent in figure 5, which compares developments in GDP and employment since the

start of the downturn. Considerably greater fluctuations are apparent this time compared

to earlier recessions, even though the same basic features are repeated. First we have a

period when activity falls without a parallel decline in employment. Next there is a period

when both activity and employment fall, and then when the economy turns there is

typically a lengthy period before employment again begins to rise. This reflects the

classic labour hoarding phenomenon, where companies prefer to wait and see before

laying off/hiring employees in order not to incur unnecessary costs.

As figure 5 also illustrates, developments suggest that we are approaching the fun point

on the curve where economic growth goes hand in hand with at least stable employment

and perhaps even a tendency towards rising employment. One precondition is of course

that the economic upswing continues, but the conclusion from both figure 4 and figure 5

is that companies at least generally appear to be on track in terms of adjusting staffing

levels to the downturn in growth in recent years.

Whether Danish companies have a more structural need to improve productivity after

years of low productivity growth is the joker in the pack for both employment andunemployment. The issue of productivity has in fact been at the core of the large spread

in economists unemployment forecasts throughout the crisis predictions have ranged

from a peak of 150,000 jobless to more than 200,000 despite more or less the same

estimates for growth.

There is no real definitive answer to the issue of the need for productivity to improve, but

it is worth noting that the entire productivity debate is at times a little difficult to quantify.

First, there is uncertainty about what precisely drives productivity growth and, second,

one could also question how exactly it should be measured. At any rate, there is unlikely

to be anyone forcing companies to hire workers who do not ultimately make a positive

contribution to the bottom line which is what the hard numbers, in the form of negative

productivity developments, show for a period of several years during the latest upswing.

Corporate Denmark does not foresee a jobless upswing

A revitalisation of productivity growth could result in a so-called jobless upswing. This

hypothesis has been aired several times by for example the OECD, Nationalbanken and

indeed we also discussed it in our December forecast.

However, looking at the signals the business community is sending in the form of

confidence indicators, there is currently no suggestion of a jobless upswing being on the

cards.

Figure 2: Employment stabilising

Source: Statistics Denmark and own calculations

Figure 3: Unemployment forecast

scuppered out of the water

Source: Nationalbanken, Finance Ministry, DRS

and own calculations

Figure 4: Marked improvement in

productivity

Source: MONA, Statistics Denmark and own

calculations

Figure 5: Is the fun point on the curve

approaching?

Source: MONA, Statistics Denmark and own

calculations

100806040200

2950

2900

2850

2800

2750

2700

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Thousands Thousands

Employment, Labour Force Survey

Employment, National Accounts

25

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2008M01 2008M07 2009M01 2009M07 2010M01 2010M07

Unemployment,thousands

Nationalbanken, March 2010 (per month:+12.500)

Danske Bank, April2010 (per month:+4.500)

Ministry ofFinance, May 2010 (per month:+5.000)

Economic Counsel, May 2010(per month: +3.000)

92

94

96

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100

102

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108

0 1 2 3 4 5 6 7 8 9

2008/2009

Number of quarterssince start ofdownturn

GDP perperson in work

1987

2001

1973

1980

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92 94 96 98 100 102 104 106

Developmentof GDP,GDP peak=100

Employment, GDP peak=100

2007q4

2010q1

Average ofrecessions (1973, 1980,1987, 1992/1993)


10/21


Weekly Focus

If one compares the corporate view of the economy and the corporate view on the need to

hire new staff, then historically there has been a fairly decent connection between an

improvement in the economic outlook and expectations of a need to hire more employees.

If this time around were to be different the result should be business having a more

positive view of the economy without a corresponding improvement on the employment

front. As can be seen in figure 6, employment expectations in the latest confidence

indicators from May move as they usually do in tandem with economic expectations,

in fact they are actually a little better than what one would immediately expect from a

historical perspective. Hence there is no evidence of a shift towards a new regime in

which economic growth does not go hand in hand with increased unemployment.

Growth outlook is key

The noticeable levelling off in the unemployment curve in recent months is not an

unequivocal signal that the labour market is turning. There have been similar periods

during earlier economic downturns in Denmark, after which unemployment again rose

(see figure 7). This phenomenon was particularly obvious during the first Oil Crisis andthe 1987-1993 recession. Developments during the Oil Crisis must be seen against the

backdrop of greater growth in the workforce as women increasingly entered the labour

market, while in the period 1987-1993 the upswing never really got off the ground. In

contrast, if we look at the downturn in the wake of the IT crisis at the start of the

millennium, there was a pronounced unemployment stop, as the economic upswing

quickly gained traction.

