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Danske - Room for easing in China

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					Investment Research
                                                                                                                            12 October 2012




Weekly Focus
Room for easing in China

Market movers ahead
•       A stream of data from China will probably show that the slowdown continued in
        September and Q3 as a whole, that inflation is still falling and that there is therefore                            Contents
        still space to ease economic policy.                                                                                Market movers ahead ........................................... 2
                                                                                                                            Global Update ................................................................. 5
•       The Spanish saga will roll on in a week featuring both a meeting of the European
                                                                                                                            Scandi update ................................................................. 7
        Council and local elections in Spain.
                                                                                                                            EMEA Update.................................................................. 8
•       US data, on the other hand, will probably show higher consumer spending and                                         Latest research from Danske Bank ........ 9
        inflation in September and signs of further growth in October.                                                      FX: Action in Scandies .......................................10
                                                                                                                            Credit: Fall(ing) ............................................................11
•       Norges Bank’s regional network will be an important pointer for Norwegian interest                                  Financial views...........................................................12
        rates and news is due from the Swedish labour market.                                                               Macroeconomic forecast ..............................14
                                                                                                                            Financial forecast ...................................................15
Global update                                                                                                               Calendar ...........................................................................16
•       Spain’s credit rating was cut to just above junk status but the other euro countries
        rallied round and the downgrade was taken on the chin by financial markets.

•       In the US, the labour market exceeded expectations while exports disappointed, so on
        balance we are none the wiser.

•       The dispute between Japan and China can now be seen in the data, with the boycott of
        Japanese cars leading to falling auto sales in China.
                                                                                                                            Financial views
•       Swedish industrial production was surprisingly robust, while Norwegian inflation was
                                                                                                                            Major indices
        lower than expected.                                                                                                                            12-Oct                  3M                 12M
                                                                                                                            10yr EUR swap                 1.75                 1.90                 2.10
No effect from Spanish downgrade                                     Chinese growth is slowing                              EUR/USD                        130                 135                  130
                                                                                                                                                        12-Oct                  6M               12-24M
    8 %, 2-year government bond yields                           8   13 % å/å                                        25.0
                                                                                                             % å/å          S&P500                       1433            -5% to +5%             5%-10%
    7                                                            7   12     << BNP-vækst
                                                                                                          Prognose   21.0
                                         Spain
                                                                     11                                                     Read more on page 15
    6                                                            6                     Industriproduktion>>          17.0
    5                                                            5   10                                                     Source: Danske Bank
                                                                      9                                              13.0
    4                                                            4
                                                                      8
    3                                                            3                                                    9.0
                                                   Italy              7
    2                                                            2                                                    5.0
                                                                      6
    1                                                            1
                                                                      5                                               1.0
        sep    nov   jan     mar    maj      jul           sep
                                                                          08    09    10      11     12       13
              11                     12

Source: Reuters EcoWin                                               Source: Reuters EcoWin




                                                                                                                            Editors

                                                                                                                            Allan von Mehren
                                                                                                                            +45 4512 8055
                                                                                                                            alvo@danskebank.dk

                                                                                                                            Steen Bocian
                                                                                                                            +45 45 12 85 31
                                                                                                                            steen.bocian@danskebank.dk


Important disclosures and certifications are contained from page 18 of this report.

                                                                                                                            www.danskeresearch.com
Weekly Focus




Market movers ahead
Global
                                                                                                •
•    Next week we will see quite a few interesting data releases for the US economy. On
                                                                                                Retail sales should grow with
     Monday, we expect the retail sales report for September to show a gain of 0.8% m/m,        increasing gasoline prices
     reflecting increasing gasoline prices and an expected increase in car sales. At the same       2.0 % m/m                                                         2.0
                                                                                                                                                         % m/m
     time, chain store sales have been mixed over the past few months. Our models point             1.5
                                                                                                                           Total retail sales
                                                                                                                                                                      1.5

     to a rise in core sales (excluding gas and autos) of 0.4% m/m.                                 1.0                                                               1.0
                                                                                                    0.5                                                               0.5
•    On Tuesday, core CPI is expected to remain modest, increasing 0.2 % m/m, whereas               0.0                                                               0.0

     headline CPI is likely to be somewhat higher at 0.4% m/m as a result of last month’s       -0.5                                                                 -0.5
                                                                                                                      Retail sales, ex autos & gas
                                                                                                -1.0                                                                 -1.0
     increase in oil prices.                                                                                     10                   11                12

•    We will also receive the first figures for manufacturing confidence in October in the
                                                                                                Source: Reuters EcoWin
     form of local business surveys from New York and Philadelphia Fed. We expect them
     both to strengthen, in line with the last ISM reading, which showed an improvement
     in new orders, and the increase in consumer confidence.

•    Overall we see progress in the US economy and expect last month’s improvement to
     take hold.

•    The European Council will meet on 18-19 October. It seems that Spain may not have
     asked for help from the ESM before the meeting as Prime Minister Rajoy would               ZEW expectations likely to rise
     prefer to wait until after the 21 October elections in Galicia and the Basque country.     100 Index           Sentix investor expectations >>          Index     40
                                                                                                 75                                                                    30
     The timing and consequences of such a request is then likely to be an issue of debate.         50
                                                                                                                                                                       20
                                                                                                                                                                       10
     According to the Agenda, the Council will review progress in the implementation of             25                                                                  0
                                                                                                      0                                                               -10
     the Compact for Growth and Jobs, assess progress made regarding the proposal for a                                                                               -20
                                                                                                    -25
     single European banking supervision mechanism and examine the wider issue of the                                                                                 -30
                                                                                                    -50         << ZEW expectations
                                                                                                                                                                      -40
     banking union and its components. On Monday, the Portuguese government will                    -75                                                               -50
                                                                                                          02 03 04 05 06 07 08 09 10 11 12
     submit its 2013 government budget proposal. Also on Monday Asian and European
     finance ministers meet at the 10th ASEM Finance Ministers meeting to strengthen the        Source: Reuters EcoWin
     partnership and discuss how to share Asia’s dynamic growth with Europe.

