JUL 07 DanskeDaily

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Investment Research — General Market Conditions 7 July 2010 Danske Daily Key news US non-manufacturing ISM declines more than expected. US stocks advance slightly, but treasury yields and the dollar decline. Mixed stock market session in Asia, most markets are in negative territory. No major market movers today, but watch out for final Q1 GDP numbers out of the euro area and German factory orders. Market overview 07:30 S&P500 (clo se) S&P500 fut (chng fro m clo se) Nikkei Hang Seng 17:00 US 2y
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   www.danskeresearch.com Investment Research — General Market Conditions Key news US non-manufacturing ISM declines more than expected.US stocks advance slightly, but treasury yields and the dollar decline.Mixed stock market session in Asia, most markets are in negative territory. Markets Overnight June US non-manufacturing ISM declined more than expected from 55.4 to 53.8 inMay and new orders dropped below 50, implying that US growth is set to slow somewhatduring H2 10.Even though the ISM reading led to underperformance in US stocks versus Europeanones, it was not enough to send US stocks into negative territory. Hence, US stocksgained around 0.5% yesterday with the S&P500 rising from a 10-month low to 1028ahead of the Q2 earnings report season, which starts next week. US treasuries rose in yesterday’s trading session, pushing 10-year yields towards theirlowest levels this year. Further, US two-year notes traded near a record low. US yieldshave been stable overnight.The recent weakening of US data is certainly being felt in currency markets , where therecent decline in EUR/USD is replaced by a strong move in the opposite direction.Yesterday the dollar fell to a six-week low against the euro, and it declined versus mostmajor currencies. Meanwhile, Australia’s dollar rose against most currencies as thenation ’s central bank said business investment is set to expand. Most FX crosses havebeen stable overnight including the scandies.No major news out of  Asia this morning. The stock market sessions have been somewhatmixed and most indices are falling this morning  –  probably driven by the ISM non-manufacturing. 7 July 2010 Senior Analyst  Lars Tranberg Rasmussen+45 4512 8534 laras@danskebank.dk Market movers today: No major market movers today,but watch out for final Q1 GDPnumbers out of the euro area andGerman factory orders. Market overview Note: * The iTraxx Europe Index shows the spread development for the most liquid investment grade CDS contracts in the euro credit market.**The iTraxx Europe Crossover shows the spread development of the most liquid non-investment gradeCDS contracts in the euro credit market  .   Source: Bloomberg Danske Daily 07:301 day +/-,%S&P500 (close) 1028.1  0.54S&P500 fut (chng from close) 1019.2  -0.49Nikkei9243.9  -1.01Hang Seng19839.6  -1.2217:0007:30+/-, bpUS 2y gov0.630.61  -1.6US 10y gov2.962.93  -3.0 iTraxx Europe (IG)120125  5.3 iTraxx Xover (Non IG)476564  88+/-, %EUR/USD1.2651.259  -0.47USD/JPY87.45087.440  -0.01EUR/CHF1.341.34  -0.03EUR/GBP0.8310.832  0.06EUR/SEK9.5999.603  0.04EUR/NOK8.048.08  0.46USDOil Brent, USD72.971.6  -1.86Gold, USD1192.81190.2  -0.22    2 | 7 July 2010 www.danskeresearch.com Danske Daily Global Daily Focus today: There are no big market movers today. German factory orders (12:00 CET)may attract a little attention if it deviates strongly from consensus. It has been rising for10 of the past 12 months and points to clear improvement in German industry. There issome risk, though, that we could see some correction lower in May as other indicatorshave pointed to some slowing in orders. Also look out for revised Euroland GDP numbers(11:00 CET) as we see a chance of an upward revision. GDP has generally been muchweaker than suggested by, for example, industrial production and PMI. Otherwise, themarkets will increasingly look ahead for the ECB meeting tomorrow  –  see FlashComment - ECB preview: Don ’  t expect too much .  