Comparing to the current situation it is thus not surprising that growth will be the key as

to whether the labour market has bottomed out. As mentioned earlier this is supported by

employment expectations, which do not suggest that we are on the threshold of an

extended period of productivity recovery. It is, however, worth remembering that the

workforce, as mentioned, has declined sharply during the crisis, and a positive cyclical

effect may come into play in the labour force that will mean rising employment may not

affect the unemployment statistic in a one-to-one ratio.

Looking more specifically at our growth forecasts, we belong to the optimistic camp of

economists. We expect economic growth this year and next of just under 2%, meaning

that we are at growth levels where there is a basis for job creation. This also supports the

idea that we may be witnessing a turnaround in the labour market at the moment.

Marked shift in our view on unemployment

If we convert the above into more specific opinions about unemployment, then we now

expect that unemployment has already peaked. There will be no dramatic fall in

unemployment in the coming years the outlook for growth is too weak, the labour force

may increase a little due to improvements in the economy and there ought to still be scope

for corporate productivity to improve. Overall, we expect that unemployment will remain

in the neighbourhood of the current 110,000-115,000 during the forecast period. Hence

our view of the labour market has undergone something of a transformation compared to

our last forecast in April. Back then we expected that unemployment would be around

30,000 higher at the end of the forecast period (see figure 8).

Figure 6: No sign of jobless upswing

among corporates

Figure 7: Unemployment flattening out

no guarantee of no further rises in

unemployment

Source: Statistics Denmark and own calculations

Figure 8: Markedly more positive view

on unemployment

Source. Statistics Denmark and own calculations

y = 0,9567x - 2,1624R =0,9511

-40

-30

-20

-10

0

10

20

30

-40 -30 -20 -10 0 10 20 30

Business confidence

Employment expectations

May 2010

0

20

40

60

80

100

120

140

160

180

0

20

40

60

80

100

120

140

160

180

0 M1 0 M 20 M3 0 M 40 M50 M6 0 M 70

1. oil crisis

2. oil crisis

Now

1987-1993

IT-crisis

Thousands

40

60

80

100

120

140

160

2006M01 2007M01 2008M01 2009M01 2010M01 2011M01

New forecast

Unemployment forecast,April2010

Thousands


11/21


Weekly Focus

Equities: What could trigger a bear market?

A myriad of market worries

Equity markets have a lot to cope with at the moment. A swirl of negative news hasundermined the positive sentiment that between February and April lifted global equities

by almost 15%. This performance has since been entirely wiped out and global equity

markets are again struggling around February levels. Equity investors are evidently very

worried about a number of factors, the most important of which we discuss below.

1. How will debt-ridden European nations repay their debts , and in connection with

this how much will growth slow in 2011? A re-run of the post-Lehman financial crisis of

2008 is the nightmare scenario for the PIIGS sovereign debt debacle.

2. The future of the financial sector. The sector, which accounts for some 20% of global

equity market value, finds itself in a regulative hurricane season, with countries such as

Germany unilaterally banning naked short selling and imposing additional taxes. The

sector has also been hit by fear of supranational regulations (e.g. Basel 3) that in thelonger term could hinder growth. Indeed, uncertain financial markets and continuing

losses on loans to homeowners, etc are already posing a challenge to earnings.

3. The oil sector has been hit by BPs problems and deepwater drilling will almost

certainly suffer heavier regulation, meaning costlier operations, due to environmental

considerations. As long as BP cannot stop the oil leak in the Gulf of Mexico, uncertainty

will plague the company and thus the global oil sector it could even spell the end of BP!

4. The notion of a jobless upswing in the US and for that matter the rest of the OECD

was resuscitated by the weak May jobs report in the US. Equity markets will increasingly

need to be fed signals that the upswing that has been under way since early 2009 is

becoming self-sustaining and thus that the private sector is taking over from the public

sector as the prime growth locomotive. Private sector job creation is a key factor here.

5. Fears of a hard landing for the global industrial economy have also become a

theme this year. The data are ever more strongly suggesting a slowdown in the global

industrial economy that is in part directly linked to developments in the Chinese economy

and trends in the developing economies in general.

Potential bear market triggers

In our view the equity market has now priced in too little growth for the coming years

(see Equity Strategy) hence we see decent potential for an equity upturn in the coming

months. That said, like the market we see a number of factors we believe could confirm,

and not refute, the latest bear market signals. A) Double-dip fears will be stimulated by

excessive falls in industrial PMIs, which therefore need to be avoided by China, the US

and Europe. B) Germany must continue to show leadership in the economic indicators.