•    In terms of hard data releases it will be a fairly quiet week. Euro area CPI is expected
     to increase by 2.6% y/y in September from 2.7% y/y in August. Part of the reason for
     inflation remaining elevated is tax hikes in several countries including VAT hikes in
     Spain. The German ZEW expectations index is projected to increase to -12.0 from
     -18.2, reflecting improved sentiment in financial markets. The ZEW current                 GDP growth in China probably eased
     conditions index is only expected to improve slightly.                                     slightly in Q3
                                                                                                    13 % y/y                                                     25.0
                                                                                                                                                        % y/y
•    It will be a very busy week in China, as most data for September and Q3 GDP is                 12      <<GDP growth
                                                                                                                                                     Forecast    21.0
     scheduled to be released. Overall the data is expected to remain relatively subdued,           11
                                                                                                                               Industrial production>>           17.0
                                                                                                    10
     but the policy response will continue to be only very cautions monetary easing. We              9                                                           13.0

     expect GDP growth to ease slightly to 7.4% y/y in Q3 from 7.6% y/y in Q2. In our                8
                                                                                                                                                                     9.0
                                                                                                     7
     view, the weakness in Q3 has been driven by weaker exports and inventory while                  6
                                                                                                                                                                     5.0

     there has been some stabilisation in domestic demand. China’s manufacturing PMIs                5                                                               1.0
                                                                                                           08         09       10      11       12       13
     suggest that industrial production stayed relatively subdued in September, where we
     expect industrial production to have eased slightly to 8.8% y/y from 8.9% y/y in           Source: Reuters EcoWin, Danske Bank

     August. In line with consensus, we expect CPI inflation to ease slightly to 1.9% y/y




2|   12 October 2012
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Weekly Focus




                                                                                               •
     in September from 2.0% y/y in August mainly on the back of lower food prices.
                                                                                               China’s inflation is not a constraint on
     Inflation is well within the Chinese government’s 4% comfort zone and hence should
                                                                                               monetary easing
     not be a constraint on monetary easing. A possible rebound in the property market has         10 % y/y
                                                                                                                  Contribution to inflation                 % y/y 10
     been the government’s main concern and in September we expect property prices to               8 Target for 2012                                                8
                                                                                                                                                       Forecast
     have increased slightly for the fourth month in a row although preliminary reports             6                          Food                                  6
                                                                                                                               Non-Food
     suggest new home sales might have softened. Foreign trade, retail sales and fixed              4                                                                4

     asset investment data will also be released next week. Some softness in retail sales is        2                                                                2

                                                                                                    0                                                                0
     possible due to a plunge in sales of Japanese auto brands in the wake of the row
                                                                                                   -2                                                                -2
     between Japan and China about some islands in the East China Sea.                                   06     07        08      09     10     11     12    13


•    The US Treasury Department is due to release a bi-annual-report on 15 October             Source: Reuters EcoWin, Danske Bank
     where it evaluates other countries’ exchange rate policies and has the possibility to
     give a country ‘currency manipulator’ status. This release will be particularly
     sensitive because it has become a major topic in the US presidential election with
     Republican candidate, Mitt Romney, promising that one of his first acts as president
     would be to give China status as a currency manipulator. The report on exchange rate
     policy has often been delayed for political reasons and this option appears to be the
     most convenient for the Obama administration. Should China get currency
     manipulator status, there are currently no automatic punishment mechanisms but only
     a commitment to start negotiations about the issue with China.



Scandi
•    In Denmark, there are no important releases in the coming week. Interest will
                                                                                               Sweden: Unemployment rate on the
     therefore centre on developments in the budget negotiations. It is also half term,        rise?
     which spells reduced levels of activity, other things being equal.
                                                                                               9,5                                                                   9,5
                                                                                                        % of labour force (ILO, 15-74)
•    In Sweden, the only release in the week ahead is the labour force survey (including       9,0
                                                                                                              2010
                                                                                                                                                                     9,0
                                                                                               8,5                                                                   8,5
     the unemployment rate), which will be published on Thursday at 09:30 CET. This
                                                                                               8,0                                                                   8,0
     outcome will prove very interesting indeed, since it is the last set of more important    7,5             2012                                                  7,5
     data that will make it into the Riksbank’s forecasts ahead of the 25 October monetary     7,0                                                                   7,0
                                                                                                                                      2011
     policy announcement. We expect a slight, seasonally normal, rise in the                   6,5                                                                   6,5
                                                                                                        jan      ma            ma        j ul    se         no
                                                                                                                      r           j                p             v
     unemployment rate to around 7.5%, but last month’s unexpected spike in the
     unemployment rate makes us a bit wary of such a call. Anyway, the interpretation will     Source: Reuters EcoWin
     be rather straightforward. A number below 7.5% should be taken as a sign that recent
     turmoil in the business sector has not yet fed through into the labour market and
     should also shave off some of the probability attached to an October Riksbank rate
                                                                                               Norges Bank’s regional network
     cut. A more pronounced rise in the unemployment rate would, likewise, be a strong
     signal of the weakening outlook also for the domestic sectors.

•    In Norway, Wednesday brings Norges Bank’s latest regional network survey, its
     preferred indicator of growth in the country’s economy. Incoming data have painted a
     more mixed picture of the Norwegian economy of late. Industrial production is
     growing surprisingly quickly, homebuilding is rebounding strongly, and house prices
     are on the up, while consumption growth has been moderate, employment has levelled
     off and lending to businesses is rising more slowly. This means that the aggregated
                                                                                               Source: Norges Bank, Danske Bank
     output growth index from the regional network will be especially important this time
     around. We expect the index to come out around 1.4, corresponding to GDP growth




3|   12 October 2012
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Weekly Focus




      of 0.7% q/q in Q3, which would be below trend and slightly less than Norges Bank
      anticipated in the June monetary policy report. Should the index drop below 1.2, this
      would require the central bank to revise down its growth forecast for 2012, which
      would put our off-consensus expectation of a December rate hike in the balance.

Market movers ahead
Global movers                                Event                                                           Period            Danske       Consensus    Previous
Mon               15-Oct      -        OTH   ASEM finance ministers' meeting
                              -        USD US Treasury Department scheduled to release bi-annual report on possible currency manipulation
                            3:30       CNY   CPI                                                  y/y          Sep              1.9%          1.9%         2.0%
                            14:30      USD Empire manufacturing PMI                              m/m           Oct              -3.00         -4.80       -10.41
                            14:30      USD Retail sales                                          m/m           Sep              0.8%          0.7%         0.9%
Tue               16-Oct    11:00      EUR CPI                                                 m/m|y/y         Sep           0.7%|2.6%      0.8%|2.7%    0.4%|2.7%
                            11:00      DEM ZEW economic sentiment                                Index         Oct               -12          -15.0        -18.2
                            14:30      USD CPI                                                 m/m|y/y         Sep           0.4%|1.8%      0.5%|1.8%    0.6%|1.7%
                            14:30      USD CPI ex. food & energy                               m/m|y/y         Sep           0.2%|2.0%      0.2%|2.0%    0.1%|1.9%
Thurs             18-Oct      -        EUR European Council meeting
                            3:30       CNY   Property prices                                                   Sep
                            4:00       CNY   Industrial production                                y/y          Sep              8.8%          9.0%         8.9%
                            4:00       CNY   Fixed assets investments                             y/y          Sep                           20.2%        20.2%
                            4:00       CNY   GDP                                                q/q|y/y    3rd quarter       1.8%|7.4%      2.0%|7.4%    1.8%|7.6%
                            4:00       CNY   Retail sales value                                   y/y          Sep                           13.2%        13.2%
                            16:00      USD Philly Fed manufacturing PMI                          Index         Oct               1.0           0.0         -1.9
Scandi movers                                Event                                                           Period            Danske       Consensus    Previous
Thurs             18-Oct    9:30       SEK   Unemployment                                         %            Sep              7.3%                       7.2%

Source: Bloomberg and Danske Markets




4|      12 October 2012
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Weekly Focus