Fixed income markets : Risk appetite continues to drive the overall direction of markets.The decline in US yields still looks a bit excessive to us but a turn in risk appetite is aprerequisite for yields turning. In the euro area , the ECB’ s weekly auction resulted in lessexcess liquidity and contributed to some upward pressure on eonia rates and euro bondyields. The decline in excess liquidity and much shorter duration on the banks ’ liquidityhas led to a substantial flattening of the yield curve as two-year yields have been pushedhigher while 10-year yields has been pushed lower by the decline in US 10-year yields.The market will focus on the ECB meeting tomorrow and awaits the upcoming earningsseason which will set the tone for equity markets  –  and hence also the bond market.Germany auctions EUR5bn 10-year bonds today. FX markets : EUR/USD continues higher, breaking above 1.26 yesterday for a 1.2662high. The upward pressure on the pair is probably related to: (i) profit-taking (stop-losses)on short speculative EUR positions, which are likely to have been significant according toIMM data; (ii) disappointing US economic data, which has led a widening of the EUR-USD interest rate spread (2Y swap spread by more than 40bp since late May); and (iii) aslightly reduced risk premium on the euro, with positive indications on theimplementation of the Greek austerity measures as the latest relief. We believe theupward pressure on EUR/USD can be sustained in the very short term; the next keytechnical resistance levels are found at 1.2673 and 1.2740  –  support at 1.2470. Scandi Daily Sweden : The Swedish National Debt Office will publish its monthly outcome for publicfinances today. The SNDO forecast a June deficit of SEK18.9bn and we see no strongarguments against that forecast. However, we note that the SNDO continues to putforward cautious estimates of government borrowing needs, despite becoming ever moreoptimistic on the Swedish economy. Norway: Norwegian manufacturing production covering May is due to be released today.   Key figures and events Period Danske Bank  Consensus  Previous 8:45 FRF Trade Balance EUR bn. May -4.210:00 NOK Manufacturing Production m/m|y/y May 0.5%|.. 0.2%|3.0%11:00 EUR GDP, s.a. - Final q/q|y/y 1st quarter 0.2%|0.6% 0.2%|0.6% 0.2%|0.6%12:00 DEM Factory Orders m/m|y/y May 0.4%|24.9% 2.8%|29.6%13:00 USD MBA Mortgage applications 8.8%16:00 CAD Ivey PMI index Jun 64.0  62.721:35 USD Fed's Kocherlakota (non-voter, neutral) speaks Wednesday, July 7, 2010   German factory orders in strongturnaround Source: Reuters Ecowin US S&P500 future Source: Danske Markets US 10y gov yield Source: Danske Markets Scandi FX Source: Danske Markets Global FX Source: Danske Markets 00010203040506070809758595105115125758595105115125 IndexIndexGerman manufacturing orders 1004101410241034104410541064107410041014102410341044105410641074Mon Tue Wed Fri Mon Wed2.832.933.033.132.832.933.033.13Mon Tue Wed Thu Mon Wed7.887.948.008.068.129.499.549.599.64Mon Tue Thu Fri Mon Wed EUR/SEK (LHS) EUR/NOK (RHS) 8787.888.689.41.2151.2351.2551.275Mon Tue Thu Fri Mon Wed EUR/USD (LHS) USD/JPY (RHS)    3 | 7 July 2010 www.danskeresearch.com Danske Daily Today’s market data: 07 July 2010 +/-  DJSTOXX50  Max2.3Max3.6 OMXC20  Min-0.6Min0.0 OMXS30  0.80.9 OSE BX  +/-DOW JONES  NASDAQ  1month  1month  S&P500  Year-to-date  Year-to-date  NIKKEI (07:30)  EUR  +/-  USD  -0.59JPY  -0.52 1day   Max## GBP  0.05 1month    Min## NOK  3.68 Year-t-date   0.4 SEK  0.39DKK  0.01PLN  0.91 USD  +/-  JPY  -0.01 1day    1month  GBP  -0.78 1month   Year-to-date  CHF  0.46 Year-t-date    +/-, bp  USD USD 10Y  -3 Max0.7Max3.0 EUR USD 30Y  -2 Min0.6Min2.9 GBP JPY 10Y  1 00 DKKSEK +/-, bp  NOK DEM 10Y  3PLN DKK 10Y  2SEK 10Y  4NOK 10Y  0PLN 10Y  -8 * As of closing previous trading day ## Max0.000 ## Max### ## Min-2.620 ## Min### +/-  USD 10Y  1Europe (IG)  -2  -10 JPY 10Y  -1HiVol  -3  -17Xover (N-IG)  -5  -61 +/-  EUR 10Y  -1DKK 10Y  -1  -5  -41 SEK 10Y  0Finan. Sub.  -7  -59 NOK 10Y  2Non-finan.  -7  -59 * As of closing previous trading day* Ask price** Ask price Source: Bloomberg 7:30(-1) og 17:00 refers to the previous (trade) day  2.6%-2.1%974410282.9%0.0%0.6%0.1%-0.6%6.64 Close  23482.6%-9.2%401209410090.5% Close  -17.340.53 Policy Rate 105.76 USD2YUSD10Y 0.25 3M 71.57 07:30  337 STOCKS -7.8%92442.6% FX & COMMODITIES 28106.22 17:0007:30  87.45152.13 151.3587.44 Spread,bp 07:30 17:00  110.59 110.07745.32807.55411.14410.23745.311190.1583.12959.91 07:30  960.30 Gold, $ 473.390.12-0.55-2.48 Industrials -6.36 CRB1M futureRB, Raw -20126.4693.20-50.10803.87125.873.892.93253.8083.17-0.74 17:00  2.96-10.10-0.68-2.51-29.58 07:30  4.82 YIELDS & INTEREST RATES 2.602.560.803.911.141.140.73 17:00  2.59 07:30(-1)*  58 07:30  Swap Spread, bp** 3.562.692.682.643.565.8430362.773.74245.927Finan. Sr.1month149 07:30  5647 07:30(-1)*  187 17:00  1251.051.121.000.500.830.25723 Credit spread, iTraxx 1day773.502.00836 17:00  30633 Oil,Brent, $ 573222522559 0.34-1.450.760.371.480.000.050.973.26-2.0-1.00.01.02.03.04.0-2.0-1.00.01.02.03.04.0USDJPYGBPFRFITLDKKSEKNOKPLN 10Y Yield Spread to Germany   -2.6-2.1-1.6-1.1-0.6-0.10.00.51.01.52.02.53.03.54.0USD2YUSD5YUSD10Y US Yield Curve D-t-D +/-, bp (right axis)07:30 (left axis)1 month ago (left axis)0.00.51.01.52.02.53.00.00.51.01.52.02.53.0DEM2YDEM5YRDEM10Y German Yield Curve D-t-D +/-, bp (right axis)07:30 (left axis)1 month ago (left axis)-0.600.201.001.80-0.600.201.001.8015161718192021 S&P500 Intraday, % Grey line indicates closing of Danish markets 00.91.82.73.6 0.000.901.802.703.6009101112131415161718 Eurostoxx Intraday, % Grey line indicates opening of US markets 2.912.942.973.000.590.610.630.650710131619220104 USD-Yields Intraday USD2Y (lhs)USD10Y (rhs)125.3125.7126.1126.5125.3125.7126.1126.50710131619220104 EUR/USD Intraday 0100200300400500600700800900020406080100120140160JulAugOctNovJanFebAprMayJul Credit spreads  iTraxx Europe (IG) (left axis) iTraxx Xover (Non IG) (right axis)    4 | 7 July 2010 www.danskeresearch.com Danske Daily Disclosure This research report has been prepared by Danske Research, which is part of Danske Markets, a division of Danske Bank. Danske Bank is under supervision by the Danish Financial Supervisory AuthorityDanske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in the DanskeBank Research Policy. Employees within the Danske Bank Research Departments have been instructed that anyrequest that might impair the objectivity and independence of research shall be referred to Research Managementand to the Compliance Officer. Danske Bank Research departments are organised independently from and do notreport to other Danske Bank business areas. Research analysts are remunerated in part based on the over-allprofitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or otherremuneration linked to specific corporate finance or debt capital transactions. Danske Bank research reports are prepared in accordance with the Danish Society of Investment Professionals’ Ethical rules and the Recommendations of the Danish Securities Dealers Association. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodologyas well as publicly available statistics for each individual security, issuer and/or country. Documentation can beobtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysisof relevant assumptions, are stated throughout the text. Expected updates This publication is updated on a daily basis. First date of publication Please see the front page of this research report for the first date of publication. Disclaimer This publication has been prepared by Danske Markets for information purposes only. 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