The effects of the weak euro, low German interest rates and global economic expansion

has to be reflected in the German IFO. C) Q2 earnings should be good, but companies

must deliver. Some financials will overshadow still solid earnings from other companies.

D) US companies will have to show they are investing at home and not just in the

developing countries. Thus the US job market must very soon demonstrate some real

improvement.

Chief Analyst

Morten Kongshaug

+45 45 12 80 57

[email protected]

Financials and energy have draggedthe market down


Fears of hard landing for globalindustrial production


Pre-announcements indicate strongQ2 earnings in the US


April

10

May June

80

85

90

95

100

105

80

85

90

95

100

105

Financials

Total

Price index 100 = 1/4/2010

Energy

00 01 02 03 04 05 06 07 08 09

-10.0

-5.0

0.0

5.0

10.0

15.0

-10.0

-5.0

0.0

5.0

10.0

15.0 % 6m % 6m

China

USA

Eurozone

06 07 08 09 10

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9 Postitiv til negativ rate
http://danskeanalyse.danskebank.dk/abo/EquityStrategy040610/$file/EquityStrategy_040610.pdfhttp://danskeanalyse.danskebank.dk/abo/EquityStrategy040610/$file/EquityStrategy_040610.pdfhttp://danskeanalyse.danskebank.dk/abo/EquityStrategy040610/$file/EquityStrategy_040610.pdf


12/21


Weekly Focus

Fixed Income: ECB succeeds in calming markets

ECB delivers more than feared

The ECB delivered less than we expected, but more than feared at the monetary policy

meeting. All key interest rates were kept unchanged, no new liquidity measures were

introduced and no new details about the government bond purchase programme were

revealed.

The only policy change was that the ordinary three-month tenders were expanded from

fixed to full allotment during Q3. Basically, this locks EONIA rates at a very low level

for the remainder of the year and on the margin it delays the exit process for the ECB.

Importantly, the decision by the ECB to expand the three-month tenders was unanimous

and generally Trichet delivered a more clear message to the market compared with the

previous meeting.

While the bar to surprise on the positive side was probably low following the disastrous

May meeting, the ECB delivered just enough to make the markets feel more confident.

Following the meeting, markets responded positively and risk appetite saw a significant

comeback after a week with nervous trading and high volatility.

Bidding returns to Euro market, money markets improve

Following a gradually seizing-up over the past couple of weeks, bidding has returned to

Euro government bond markets over the past few days. Both high quality countries

(France, Belgium, Netherlands) and PIIGS have tightened versus Germany since

Wednesday. On top of this, money market conditions have continued to improve and

there are signs that funding tensions in the USD market are easing. Evidence from the

forward market is particularly encouraging with the USD FRA/OIS spread narrowingconsistently over the past few weeks.

From fear to fundamentals

With the ECB meeting out of the way and some general signs of improvement in market

conditions, this will hopefully leave some room for markets to turn focus away from fear

and back to fundamentals.

While the Euro debt crisis has dominated the agenda, the flow of global economic data

has remained robust and there are few signs of contagion so far. If we do not get new

shocks in the coming week, there could be room for a recovery in risk appetite. Given the

unusually high correlation with equities, this would imply higher bond yields and steeper

curves in both the US and Germany.

The calendar is dominated by tier two data next week. There will be little news from the

Fed which is entering the usual blackout period ahead of the FOMC meeting on 23 June

and there are no interesting ECB speeches scheduled. Focus will be on bond auctions in

Ireland, Spain, France and Germany and the auction announcement in the US.

Key events of the week ahead

German ZEW (15 June) US Empire and NABH (15 June) Ireland sells 2016 and 2018

bonds (15 June)

US PPI and building permits(16 June)

Germany sells EUR5bn10-yearbonds (16 June)

Spain to sell 2020 and 2041bonds

US CPI (17 June) France to sell notes, US auction

announcement (17 June)

Euro sovereigns spreads tightening

Source: Ecowin and Danske Markets

Money markets improve

Source: Bloomberg and Danske Markets

Senior Analyst

Peter Possing Andersen

+45 45 13 70 19

[email protected]

March

10

April May June

0

50

100

150

200

250

300

350

400

450

500

0

50

100

150

200

250

300

350

400

450

500 bp bp

Spain

Ireland

Portugal

Italy

0

10

20

30

4050

60

70

80

0

10

20

30

4050

60

70

80

N ov 2009 Jan 2010 Mar 2010 May 2010

bpbp FRA/OIS spread 2nd contract

3M USD Libor OIS s pread


13/21


Weekly Focus

FX: More hiking cycles kicked off

BoC and RBNZ kicking off hiking cycles, more to come!