Global Update
Spain resilient despite downgrade
In the euro area, focus once again centred on the political events and news from the rating
                                                                                              Limited impact on Spanish yields from
agencies. The week kicked off with a Eurogroup meeting. The political leaders embraced
                                                                                              S&P downgrade
the recent Spanish reform efforts and Eurogroup President Juncker said that “the               8 %, 2-year government bond yields                                  8
measures are in line with the EU country-specific recommendations for Spain and in             7                                                                   7
                                                                                                                                           Spain
some areas go even beyond”. In our view, this signals that a future Memorandum of              6                                                                   6
                                                                                               5                                                                   5
Understanding (which is a condition for an ESM precautionary programme and ECB
                                                                                               4                                                                   4
intervention) will probably be no harsher than the measures already put forward by the         3                                                                   3
                                                                                                                                                     Italy
Spanish government. We continue to expect Rajoy to make a formal request for an ESM            2                                                                   2
                                                                                               1                                                                   1
programme before the end of the month and we would be very surprised if this has not                sep     nov        jan       mar    maj    jul           sep
                                                                                                           11                            12
happened before the end of the year. The Eurogroup also gave Portugal another year to
reach its fiscal targets.                                                                     Source: Reuters EcoWin, Danske Bank


Continuing with Spain, on Wednesday evening Standard & Poor’s cut Spain’s credit
rating by two notches to ‘BBB-’ – only one notch above junk status – with a negative
outlook. S&P wrote in a press statement: ‘The negative outlook on the long-term rating        Stronger-than-expected euro area
reflects our view of the significant risks to Spain’s economic growth and budgetary           industrial production
performance, and the lack of a clear direction in eurozone policy’. The downgrade              130 Index                                             Index 130
                                                                                               125                                                         125
caused an initial spike in yields, but markets quickly shook off the negative sentiment.       120                           Germany                       120
                                                                                               115                                                         115
                                                                                               110                                                         110
The ‘Draghi put’ and expectations on the effectiveness of the OMT continue to support          105                                              Euroland 105
                                                                                               100                                                         100
market sentiment.                                                                               95                                                          95
                                                                                                90                                                          90
                                                                                                85                           France                         85
The IMF lowered its global growth outlook for this year with the release of its autumn          80                                                          80
                                                                                                                                         Italy Spain
                                                                                                75                                                          75
World Economic Outlook. The downward revisions were most pronounced for the euro                   04 05          06        07   08    09 10 11 12
area, where growth expectations for 2013 were revised down from 0.7% to 0.2%. Spain is
weighing down on growth with an expected drop in GDP of 1.3% in 2013. This supports           Source: Reuters EcoWin, Danske Bank

our view that the Spanish government’s official growth forecast for 2013 of -0.5% is way
too optimistic. We expect a drop in Spanish GDP of 1.5% next year.

This week’s main release in the euro area was industrial production figures. The French
number increased 1.5% m/m in August and the Spanish and Italian figures also surprised        US exports down again in August
on the upside.                                                                                145                                                                  145
                                                                                                     USD bn                                           USD bn
                                                                                              140                                                                  140

US: Mixed bag of data                                                                         135                                                                  135

                                                                                              130                  US real exports                                 130
The news out of the US was a mixed bag and did not provide much new information.              125                                                                  125

Initial jobless claims fell much more strongly than expected to 339k (consensus 370k, last    120                                                                  120

                                                                                              115                                                                  115
369k). However, according to the Department of Labor, this was mostly due to a fall in
                                                                                              110                                                                  110
one state so the decline probably does not represent the true state of the labour market.     105                                                                  105
                                                                                                          08           09         10          11             12
The trend in claims has been down recently, though, signalling a gradual improvement of
the labour market.                                                                            Source: Reuters EcoWin, Danske Bank

The export sector saw sales decline for the second month in a row in August witnessing
the global slowdown over the summer. Real exports fell 2.6% in August following a
similar decline in July. The weakness in exports is also reflected in the ISM new export
orders index which is at a very low level.




5|   12 October 2012
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Weekly Focus




The NFIB small business index was broadly stable in September at 92.8 versus 92.9 in
August. Overall it has recovered slightly in recent months after hitting this year’s low in   US NFIB small business index
July.                                                                                         102,5
                                                                                                      Index                                                 Index
                                                                                                                                                                    102,5
                                                                                              100,0                                                                 100,0
                                                                                               97,5                   NFIB Small business optimism                   97,5
Overall we still believe the US economy will recover slightly in the coming months,
                                                                                               95,0                                                                  95,0
although growth is likely to remain moderate as the uncertainty over the ‘fiscal cliff’ is     92,5                                                                  92,5
                                                                                               90,0                                                                  90,0
weighing on spending. Next year we look for somewhat stronger growth as the
                                                                                               87,5                                                                  87,5
uncertainty fades on the other side of fiscal cliff.                                           85,0                                                                  85,0
                                                                                               82,5                                                                  82,5


China: Tensions with Japan hurt auto sales in September
                                                                                               80,0                                                                  80,0
                                                                                                       06        07        08        09    10        11     12


It has been a week with only minor releases in China: the HSBC/Markit service PMI             Source: Reuters EcoWin, Danske Bank
improved from 52.0 in August to 54.3 in September. Hence, it painted a more positive
picture than the NBS non-manufacturing PMI released in the previous week, which
showed decline from 56.3 in August to 53.7 in September. We regard the HSBC/Markit
survey as the most reliable of the two surveys, because the NBS non-manufacturing PMI
has a relatively short data history and for that reason there appears to be considerable      Service sector relatively resilient
seasonality left. The HSBC/Markit service PMI indicates that industries outside the           65
                                                                                                    Diffusion
                                                                                                                                                                      65
                                                                                                                                                     Diffusion
manufacturing sector remain relatively resilient.                                                                     HSBC service PMI
                                                                                              60                                                                      60

Seasonally adjusted passenger car sales in September declined 5.8% m/m after improving        55                                                                      55

3.4% m/m in the previous month. This is the first sign that there will be a real impact       50                                                                      50

from the current tensions between China and Japan in connection with their row over           45                                                                      45
                                                                                                                            HSBC manufacturing PMI
sovereignty of some minor islands in the East China Sea. Sales of Japanese autos in China     40                                                                      40
plunged in September with Japanese brands reporting sales declines in the 30-40% range                07         08             09        10         11      12

in China. Other non-Japanese brands have benefited substantially, but the overall impact      Source: Reuters EcoWin, Danske Bank
on auto sales has probably been negative. Although some of the Japanese autos are
produced in China, the current conflict between Japan and China is a bigger problem for
Japan than China.


