1. finance
2. investing
3. stocks

Investment Research — General Market Conditions
12 January 2015
Danske Daily
Market movers today




In the US the Fed will release its Labour Market Conditions Index (LMCI) for
December based on data from Friday’s labour market report. According to the LMCI
indicator the improvement in the labour market slowed in both October and
November and in November improved at its slowest pace since January 2014. Hence,
the continued decline in LMCI suggests that there remains considerable slack in the
labour market despite strong payroll gains and continued decline in the
unemployment rate.
A couple of central bank speeches in the calendar. Atlanta Fed president Dennis
Lockhart (voter, neutral) will speak about the US economic outlook at 18:40 CET. At
19:00 CET ECB governing council member Ewald Nowotny will speak about 2015
monetary policy in Vienna.
The most important events this week are the EU Court of Justice’s non-binding ruling
on the legality of ECB’s OMT-programme on Wednesday and retail sales and
consumer prices in the US on Wednesday and Friday, respectively.
Inflation in Denmark. For more on Scandi markets see page 2.
Selected market news
The big event on Friday was the December employment report that showed a very solid
job growth of 252,000 and positive net revisions to the figures of the two previous
months of 50,000. The unemployment rate fell to 5.6%, as the labour force declined by
273,000 and as household employment increased by 111,000. Despite the solid gain in
employment, wage inflation continued to be very modest, as hourly earnings decreased
0.2% m/m in December and as November earnings were revised down to 0.2%, from
0.4%. Hence, despite the solid job growth, the Fed seems in no hurry to hike rates as the
limited wage pressure leaves the Fed room to be patient. The bond market took its clue
from the modest wage inflation and 10y treasury yields dropped once again below 2.0%.
The US stock market also ended the session lower, especially as the market adopted the
bearish sentiment from the European session. European equity markets came under
pressure, as Bloomberg claimed to know that the governing council had been presented
with a model in which the ECB buys as much as EUR500bn in investment grade assets. If
the story is correct, it would be in the low end of expectations and it is questionable
whether the ECB balance sheet can be boosted as much as intended by the ECB. The
‘investment grade’ focus leaves Greece out of any purchases, whereas Portuguese
government bonds should be accepted, as Portugal has one investment grade rating
(DBRS).
Market expectations are very high that the ECB will announce a QE-programme on 22
January. However, keep an eye on the European Court of Justice’s opinion on the OMTprogramme on Wednesday and comments from ECB members like the one from
Germany’s Lautenschläger over the weekend, where she once again argued against asset
purchases.
Important disclosures and certifications are contained from page 5 of this report.
Market overview
07:30
S&P500 (close)
S&P500 fut (chng from close)
Nikkei
Hang Seng
2044.8
2033.6
17197.7
23961.6
1 day +/-,%




17:00
07:30
US 2y gov
US 10y gov
0.55
1.96
0.56
1.94

iTraxx Europe (IG)
iTraxx Xover (Non IG)
63
346
64
348

1.184
118.600
1.20
0.781
9.509
9.05
1.187
118.190
1.20
0.782
9.545
9.07

49.4
1218.3
49.4
1229.8

EUR/USD
USD/JPY
EUR/CHF
EUR/GBP
EUR/SEK
EUR/NOK
Oil Brent, USD
Gold, USD
-0.84
-0.08
0.18
0.17
+/-, bp
1.2
-1.7

0.4
1.7







+/-, %
0.23
-0.35
0.02
0.13
0.38
0.22
USD
-0.08
0.94
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 show the spread
development of the most liquid non-investment grade
CDS contracts in the euro credit market.
***The Markit CDX North America Investment Grade
Index shows the spread development for the most
liquid investment grade CDS contracts in the US credit
market.
Source: Bloomberg
Selected readings from Danske Bank
 US: solid job growth but no
inflation, 9 January 2015
 Weekly Focus, 9 January 2015
 Rotation of FOMC voting rights, 9
January 2015
Chief Analyst
Arne Lohmann Rasmussen
+45 45 12 85 32
arr@danskebank.dk
www.danskeresearch.com
Today’