Despite the sovereign debt crisis continuing to haunt the financial markets, June has seen

both the BoC and the RBNZ kick off their hiking cycles, defying concerns over a possible

double-dip in global economic growth. The 1 June BoC hike was in line with market

expectations, and as the accompanying statement devoted much attention to the downside

risks to global growth, the reaction in USD/CAD was relatively muted. In our view, the

strong momentum in the Canadian economy and stickiness in core inflation are likely to

warrant more hikes in the near future. In turn, this should imply more upside for the

Canadian dollar, though the current fragile market sentiment remains a clear risk.

This week, the RBNZ became the fourth G10 central bank to hike rates from the crisis

low of 2.50%. This hike was also expected in the market, but a relatively upbeat

statement gave the kiwi a lift and NZD/USD rose nearly 2%. With the recovery in New

Zealands main trading partners well under way, more hikes should be coming up.

Whos next? We look for the SEK to receive support from Riksbank hikes, possibly as

early as 1 July. Although Riksbank member Nyberg cast some doubts on the immediate

prospects for higher borrowing costs in Sweden due to uncertainty in Southern Europe, a

July hike remains our base case.

Little news from ECB

Although there had been some speculation about a possible rate reduction ahead of this

weeks ECB meeting, there was no cut and no new liquidity measures introduced. In stark

contrast with the May meeting, where the ECBs failure to address the escalating debt

crisis caused the EUR to be severely punished, this time around expectations for further

measures to deal with the crisis were likely quite low and EUR/USD traded slightly

higher over the day.

There is in our view still plenty of event risk emanating from the sovereign debt crisis and

the unanimous decision to provide three-month liquidity at full allotment in Q3 underlinesthat a normalisation of monetary policy is not imminent. We believe the EUR will

continue to lose against the USD as long as European monetary policy is getting looser,

European risks remain high and debt markets are not functioning.

CHF at all-time high versus EUR ahead of SNB meeting

The past week has seen the Swiss franc strengthen to a new all-time high against the euro

taking EUR/CHF to a 1.3734 low. An accelerated euro sell-off coupled with safe-haven

flows into the Swiss franc, as falling prices on risky assets increased the demand for

insurance, added too much downside pressure on EUR/CHF for the Swiss National Bank

(SNB) to sustain its approximate 1.40 level. It was not because the SNB did not put great

efforts into preventing a further appreciation, however. Recently published data shows

that the foreign exchange reserves jumped by CHF79bn in May. This indicates that May

saw an unprecedented level of SNB intervention, but that the SNB nevertheless was notable to withstand the massive franc buying pressure. Improved risk sentiment in recent

days has eased the downside pressure on EUR/CHF. However, given Switzerlands

strong fiscal position and growth outperformance, we expect the fundamental trend to be

for a stronger franc.

The next key event will be the Q2 SNB meeting on Thursday. We expect little change to

the current monetary policy setting and focus to be on how the SNB expects to mop up

the excess liquidity it has poured into the financial system since March 2009. The biggest

risk to the upside in EUR/CHF is the potential unwinding of what is likely to be still

stretched short EUR/CHF positions in the market.

Senior Analyst

Sverre Holbek

+45 45 14 88 82

[email protected]

Senior Analyst

Kasper Kirkegaard+45 45 13 70 18

[email protected]

G10 FX 1-week changes vs. EUR

Source: Bloomberg

BoC and RBNZ policy rates

Jan

06

May Sep Jan

07

May Sep Jan

08

May Sep Jan

09

May Sep Jan

10

May0

1

2

3

4

5

6

7

8

9

0

1

2

3

4

5

6

7

8

9

RBNZ

BoC

Source: Ecowin

SNB FX reserves soaring

Source: Ecowin

-2.0% -1.0% 0.0% 1.0% 2.0%

USD

JPY

NOK

SEK

GBP

CHF

NZD

AUD

CAD

99 01 02 03 04 05 06 07 08 09

40

70

100

130

160

190

220

40

70

100

130

160

190

220BN CHF

Swiss foreign FX reserves


14/21


Weekly Focus

Commodities: Focus on oil disaster

The oil spill in the Gulf of Mexico has turned into a nightmare not just for the

environment, but also for oil company BP. Since the disaster, its share price has halvedand the price of insurance (CDSs) for debt issued by BP has soared. The market is

naturally worried about the size of the bill that awaits BP and it is now estimated that up

to 900,000 barrels of oil have escaped, almost four times as much as after the Exxon

Valdez disaster in 1989.