Japan: Trying to draw a line in the sand on JPY                                               Auto sales in China drop as Chinese
                                                                                              consumers dump Japanese cars
In Japan the data released in the past week confirmed that GDP growth is slowing and          300                                                                   300
                                                                                                                      Domestic vehicle sales
GDP is poised to contract slightly in Q3. Seasonally adjusted domestic machinery orders       275                                                                   275
                                                                                              250             Passenger cars                                        250
declined 3.3% m/m in August; however, it should be remembered that the decline came           225                                                                   225
                                                                                              200                                               Trucks              200
on the back of solid increases in the previous two months. As expected, Japan used the
                                                                                              175                                                                   175
IMF and World Bank meeting in Tokyo to discuss the impact of the strong JPY with              150                                                                   150
                                                                                              125                                                                   125
Japan’s G-7-patners. Japan’s newly appointed finance minister, Kuriki Jojima, said that “I    100                                                                   100
firmly explained to the G-7 our deep concern over the strong yen’s negative effects on the     75                                                                    75
                                                                                                        08            09             10         11         12
economy.” In our view, Jojima has probably also explained to its G-7 counterparties that
Japan intends to intervene in the FX market again if JPY resumes its appreciation against     Source: Reuters EcoWin, Danske Bank
USD.




6|   12 October 2012
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Weekly Focus




Scandi update
Denmark – substantial increase in exports
Export figures for August revealed strong growth of 4.1% from July to August and 7.8%
over the past year. This is due primarily to demand from the US, Norway and China –            Substantial increase in exports
                                                                                               55
economies that are themselves growing. Together with slightly more encouraging figures                 DKK bn


                                                                                               50
for private consumption, the export data suggest that Denmark has a good chance of
                                                                                               45
avoiding the negative GDP growth in Q3 that would spell another technical recession.
                                                                                               40
The strong growth in exports also contributed to a healthy current account surplus in
                                                                                               35
August of DKK14.3bn. Meanwhile, inflation came out at 2.5% y/y in September, up a




                                                                                                    2005




                                                                                                                2006




                                                                                                                       2007




                                                                                                                              2008




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                                                                                                                                                      2011




                                                                                                                                                                  2012
tenth of a point on August but still well below wage growth, which was measured at 1.6%        Source: Statistics Denmark
in Q2.

Sweden – chance of a stronger economy?
Last week’s industrial data was interesting in a number of ways but mainly due to the
surprisingly strong industrial production data. Whereas all (yes, all) indicators pointed to   Unexpected divergence
a weak to very weak outcome, the index actually rose in August. Bar any mis-                   110 Index (s.a., w.d.a.)                                              110
                                                                                               105                                                                   105
measurements, this is hard to fathom given that the only reasonable explanation –              100                                                                   100
                                                                                                                          Production
                                                                                                95                                                                    95
inventory build-up – though possible, seems improbable. According to inventory data             90                                                                    90
industrial companies spent most of Q2 cutting down on inventories in response to the            85                                                                    85
                                                                                                80                                                 Orders             80
weakening outlook and we would be very surprised to see this development not only               75                                                                    75
                                                                                                70                                                                    70
halted but also reversed in Q3. It just does not rhyme with weak surveys (BCI, PMI, etc.)
                                                                                                     06      07        08    09      10             11       12
and weak demand data (exports, retail sales, etc.).
                                                                                               Source: Statistics Sweden
However, this is the data we have to work with and, according to a very preliminary take
on Q3 GDP, assuming seasonally normal developments for primary data in September,
there is quite some upside potential vis-à-vis our own and – more importantly – the
Riksbank’s forecasts. Our estimate suggests that GDP growth in Q3 could be above 1%
y/y, which is close to the Riksbank’s current forecast. This would be a surprise to all
forecasters, including the Riksbank itself, as major revisions to Q2 data were believed to
render its forecasts obsolete.

Norway – lower inflation, limited effect on rates
Core inflation came out at 1.1% y/y in September and has therefore been lower than
expected in recent months. As most analysts have noted, this would, in isolation, spell a      Moderate inflation
downward revision of Norges Bank's interest rate path when it presents its next monetary
policy report on 31 October. However, we predict less of an impact on the interest rate
path than many seem to expect. A robust assumption would seem to be a downward
revision of the inflation forecast for 2012 to 1.25%, from 1.5.% in the June monetary
policy report. Based on the calculations performed by the central bank in June, this
should, in isolation, pull the interest rate path down by around 10bp in 2013. Lower
interest rates in the outside world, a stronger krone and lower growth would also put
downward pressure on the interest rate path. However, this is counteracted by money            Source: Reuters EcoWin

market rates being 30-40bp lower than expected. Taken together, this translates into only
marginal changes in the interest rate path.




7|   12 October 2012
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Weekly Focus




EMEA Update
The numbers show that the NBP needs to cut
Somewhat surprisingly the Polish central bank (NBP) kept its key policy rate unchanged
at the Monetary Policy Council (RPP) meeting at the beginning of October. The markets
(and we) had expected a cut. The NBP did say however, that it would ease monetary
policy at the RPP meeting in November if the data continue to show a deceleration in
growth and a continued softening of inflationary pressure. We think that the
macroeconomic data due for release next week will show exactly that.

One of the reasons the NBP is reluctant to cut interest rates is that inflation is above its
official inflation target of 2.5% and it is likely that next week’s inflation data will show
that inflation has remained above target in September. We expect inflation of 3.8% y/y in
September – unchanged from August. However, looking ahead we expect a fairly sharp
deceleration in Polish inflation.

Polish industrial production has slowed somewhat this year on the back of the global
slowdown, which is weighing on Polish exports. We expect Polish industrial production
to have dropped by 2.5% y/y in September - down from +0.5% y/y in August. The
slowdown partly reflects seasonal factors but there is no doubt that the Polish
manufacturing sector is facing fairly strong headwinds.

The fairly sharp slowdown in Polish growth is having an impact on the labour market and
the trend has clearly turned negative for wages and employment. In fact, we expect
employment to have dropped 0.1% y/y in September and wage growth to be a meagre
2.5% y/y.

So, all in all, next week’s Polish data should confirm the need for monetary easing in
Poland and we expect the NBP to cut rates in November.

Turkish central bank to keep the key policy rate on hold
While we think that the key policy rate (one week repo rate) of 5.75% is likely to be kept
on hold in Turkey at next week’s Monetary Policy Committee meeting, the Turkish
central bank (TCMB) might lower further the upper end of the so-called interest-rate
corridor of borrowing costs following the 150bp cut last month. By cutting the ceiling of
the borrowing costs, the TCMB seems to be aiming to normalise the way it uses monetary
instruments. Nonetheless, there is limited opportunity to lower the key policy rate of
5.75% at the moment. With inflation hovering well above the medium-term target of 5%,
exactly at 9.2% y/y in September, and with an expected further rise in October due to tax
and price increases effective from 1 October, the room for manoeuvre to fight the
economic slump has diminished in our view. Taking into account the upside risks to
inflation and our still bearish view on the Turkish lira, we have decided to scale down our
                                                                                               Chief Analyst
expectations of the key policy rate cut and we now expect the TCMB to keep it on hold          Lars Christensen
over the next 12 months.                                                                       +45 45 12 85 30
                                                                                               larch@danskebank.dk

                                                                                               Analyst
                                                                                               Stanislava Pravdova
                                                                                               +45 45 12 80 71
                                                                                               spra@danskebank.dk




8|   12 October 2012
                                                                                               www.danskeresearch.com
Weekly Focus




Latest research from Danske Bank
10/10/12 Cross Asset Strategy: The recognition lag of a new policy framework

Fed's recent action is a regime change. We should expect a positive impact on the
markets, but so far the reaction has been muted. We argue there is a recognition lag
before Fed’s actions are fully appreciated.