But we are not BP analysts, and predicting the fate of individual companies is not our

concern here. The spill has, however, meant that deepwater drilling has suddenly become

a highly controversial technology and the accident will almost inevitably have a major

impact on the sector going forward. The Obama administration has provisionally halted

all drilling in deep water in the Gulf of Mexico for six months, although current

production will be permitted to continue for the time being. The Norwegians have also

indefinitely suspended any new drilling in deep water, but are allowing ongoing drilling

to proceed.

The International Energy Agencys latest monthly Oil Market Report looks at the long-

term consequences of the disaster. The IEA reckons that it could have a marked effect on

oil supply, with up to 300,000 b/d of deepwater production in the danger zone over the

next five years. This might not sound much on the face of it, but with the market balance

expected to tighten in the coming years, this is far from insignificant not least because

deepwater drilling has for many years been seen as the way forward, especially outside

Opec.

However, the impact on costs could considerably outweigh the impact on supply. With

Opec keeping a rein on production, oil prices are, in principle, decided by the most

expensively produced oil to be sold in the market the marginal cost is equal to the price.

The cost of deepwater drilling is now set to rise. Following the Piper Alpha disaster in the

North Sea in 1988, for example, the UK introduced more than 100 new maintenance and

safety regulations. There are already reports that the price of insurance for deepwater

drilling has rocketed. Future insurance and contingency requirements may also make it

difficult for smaller operators that do not have the same financial strength as the oil

majors.

OECD demand for oil on the up

Although the oil spill is by some margin the worst ever, the impact on oil prices to date

has been modest. After all, the spill is but a drop in the ocean in terms of the overall oilmarket. What has caught our attention, though, is that the IEA has again revised up its oil

demand forecast for 2010, this time from 1.6 to 1.7mb/d. The IEA puts this down mainly

to higher economic growth in the US. There is much to suggest that the prediction we

made in our lastCommodities Monthlythat growth in OECD demand would be the next

big market driver is now materialising. We therefore expect oil prices to remain upward

bound in the coming quarters.

Prospect of rising costs pushing up

long oil prices

Source: Bloomberg

US oil demand on the up

Source: EcoWin

Prospect of rising costs pushing up

long oil prices

Source: Bloomberg

Chief Analyst

Arne Lohmann Rasmussen

+45 4512 8532

[email protected]

05 06 07 08 09 10

-25

-20

-15

-10

-5

0

5

10

15

20

-25

-20

-15

-10

-5

0

5

10

15

20%y/y %y/y

Totaldistallatefuelsupplied,4wmva.

Totalproductssupplied,4wmva.
http://danskeanalyse.danskebank.dk/abo/CommoditiesMonthly270510/$file/CommoditiesMonthly_270510.pdfhttp://danskeanalyse.danskebank.dk/abo/CommoditiesMonthly270510/$file/CommoditiesMonthly_270510.pdfhttp://danskeanalyse.danskebank.dk/abo/CommoditiesMonthly270510/$file/CommoditiesMonthly_270510.pdfhttp://danskeanalyse.danskebank.dk/abo/CommoditiesMonthly270510/$file/CommoditiesMonthly_270510.pdf


15/21


Weekly Focus

Financial views

Equities Our overall view is that stock markets will return to the bullish trend due to continued

global economic expansion and overly nervous investors who have now priced in

close to zero growth in European corporate earnings over the coming five years.

Hence we see the recent market correction as a buying opportunity. However,

investors should still recognise that, in the short term, the high risk profile of the

market may continue due to very uncertain economic conditions for the Financials

sector. We reiterate our European/Nordic recommendations to underweight Financials

and overweight Industrials and Health Care. The latter two are main beneficiaries of a

weaker euro and a stronger US dollar.

Fixed Income

Risk aversion is the only driver of yields at the moment. If risky assets succeed torebound, both German and US yields will follow suit by moving higher. However, if

the crisis escalates again, yields will once again drop faster than a lead balloon.

We expect some relief in bond markets in the coming weeks as the crisis takes a stepback. Governments and central banks have done much to counter the crisis and we

expect it will help ease fears. Fiscal belt-tightening in Italy, Spain and Portugal also

goes some way to help the credibility of fiscal programmes. Finally, continued strong

macro data out of the big countries should provide some cushion.

Euroland intra-spreads: We remain overweight in Germany, Italy, the Netherlands,Austria and Ireland. We are underweight in France, Spain, Greece and Portugal. We

recommend 5Y Italy versus France and 30Y Italy versus Germany.

Scandinavian government bonds are performing well and we remain overweight 2YDGBs and 5Y SGBs vs France and long 10Y DGBs vs France. We are long on

Norwegian krone T-bills on an outright basis with open currency exposure.

Credit

Liquidity is slowly coming back to the credit market, but there is still limited activityin the primary market. Banks remain under some pressure as sovereign debt fears

refuse to go away. We believe this picture is likely to remain with us for some time.

From a fundamental perspective we are positive on investment grade credit from non-financial companies. Company credit metrics are currently sound and we thus

consider the default risk in the short to medium term as very low. Furthermore,

companies of high credit quality offer an alternative for investors that seek an exitfrom what they perceive as risky sovereign exposure.

FX Outlook EUR/USD continues to hit new lows and further downside, in our view, is still to

come as political risks in Europe weigh on the euro and US rates are expected to rise.

Despite a massive effort from the SNB to stem currency inflow, EUR/CHF is

declining and new record-lows cannot be excluded. EUR/GBP has fallen dramatically

and we believe we will have a consolidation period before a move lower. The yen is

too expensive in our view while CAD is a good buy.

Equities and US 10Y yield


EUR/USD and USD/JPY


Credit spreads


Commodity prices


dec

09

jan

10

feb mar apr maj jun

3,1

3,2

3,3

3,4

3,5

3,6

3,7

3,8

3,9

4,0

925

975

1025

1075

1125

1175

1225

1275 Index %US 10-year gov bond >>

jun

07

okt

08

feb jun okt

09

f eb jun okt

10

feb

1,5

2,5

3,5

4,5

5,5

6,5

0,0

5,0

10,0

15,0

20,0

25,0 % points % points

>

jun

09

aug okt dec

10

feb apr jun

2250

2500

2750

3000

3250

3500

3750

4000

55

60

65

70

75

80

85

90USD/barrel Index

LME metal prices >>


16/21


17/21


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 -4.9 -4.6 2.5 -12.0 -1.7 -10.3 -13.2 1.3 3.5 -2.8 38.8 4.02010 1.8 2.7 1.2 -2.3 0.8 2.7 2.6 2.0 4.6 -5.6 42.0 3.22011 1.9 2.5 0.5 1.3 0.2 3.5 3.5 1.8 5.0 -4.5 46.5 2.5

Sweden 2009 -4.9 -0.8 2.1 -15.3 -1.5 -12.5 -13.4 -0.3 8.4 -1.3 39.5 7.62010 1.8 2.2 4.6 0.4 0.5 3.5 6.8 1.4 10.3 -2.8 43.1 5.92011 2.0 1.8 1.5 2.2 0.0 4.4 4.2 2.4 10.3 1.0 44.0 6.8

Norway 2009 -1.4 0.1 5.0 -7.9 -1.8 -4.2 -9.6 2.2 3.1 8.0 26.0 19.02010 3.1 5.0 3.1 -0.5 1.0 2.3 5.6 2.5 3.3 12.0 26.0 24.92011 1.7 4.4 2.5 0.0 0.0 1.4 7.3 1.9 3.4 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 1.5 0.2 0.0 -4.0 0.0 4.0 2.0 1.4 10.0 -3.8 49.0 1.42011 2.5 1.5 0.5 3.5 0.0 9.0 5.5 2.0 9.2 -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

Public

debt4

Public

budget4

Year GDP1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Infla-

tion1

Unem-

ploym.3

Infla-

tion1

Unem-

ploym.3

Switzer-

land

Year GDP1

Private

cons.1

Im-

ports1

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

Ex-

ports

1

Im-

ports

1

Infla-

tion

1

Unem-

ploym.

3

Public

budget

4

Current

acc.

4

Public

debt

4

Year GDP

1

Private

cons.

1

Public

cons.

1

Fixed

inv.

1

Stock

build.

2


18/21


Weekly Focus

Financial forecast

Source: Danske Markets

Bond and money marketsCurrency

vs USD

Currency

vs DKK

USD 11-Jun - 614.1

+3m - 620+6m - 648

+12m - 587

EUR 11-Jun 121.2 743.9

+3m 120 744.0

+6m 115 745.0

+12m 127 746.0

JPY 11-Jun 91.6 6.71

+3m 95 6.53

+6m 99 6.54

+12m 102 5.74

GBP 11-Jun 147.1 903.2

+3m 143 886

+6m 139 898

+12m 155 910

CHF 11-Jun 114.3 537.4

+3m 115 539

+6m 119 544

+12m 111 529

DKK 11-Jun 614.1 -

+3m 620 -

+6m 648 -

+12m 587 -

SEK 11-Jun 789.1 77.8

+3m 792 78.3

+6m 817 79.3

+12m 724 81.1

NOK 11-Jun 649.0 94.6

+3m 638 97.3

+6m 661 98.0

+12m 598 98.2

PLN 11-Jun 337.6 181.9

+3m 333 186

+6m 348 186

+12m 311 189

Equity markets

Regional

Price trend

12 mth.