9|   12 October 2012
                                                                                       www.danskeresearch.com
Weekly Focus




FX: Action in Scandies
The Swedish krona has been under pressure this week as Swedish numbers surprised
negatively. Data from the labour market showed that the number of lay-offs is rising            SEK under pressure
dramatically, inflation came in well below the current Riksbank inflation path and order
data point to a bleak future for industrial production. There is little doubt that Sweden is
now feeling the headwind from the weaker growth in the eurozone and the strong
appreciation of SEK in Q2.

All in all, the latest Swedish data support our view that the Riksbank will cut rates by yet
another 25bp at the monetary policy meeting on 25 October. This is not yet fully priced
and a further move higher in EUR/SEK is expected over the next couple of weeks and a
test of 8.80 is likely. However, when looking a couple of months ahead we believe that
                                                                                                Source: Reuters EcoWin
EUR/SEK will start to trend lower once again. The Swedish economy is stronger than the
eurozone, Sweden will still offer a positive carry compared to the eurozone and finally,
SEK is actually still undervalued if we take a purchasing power parity approach.

Despite the headwind for SEK, the Norwegian krone has performed quite well lately. It
reflects that the Norwegian economy is still very strong boosted by strong domestic
demand and booming oil investments. In fact, we have been arguing for a long time that
Norway and Sweden are on divergent monetary policy paths and the past month
underlines this. The Norwegian central bank is still saying that rates will have to go up
between December 2012 and June 2013. A view we share despite Norwegian inflation
being below the inflation path put forward by Norges Bank in its latest monetary policy
report. In our view the lower inflation is more than mitigated by a significant drop in the
Norwegian NIBOR rates. The latter will lift Norges Bank’s interest rate path more than
low inflation will lower it.

However, the daily purchase of foreign currency by Norges Bank on behalf of the
Pension Fund – Global (Petroleum fund) in November is a risk to NOK. We have often
seen that Norges Bank purchases more foreign currency in November than in other
months and when we take a look at the numbers in the new budget this might very well
also be the case this year. Hence, be careful with long NOK positions going into
November. The daily amount that Norges Bank will purchase in November will be
announced on the last trading day in October.

Finally, there has been a new move higher in EUR/DKK the past couple of weeks. It
underlines that the inflow into Danish safe-haven assets has now come to a halt.               Limited upside for EUR/DKK
EUR/DKK is now trading at a level where we would expect the Danish central bank to be
actively supporting DKK by intervention. We still believe that the Danish central bank
prefers to keep EUR/DKK slightly below the central parity at 7.46038. Hence, the upside
for EUR/DKK at this level should be very limited. We expect the Danish central bank to
act in a symmetric way. Hence, first we need a currency outflow of DKK15-20bn and
then it will hike. Bottom-line is that we are moving in that direction. The need for safe-
havens is falling day by day and eventually rates will go up in Denmark. It underlines that
the potential for EUR/DKK to go higher is limited.
                                                                                               Source: Reuters EcoWin




                                                                                               Chief analyst
                                                                                               Arne Lohmann Rasmussen
                                                                                               +45 4512 8532
                                                                                               arr@danskebank.dk




10 |   12 October 2012
                                                                                               www.danskeresearch.com
Weekly Focus




Credit: Fall(ing)
Market commentary
Despite somewhat limited newsflow we have noted a sour mood in the financial markets
during the week with credit indices drifting wider. The most important piece of news was      iTraxx Europe (investment grade)
the S&P downgrade of Spain by two notches to ‘BBB-’ on Thursday, leaving the country          250 bp



only one notch above high yield status. The outlook on the rating remains negative. The       200


downgrade of the sovereign implies that most Spanish banks will also be downgraded
                                                                                              150
soon – probably by one or two notches. Ongoing tension in Spain is the most important
driver for the debt crisis and at some stage the Spanish government is likely to ask for an   100


aid programme which would be a prerequisite for the ECB buying government bonds.
                                                                                               50

Despite the sour mood of late, we are not too concerned for the moment and expect credit
indices to range-trade for the rest of the year and cash credit to remain well bid.            0
                                                                                               May/09     Nov/09    May/10   Nov/10   May/11   Nov/11   May/12



                                                                                              Source: Bloomberg, Danske Markets
Of minor note was that the IMF published its biannual global financial stability report in
which the fund expressed a somewhat cautious view on the world. In particular,
(potential) capital flight from the eurozone was highlighted as a short-term concern if
                                                                                              iTraxx Crossover (high yield)
European policymakers fail to address the systemic nature of the European debt crisis.
                                                                                              1,200 bp

Furthermore, the IMF cut its global growth outlook.
                                                                                              1,000


The relatively weak sentiment has meant we have seen modest primary market activity.           800

From the Nordic region, Lauritzen (implied high yield issuer) was in the market with a
                                                                                               600

NOK500m transaction.
                                                                                               400


When sentiment improves, activity is likely to pick up again although the busiest weeks        200

are probably behind us.
                                                                                                 0
                                                                                                 May/09    Nov/09   May/10   Nov/10   May/11   Nov/11   May/12



                                                                                              Source: Bloomberg, Danske Markets




                                                                                              Senior Analyst
                                                                                              Henrik Arnt
                                                                                              +45 45 12 85 04
                                                                                              Henrik.arnt@danskebank.dk




11 |   12 October 2012
                                                                                              www.danskeresearch.com
Weekly Focus




Financial views
Equities
•      Global equities are still trading close to a one-year high. It has been a ‘risk-on’        Equities and US 10Y yield
       environment since June and risk/reward is currently close to being balanced. There is
       a clear risk of a short-term sell-off on a weak Q3 reporting season, renewed eurozone
       stress and clear uncertainty regarding the economic effects of the overall global policy
       mix (fiscal and monetary policy) from the start of 2013. In late August, we lowered
       our recommendation on equities to Neutral and before we can take steps to return to
       an Overweight, we need to see signs that the global economy is close to entering a
       new period of activity acceleration. For now, we recommend to overweight European
       equities, particularly Healthcare, Telecoms and Consumer Cyclicals.
                                                                                                  Source: Reuters EcoWin
Fixed income
•      The ECB has delivered, the German Court has delivered, the Fed has delivered.
       Overall, risk appetite has further to go, in our view. We see room for steeper swap        EUR/USD and USD/JPY
       curves, driven mainly from the very long end of the curves.

•      We are overweight Scandinavia versus Euroland.
Credit
•      Cash bonds remain well bid, reflecting ample liquidity and a search for yields.
       Furthermore, investment grade credit continues to benefit from offering a relatively
       safe harbour that still offers a pick-up to depressed government bond yields.