Regional recommen-

dations

USA 0% to +10% Underweight

Japan 0% to +10% Neutral

Emerging markets (USD) 0% to +10% Overweight

Pan-Europe (EUR) 0% to +10% Neutral

Nordics

Sweden 0% to +10% Neutral

Norway 0% to +10% Neutral

Denmark 0% to +10% Neutral

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011

NYMEX WTI 81 78 80 85 87 89 92 94 81 91

ICE Brent 79 79 79 84 86 88 91 93 80 90

Copper 7,274 7,300 7,500 7,800 8,200 8,600 8,650 8,700 7,468 8,538

Zinc 2,307 2,150 2,200 2,400 2,500 2,500 2,550 2,550 2,264 2,525

Nickel/1000 20 24 22 23 23 23 23 23 22 23

Steel 464 525 550 575 580 585 590 600 529 589

Aluminium 2,199 2,200 2,250 2,300 2,400 2,400 2,400 2,400 2,237 2,400

Gold 1,110 1,175 1,150 1,100 1,050 1,000 1,000 1,000 1,134 1,013

Matif Mill Wheat 126 133 133 132 127 133 133 133 131 132

CBOT Wheat 518 480 470 450 475 500 500 500 480 494

CBOT Corn 389 370 375 400 410 420 430 440 384 425

CBOT Soybeans 969 960 975 1,000 1,025 1,050 1,075 1,100 976 1,063

0.50

Average

Key int.

rate

0.13

0.130.13

1.00

3.00

0.25

1.00

1.00

0.10

0.10

0.50

10-yr swap yield

0.68

1.05

1.05

1.05

3m interest rate

3.30

1.00

0.10

0.50

0.25

1.05

1.00

0.65

0.75

0.75

4.10

4.10

0.25

0.75

1.00

0.50

1.90

0.25

0.10

1.16

3.50

2.00

0.50

0.75

1.50

3.50

2.25

2.50

3.50

3.50

0.54

0.72

0.24

0.73

0.09

0.250.35

1.25

0.65

0.65

0.25

0.30

0.30

0.30

4.10

3.75

0.25

0.75

1.25

1.25

1.50

1.10

0.80

2.65

760

2.65

2.90

3.35

3.60

2.30

5.80

5.20

5.00

4.00

3.30

1.80

1.85

2.10

0.70

0.85

1.50

1.58

2.10

1.45

1.90

1.70

1.75

1.90

0.50

0.65

1.00

120115

127

114

114

130

1.31

395

121.2

-

-

-

-

110.9

744

745

746

956.1

786.3

409.1

760

400

400

950

940

920

765

82.4

138.4

743.9

84.0

83.0

82.0

138

137

141

1.15

1.26

0.47

1.49

0.55

1.60

1.25

1.25

1.65

1.30

High

3.17

4.42

Currency

vs EUR2-yr swap yield

Risk

Low -5% to +5%

Price trend

3 mth.

-5% to +5%

-5% to +5%

High

High

Low

Average

High

344

11-Jun

-5% to +5%

-5% to +5%

-5% to +5%

-5% to +5%

75

19

6,410

1,720

1,219

130

75

425

1,949

20112010

3.90

3.38

3.75

3.50

3.25

3.40

3.55

4.90

3.60

3.70

1.55

1.60

1.65

3.47

3.85

4.00

3.55

3.08

5.34

5.85

6.10

6.35

4.20

2.01

2.25

2.30

2.50

934

434

2.94

3.90

4.40

4.13

4.50

4.70

2.86

3.60


19/21


Weekly Focus

Calendar


Key Data and Events in Week 24

Period Danske Bank Consensus Previous

0:45 NZD Retail sales (ex auto) Apr -0.4% 1.1%1:50 JPY BSI Large Manufacturing q/q 2nd quarter 4.3%

6:30 JPY Industrial production, final m/m|y/y Apr

9:15 CHF Producer & Import prices m/m|y/y May 0.6%|0.8%

11:00 EUR Industrial production m/m|y/y Apr 0.4%|8.6% 0.6%|.. 1.5%|7.4%

11:15 USD Fed's Bullard speaks on the Global Recovery in Tokyo


- JPY BoJ Monetary Policy Announcement % 0.10 0.10 0.10

1:01 GBP RICS House Price Balance Index May 17%

3:30 AUD RBA June minutes

9:30 DKK Wholesale prices m/m|y/y May 1.3%|5.1%

10:00 NOK Trade balance NOK bn May 27.1

10:30 GBP CPI Inflation m/m|y/y May 0.3%|3.5% 0.6%|3.7%11:00 EUR ZEW economic sentiment Jun 37.6

11:00 DEM ZEW economic sentiment Index Jun 44.0 48.0 45.8

11:00 DEM ZEW current situation Index Jun -10 -15 -21.6

12:15 USD Fed's Bullard speaks on Asset Bubbles in Hong Kong

14:30 USD Import prices m/m|y/y May -1.2%|8.1% 0.9%|11.1%

14:30 USD Empire State Manufacturing Index Index Jun 20.00 19.11

15:00 USD TICS international capital flow, Net inflow USD bn Apr 10.5

19:00 USD NAHB Housing Market Index Index Jun 21 22 22

19:00 USD Auction of USD42 bn 2-year notes


1:50 JPY Tertiary Industry Index m/m Apr 2.6% -3.0%

7:00 JPY Bank of Japan Monthly Report

9:30 SEK National Debt Office report, Central Gov. borrowing: Forecast & analysis

10:00 ITL Inflation (HICP), Final m/m|y/y May 0.1%|1.6% 0.1%|1.6%

10:30 GBP Jobless Claims Change May -24.0 -27.1

10:30 GBP Average Earnings 3Ms/YoY May 4.3% 4.0%

10:30 GBP ILO Unemployment Rate % May 8.0% 8.0% 8.0%

11:00 EUR Inflation (CPI), final m/m|y/y Jun 0.1%|1.6% 0.1%|1.6% 0.5%|..

11:00 EUR Core Inflation y/y May 0.1%|0.8% ..|0.8% ..|0.8%

13:00 USD MBA mortgage applications

14:30 USD PPI m/m|y/y May 0.2%|5.6% -0.5%|4.8% -0.1%|5.5%

14:30 USD PPI core m/m|y/y May 0.1%|1.2% 0.1%|1.1% 0.2%|1.0%

14:30 USD Housing starts 1000 (m/m) May 632 (-6.0%) 650 (-3.3%) 672 (5.8%)

15:15 USD Industrial production m/m May 0.8% 0.9% 0.8%

15:15 USD Capacity utilization % May 74.5% 73.7%

16:00 USD Building Permits 1000 (m/m) May 623 (2.2%) 628 (2.9%) 606 (-11.5%)

23:45 USD Bernanke Speaks at Financial Regulation Conference in New York

Monday, June 14, 2010

Tuesday, June 15, 2010

Wednesday, June 16, 2010


20/21


Weekly Focus

Calendar - continued



5:00 NZD Consumer confidence Index Jun 126

7:00 JPY Leading Economic Index, final y/y Apr

9:15 CHF Industrial production q/q|y/y 1st quarter 6.4%|-1.1%9:30 CHF Monetary policy decisions, 3-month libor target 2nd quarter 0.25% 0.25% 0.25%

9:30 DKK New car sales, s.a. (Private households) May 3.9%|-17.9%

9:30 SEK Statistics Sweden, Unemployment % May 9.1% 9.5%

10:30 GBP Retail Sales ex auto fuel m/m|y/y May 0.0%|2.0% 0.1%|3.0%

12:30 SEK Barbro Wickman-Parak speak on "The Repo - Experience After Three Years" at Danske Bank Stockholm

14:30 USD CPI m/m|y/y May -0.1%|2.0% -0.2%|2.0% -0.1%|2.2%

14:30 USD CPI ex. food & energy m/m|y/y May 0.0%|0.8% 0.1%|0.9% 0.0%|0.9%

14:30 USD Initial jobless claims 1000

14:30 USD Current account bill. USD 1st quarter -119.3 -115.6

15:00 USD Leading indicator Index May 0.4% -0.1%

16:00 USD Philadelphia Fed. Index Jun 21.0 21.4


1:50 JPY BoJ Board Minutes

10:30 GBP Public Finances (PSNCR) bn. GBP May 8.8

10:30 GBP Broad money M4 m/m|y/y May 0.0%|3.3%

14:30 CAD Leading indicators m/m May 0.9%


Fri 11 - 18 CNY Actual FDIC y/y May 22.3% 24.7%

Mon 14 - 18 GBP Nationwide Consumer Confidence m/m|y/y May 72 74

Friday, June 18, 2010

During the week

Thursday, June 17, 2010


21/21

Weekly Focus

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Calculations and presentations in this report are based on standard econometric tools and methodology.

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Major risks connected with recommendations or opinions in this report, including as sensitivity analysis of

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Please see the front page of this research report.

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Documents

JUN 11 Weekly Focus