•      On the back of a strong investor bid, our base case is that further spread tightening is
                                                                                                  Source: Reuters EcoWin
       the most likely scenario for the rest of 2012. However, the spread tightening potential
       from current levels is not significant as we see it. Given the relatively steep credit
       curves, we see most value beyond three- to four-year maturities.
                                                                                                  Credit spreads
FX
•      The euro has lost some of the support it gained after the ECB and Fed meetings. In
       our view, the Fed delivered much more than expected and the ECB has removed a lot
       of tail risk from the euro. The open-ended easing by the Fed is, in our opinion, clearly
       dollar negative and we believe it is just a matter of time before EUR/USD starts to
       move higher once again. We have in the aftermath of the Fed pencilled in a 1.35 3M
       target for EUR/USD. However, there is still a lot of uncertainty about the eurozone
       crisis and low global growth indicates that the expected euro rebound might be
       somewhat bumpy and that EUR/USD will move lower over the course of 2013 once               Source: Reuters EcoWin

       again.
•      SEK has recently been under pressure due to growing expectations that the Swedish
       central bank will lower rates in October due to a significantly weaker growth outlook.     Commodity prices
       Ahead of the Riksbank announcement, we expect further upside for EUR/SEK.
       However, on the medium- to long-term horizon we still expect a stronger SEK. We
       continue to expect demand for safe havens and Sweden is still a fundamentally strong
       case relative to the euro zone. Norges Bank also sounded relatively relaxed about the
       latest NOK appreciation at the most recent monetary policy meeting. We expect a
       slightly lower EUR/NOK in 2012. EUR/DKK has recently stabilised following the
       latest move higher.

                                                                                                  Source: Reuters EcoWin




12 |    12 October 2012
                                                                                                  www.danskeresearch.com
Weekly Focus




Commodities
•      Commodities have been reluctant to gain further following the central-bank induced
       increase in early-mid September as worries over China and overproduction have
       weighed.

•      We think China is priced too negatively and with risk appetite set to stay decent a late
       Q4 rally is likely. However, 2013 is set to be weak, with not least the oil market set
       for excess supply.




13 |    12 October 2012
                                                                                                  www.danskeresearch.com
Weekly Focus




Macroeconomic forecast
       Macro forecast, Scandinavia
                                        Private    Public      Fixed     Stock        Ex-      Im-        Infla-     Unem-      Public   Public   Current
                     Year     GDP 1     cons.1     cons.1      inv.1     build.2    ports1    ports1      tion1      ploym.3   budget4   debt4     acc.4
       Denmark      2011        0.8       -0.8       -1.3       0.2        0.3        7.0       5.2           2.8      6.2      -1.8     46.6       6.6
                    2012        0.1       0.9        0.0        1.5        -0.1       1.9       2.7           2.5      6.2      -3.8     45.6       6.0
                    2013        1.2       1.1        0.7        1.2        0.1        2.5       2.6           2.0      6.4      0.3      42.8       5.7
       Sweden       2011        3.9       2.1        1.7        6.7        0.5        7.1       6.3           3.0      7.5      0.1      38.4       6.9
                    2012        1.0       1.6        0.4        3.3        -0.7       0.0       0.2           1.1      7.7      -0.4     38.6       6.6
                    2013        1.3       1.7        0.6        1.5        0.2        2.6       3.5           0.8      8.0      -1.0     39.0       6.8
       Norway       2011        2.5       2.4        1.5        6.4        0.3       -1.4       3.5           1.2      3.3      13.8     49.5        -
                    2012        3.5       3.5        1.9        8.1        -0.2      2.7        0.5           1.0      3.1      13.6     49.5        -
                    2013        3.3       3.8        2.4        8.6        -0.2      0.9        4.3           1.6      3.0      12.5     49.5        -


       Macro forecast, Euroland
                                        Private    Public      Fixed     Stock        Ex-      Im-        Infla-     Unem-      Public   Public   Current
                     Year     GDP 1     cons.1     cons.1      inv.1     build.2    ports1    ports1      tion1      ploym.3   budget4   debt4     acc.4
       Euroland     2011       1.5        0.2        -0.3       1.6        0.2        6.4       4.2           2.7     10.2      -4.1     88.0       0.1
                    2012       -0.4       -0.6       0.0        -2.9       -0.7       1.3       -1.6          2.5     11.2      -3.4     91.9       0.5
                    2013       0.5        0.0        -0.4       0.2        0.0        2.3       1.2           1.8     11.7      -3.2     92.9       0.8
       Germany      2011        3.1       1.4        1.1        8.1        -0.1       8.4       7.9           2.5      7.1      -1.0     81.2       5.1
                    2012        0.9       0.7        1.3        -2.4       0.1        2.5       1.3           2.0      6.9      -1.1     82.4       4.5
                    2013        1.4       0.6        0.7        3.0        0.0        3.5       3.1           1.8      6.9      -0.8     81.1       4.3
       France       2011        1.7       0.2        0.2        3.5        0.0        5.5       5.2           2.3      9.6      -5.2     85.8      -2.7
                    2012        0.1       -0.2       1.0        0.5        0.4        2.4       0.9           2.1     10.2      -4.7     90.8      -2.5
                    2013        0.4       0.4        0.1        0.8        -0.1       2.9       3.1           1.7     10.4      -4.0     92.8      -2.2
       Italy        2011       0.5        0.2        -0.9       -1.2       0.0        6.3       1.0           2.9      8.4      -4.1     120.1     -3.1
                    2012       -2.1       -2.9       -0.9       -7.1       -1.0       0.9       -6.5          3.0     10.6      -2.4     124.2     -2.5
                    2013       -0.3       -1.0       -0.5       0.2        0.0        3.5       2.4           2.0     11.1      -1.3     122.3     -1.5
       Spain        2011       0.4        -0.8       -0.5       -5.5       -0.6       7.6       -0.9          3.0     21.7      -8.5     68.5      -3.5
                    2012       -1.5       -2.1       -3.4       -9.1       0.5        1.2       -5.4          1.9     24.9      -7.0     84.5      -2.8
                    2013       -1.5       -1.7       -1.7       -4.3       0.0        2.5       0.7           1.7     26.4      -5.5     92.0      -0.5
       Finland      2011        2.7       2.5        0.1        4.6         -        2.6        5.7           3.4      7.8      -0.6     49.1      -1.2
                    2012        0.0       1.5        0.2        -1.0        -        -2.0       -1.0          2.9      7.7      -0.7     52.5      -1.2
                    2013        1.0       1.0        0.5        1.5         -        1.5        1.0           2.6      7.9      -0.5     54.0      -0.7


       Macro forecast, Global
                                        Private    Public      Fixed     Stock        Ex-      Im-        Infla-     Unem-      Public   Public   Current
                     Year     GDP 1     cons.1     cons.1      inv.1     build.2    ports1    ports1      tion1      ploym.3   budget4   debt4     acc.4
       USA          2011        1.8       2.5        -3.1       6.6        -0.2       6.7       4.8           3.1      8.9      -8.6      97.0     -3.1
                    2012        2.2       1.9        -2.1       9.0        0.2        4.3       3.8           2.3      8.2      -7.7     102.0     -3.3
                    2013        2.1       1.7        -1.0       6.5        0.0        7.4       5.4           1.5      7.9      -6.3     106.0     -3.3
       Japan        2011       -0.7       0.0        2.1        0.6        0.1        0.0       5.8           -0.3     4.5      -10.1    229.7      3.5
                    2012       2.3        1.6        2.1        4.4        0.0        6.2       4.7           -0.2     4.3       -9.2    235.0      2.2
                    2013       1.6        1.0        1.1        2.1         -         6.8       5.2           0.1      4.2       -8.0    240.6      2.7
       China        2011        9.2         -          -          -         -          -          -           5.4      4.3      -1.2     33.0       2.8
                    2012        7.7         -          -          -         -          -          -           2.7      4.3      -1.5     26.0       2.5
                    2013        8.6         -          -          -         -          -          -           2.9       -       -1.0     22.2       2.9
       UK           2011       0.7        -0.8       0.3        -2.0       1.1       4.2        2.0           4.5      8.5      -8.3     82.5      -2.0
                    2012       -0.2       0.3        0.5        2.0        1.3       -0.4       3.3           2.7      8.8      -8.0     88.4      -1.5
                    2013       1.2        1.0        -1.1       2.0        1.3       2.0        3.5           2.0      8.5      -6.5     91.4      -1.2
Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.




14 |   12 October 2012
                                                                                                                     www.danskeresearch.com
Weekly Focus




Financial forecast
Bond and money markets
                                      Key int.                                                                Currency     Currency            Currency
                                                 3m interest rate   2-yr swap yield   10-yr swap yield
                                       rate                                                                    vs EUR       vs USD              vs DKK
USD                          12-Oct    0.25           0.34               0.39              1.73                129.7            -                575.0
                              +3m      0.25           0.35               0.35              1.85                 135             -                 553
                              +6m      0.25           0.35               0.30              2.00                 135             -                 552
                             +12m      0.25           0.35               0.30              2.30                 130             -                 573
EUR                          12-Oct    0.75           0.21               0.47              1.75                  -           129.7               745.9
                              +3m      0.75           0.20               0.50              1.90                  -            135                746.0
                              +6m      0.75           0.20               0.50              1.95                  -            135                745.0
                             +12m      0.75           0.25               0.50              2.10                  -            130                745.0
JPY                          12-Oct    0.10           0.19               0.25              0.77                101.7         78.4                7.33
                              +3m      0.10           0.20               0.30              0.80                 110            81                6.78
                              +6m      0.10           0.20               0.30              0.90                 111            82                6.71
                             +12m      0.10           0.20               0.30              1.05                 108            83                6.90
GBP                          12-Oct    0.50           0.54               0.66              1.85                80.9          160.4               922.4
                              +3m      0.50           0.65               0.80              2.10                85.0           159                 878
                              +6m      0.50           0.65               0.80              2.20                85.0           159                 876
                             +12m      0.50           0.65               0.85              2.40                82.0           159                 909
CHF                          12-Oct    0.00           0.04               0.08              0.91                121.0         93.3                616.6
                              +3m      0.00           0.05               0.15              1.05                 124            92                 602
                              +6m      0.00           0.05               0.15              1.10                 122            90                 611
                             +12m      0.00           0.05               0.20              1.20                 120            92                 621
DKK                          12-Oct    0.20           0.34               0.68              1.88                745.9         575.0                 -
                              +3m      0.30           0.35               0.65              2.00                 746           553                  -
                              +6m      0.40           0.45               0.70              2.10                 745           552                  -
                             +12m      0.40           0.50               0.75              2.25                 745           573                  -
SEK                          12-Oct    1.25           1.51               1.28              2.05                865.8         667.5               86.1
                              +3m      1.00           1.60               1.45              2.20                 850           630                87.8
                              +6m      1.00           1.50               1.30              2.10                 840           622                88.7
                             +12m      1.00           1.50               1.50              2.30                 840           646                88.7
NOK                          12-Oct    1.50           1.95               2.15              3.16                738.6         569.4               101.0
                              +3m      1.50           2.05               2.25              3.20                 735           544                101.5
                              +6m      1.75           2.10               2.35              3.50                 730           541                102.1
                             +12m      2.00           2.30               2.45              3.60                 725           558                102.8

Equity markets
                                                                                        Risk profile      Price trend      Price trend     Regional recommen-
                                                                                           3 mth.           3 mth.           12 mth.             dations
Regional
USA                                              Relatively expensive                     Medium          -5% to +5%        5%-10%            Underweight
Emerging markets (USD)                           Awaiting Chinese recovery                Medium          -5% to +5%        5%-10%              Neutral
Europe (ex. Nordics) (EUR)                       Euro area crisis to abate                 High           -5% to +5%       10%-15%             Overweight
Nordics                                          Strong macro balances                    Medium          -5% to +5%        5%-10%              Neutral

Commodities
                                                              2012                                     2013                              Average
                                      12-Oct        Q1       Q2        Q3       Q4       Q1       Q2        Q3       Q4      2012                   2013
NYMEX WTI                                92        103       93        94       94       94       94        92       94        96                     94
ICE Brent                               115        118      109       110      108      106      104       100      100       111                    103
Copper                                 8,240      8,329    7,829     7,700    7,900    8,000    8,100     8,200    8,300     7,940                  8,150
Zinc                                   1,967      2,042    1,932     1,850    1,875    1,865    1,855     1,845    1,835     1,925                  1,850
Nickel                                17,725     19,709   17,211    16,500   16,750   16,850   16,950    17,050   17,150    17,542                 17,000
Steel                                   351        522      457       380      375      370      365       360      355       489                    363
Aluminium                              2,016      2,219    2,019     1,925    1,950    1,940    1,930     1,920    1,910     2,028                  1,925
Gold                                   1,768      1,690    1,612     1,650    1,675    1,700    1,725     1,750    1,775     1,657                  1,738
Matif Mill Wheat                        262        210      212       250      245      235      225       215      205       229                    220
CBOT Wheat                              878        643      641       850      800      761      723       691      659       734                    708
CBOT Corn                               768        641      618       775      765      755      745       735      725       700                    740
CBOT Soybeans                          1,535      1,272    1,426     1,600    1,575    1,525    1,475     1,425    1,375     1,468                  1,450

Source: Danske Markets




15 |   12 October 2012
                                                                                                                   www.danskeresearch.com
Weekly Focus




Calendar
Key Data and Events in Week 42

Monday, October 15, 2012                                                                       Period      Danske Bank    Consensus     Previous
        -       CNY      Trade balance (Saturday 13 Oct)                         USD bn         Sep           19.50         20.67        26.66
        -       CNY      Exports (Saturday 13 Oct)                                 y/y          Sep           4.9%          5.1%          2.7%
        -       CNY      Imports (Saturday 13 Oct)                                 y/y          Sep           3.2%          2.5%         -2.6%
        -       OTH      ASEM finance ministers' meeting
        -       OTH      Earnings: Citigroup
        -       EUR      Portuguese 2013 government budget proposal
        -       USD      US Treasury Department scheduled to release bi-annual report on possible currency manipulation
       1:01     GBP      Rightmove House Prices                                 m/m|y/y         Oct                                    -0.6%|0.7%
       3:20     JPY      BoJ Deputy Governor Yamaguchi speaks
       3:30     CNY      CPI                                                       y/y          Sep           1.9%          1.9%          2.0%
       3:30     CNY      PPI                                                       y/y          Sep                         -3.5%        -3.5%
       6:30     JPY      Industrial production, final                           m/m|y/y         Aug                                    -1.3%|-4.3%
       9:00     DKK      Wholesale prices                                       m/m|y/y         Sep                                    1.6%|3.2%
       9:15     CHF      Producer & Import prices                               m/m|y/y         Sep                                    0.5%|-0.1%
   10:00        NOK      Trade balance                                           NOK bn         Sep                                       33.8
   10:30         ITL     General government debt                                 EUR bn         Aug                                      1967.5
   14:00        USD      Fed's Dudley (voter, dove) speaks
   14:30        USD      Empire manufacturing PMI                                 m/m           Oct           -3.00         -4.80        -10.41
   14:30        USD      Retail sales                                             m/m           Sep           0.8%          0.7%          0.9%
   14:30        USD      Retail sales less autos                                  m/m           Sep           0.7%          0.6%          0.8%
   14:30        USD      Retail sales less autos and gas                          m/m           Sep           0.4%          0.4%          0.1%
   18:45        USD      Fed's Lacker (voter, hawk) speaks
   19:10        USD      Fed's Bullard (non-voter, neutral) speaks
   23:45        NZD      CPI                                                     q/q|y/y     3rd quarter                  0.5%|1.0%    0.3%|1.0%


Tuesday, October 16, 2012                                                                      Period      Danske Bank    Consensus     Previous
        -       OTH      Earnings: Coca-Cola, Goldman Sachs, Intel
       2:30     USD      Fed's Willams (voter, neutral) speaks
   10:30        GBP      PPI - Input                                            m/m|y/y         Sep                       0.5%|-0.5%   2.0%|1.4%
   10:30        GBP      PPI - Output                                           m/m|y/y         Sep                       0.3%|2.2%    0.5%|2.2%
   10:30        GBP      CPI                                                    m/m|y/y         Sep                       0.4%|2.3%    0.5%|2.5%
   11:00        EUR      CPI - core                                                y/y          Sep                                       1.5%
   11:00        EUR      CPI                                                    m/m|y/y         Sep         0.7%|2.6%     0.8%|2.7%    0.4%|2.7%
   11:00        EUR      Trade balance                                           EUR bn         Aug                                       7.9
   11:00        DEM      ZEW economic sentiment                                   Index         Oct            -12          -15.0         -18.2
   11:00        DEM      ZEW current situation                                    Index         Oct            13           11.0          12.6
   11:15        EUR      ECB announces allotment in 7-day (MRO)
   13:00        EUR      ECB announces allotment in 7-day term deposits
   14:30        USD      CPI                                                    m/m|y/y         Sep         0.4%|1.8%     0.5%|1.8%    0.6%|1.7%
   14:30        USD      CPI ex. food & energy                                  m/m|y/y         Sep         0.2%|2.0%     0.2%|2.0%    0.1%|1.9%
   15:15        USD      Industrial production                                    m/m           Sep           0.0%          0.2%         -1.2%
   15:15        USD      Capacity utilization                                                   Sep                         78.3%        78.2%
   16:00        USD      NAHB Housing Market Index                                Index         Oct                          41            40
Source: Danske Markets




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Weekly Focus




Calendar - continued

Wednesday, October 17, 2012                                                                     Period      Danske Bank   Consensus    Previous
        -       OTH      Earnings: SKF, Bank of America, American Express, IBM
   10:30        GBP      Minutes from MPC meeting
   10:30        GBP      Jobless Claims Change                                     1,000         Sep                        -3.0         -15.0
   10:30        GBP      ILO Unemployment rate                                       %           Aug                        8.1%         8.1%
   10:30        GBP      Average Earnings                                         3Ms/YoY        Aug                        1.6%         1.5%
   13:00        USD      MBA Mortgage Applications
   14:30        USD      Housing starts                                          1000 (m/m)      Sep           785          770          750
   14:30        USD      Building Permits                                        1000 (m/m)      Sep           805          810          803


Thursday, October 18, 2012                                                                      Period      Danske Bank   Consensus    Previous
        -       EUR      European Council meeting
        -       ESP      House price index                                         q/q|y/y    3rd quarter     -2.0%|…                 -2.5%|-8.3%
        -       OTH      Earnings: Nokia, Google, Microsoft
       3:30     CNY      Property prices                                                         Sep
       4:00     CNY      Industrial production                                       y/y         Sep           8.8%         9.0%         8.9%
       4:00     CNY      Fixed assets investments                                    y/y         Sep                       20.2%        20.2%
       4:00     CNY      GDP                                                       q/q|y/y    3rd quarter    1.8%|7.4%    2.0%|7.4%   1.8%|7.6%
       4:00     CNY      Retail sales value                                          y/y         Sep                       13.2%        13.2%
       8:00     CHF      Trade balance                                            CHF bn.        Sep                                     1.73
       9:30     SEK      Unemployment                                                %           Sep           7.3%                      7.2%
   10:30        GBP      Retail Sales                                             m/m|y/y        Sep                       …|2.2%     -0.2%|2.7%
   14:30        USD      Initial jobless claims                                    1000                                                  367
   16:00        USD      Philly Fed manufacturing PMI                               Index        Oct            1.0          0.0         -1.9


Friday, October 19, 2012                                                                        Period      Danske Bank   Consensus    Previous
        -       OTH      Earnings: Fortum, General Electric, McDonald's, Morgan Stanley
       6:30     JPY      All Industry Activity Index                                m/m          Aug                        0.1%        -0.6%
       7:00     JPY      Leading economic Index, final                             Index         Aug                                     93.6
   10:00        EUR      Current account                                           EUR bn        Aug                                     9.7
   10:30        GBP      Public Finances (PSNCR)                                   GBP bn        Sep                                     -9.6
   14:30        CAD      CPI                                                        m/m          Sep                        0.3%         0.4%
   16:00        USD      Leading indicator                                                       Sep                        0.1%        -0.1%
   16:00        USD      Existing home sales                                         m           Sep           4.75         4.70         4.82


During the week                                                                                 Period      Danske Bank   Consensus    Previous
Fri 12 - 15     CNY      Money supply M2                                            y/y          Sep                       13.7%        13.5%
Sun 14 - 18     CNY      Actual FDI                                                 y/y          Sep                        -3.5%       -1.4%

The editors do not guarantee the accurateness of figures, hours or dates stated above
For furher information, call (+45 ) 45 12 85 22.

Source: Danske Markets




17 |    12 October 2012
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Weekly Focus




Disclosure
This research report has been prepared by Danske Reseach, a division of Danske Bank A/S ("Danske Bank"). The
authors of the research report are Allan von Mehren, Chief Analyst and Steen Bocian, Chief Economist.

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Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis
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limitation any loss of profits, arising from reliance on this research report.




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Weekly Focus




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