[Tex
Danske Daily
Scandi markets
Denmark. Fuel prices dragged down Danish inflation in December but there are no
indications that other energy prices fell. Large movements in fuel prices mean large
uncertainties, as we do not know exactly which days prices were sampled. We are also
expecting some negative impact from clothes and book prices that were unusually high in
November. Food prices seem to remain under pressure but, on the other hand, were
unusually high in Germany in December. It is highly likely that CPI inflation is below
zero y/y in January but unlike in the euro area, there are some fairly strong base effects,
which should pull inflation back up above zero during the spring.
US S&P500 future
2066
2066
2046
2046
2026
2026
2006
2006
1986
1986
Fri
Mon
Tue
Wed
Thu
Mon
Source: Bloomberg, Danske Bank Markets
Fixed income markets
Although US job creation appears solid overall, there are also signs of slack as there is
limited wage pressure. Last Friday’s US job report created more downward pressure on
US rates. We still prefer a sidelined approach and to let the rally continue until we see
stabilisation, before we enter short positions.
This week’s main event will the opinion on the OMT from the European Court of Justice
on Wednesday. The Greek election is also moving closer but with SYRIZA and Germany
indicating that they are willing to reach a compromise, the ‘Grexit’ risk is diminishing, at
least for now. This should contribute to a more positive sentiment about Greek assets,
which in turn should bring relief to periphery markets.
We have a dense issuance calendar this week with gross issuance of more than EUR25bn.
New benchmarks will be launched from the Netherlands, Germany and possibly the
EFSF. Austria and Spain are both set to have tap auctions. Large coupons and
redemptions out of France and the Netherlands imply a small positive cash flow this
week, despite the high supply.
High volatility prevailed in the government bond market in the first full week of 2015. If
the reduced market liquidity is a consequence of the regulatory changes, it is likely that
market participants just have to get used to this new regime.
US 10y gov yield
2.24
2.24
2.14
2.14
2.04
2.04
1.94
1.94
1.84
1.84
Thu
Mon
Tue
Wed
Thu
Fri
Source: Bloomberg, Danske Bank Markets
Global FX
EUR/USD (LHS)
USD/JPY (RHS)
1.215
120.8
119.9
1.195
119
1.175
Thu
118.1
Mon
Tue
Wed
Fri
Mon
Source: Bloomberg, Danske Bank Markets
FX markets
Despite the strong US payrolls on Friday afternoon the dollar index ended the day lower,
as worries over weak earnings grabbed markets following the initial cheer; EUR/USD
closed above 1.18, thus highlighting that the FX market remains alert to the fact that the
Fed will most likely have to move very slowly on rate hikes. This came after a fourth
consecutive week in which speculators added to EUR shorts (according to IMM data),
underlining that while the single currency certainly seems soft for now due to a range of
political risks, there are already a lot of EUR bears out there. Fitch's downgrade of Russia
on Friday should, however, ensure that risks to the euro zone from this side will stay
around for now and hence keep both the EUR and RUB under pressure. In the Scandi
sphere the SEK could remain soft ahead of Tuesday's CPI report, whereas the NOK
should stay focused on oil-price moves. Brent crude oil dipped briefly below USD49/bbl
on Friday and a stabilisation in the oil price will most likely be a prerequisite for EUR,
RUB and NOK alike to shrug off recent weakness.
2|
12 January 2015
Scandi FX
EUR/SEK (LHS)
EUR/NOK (RHS) 9.32
9.53
9.23
9.48
9.14
9.43
9.05
9.38
Thu
8.96
Mon
Tue
Thu
Fri
Source: Bloomberg, Danske Bank Markets
www.danskeresearch.com
Danske Daily
Key figures and events
Monday, January 12, 2015
9:00
DKK
CPI
9:00
CHF
Centralbank - press briefing
9:30
SEK
Budget balance
16:00
USD
Fed's LMCI
18:40
USD
Fed's Lockhart (voter, neutral) speaks
Period
Danske Bank
m/m|y/y
Dec
-0.30%|0.20%
SEK bn
Dec
11
m/m
Dec
2.9%
Consensus
Previous
-0.20%|0.50%
Source: Bloomberg, Danske Bank Markets
3|
12 January 2015
www.danskeresearch.com
Danske Daily
Today’s market data: 12 January 2015
STOCKS
S&P500 Intraday, %
0.30
0.30
0.10
-0.10
-0.10
-0.60
-0.50
-1.30
-0.90
-2.00
-1.30
-2.70
Max
Min
-0.50
0.3
-1.3
0.4
-0.90
Eurostoxx Intraday, %
Max
Min
0.1
Close
-0.6
0.1
-2.7
0.7
-1.3
+/-
DJSTOXX50
2955

-1.8%
OMXC20
OMXS30
753
1444


0.1%
-0.8%
OSE BX
580

0.1%
-2
Close
-1.30
15
16
17
18
19
20
Grey line indicates closing of Danish markets
21
10
11
12
13
14
15
16
17
18
Grey line indicates opening of US markets

1 month
Year-to-date
-2.7
09
2.1%
-0.7%


1 month
Year-to-date
1.6%
-1.6%

+/-
DOW JONES
17737

-1.0%
NASDAQ
4704

-0.7%
S&P500
NIKKEI (07:30)
2045
17198

-0.8%
-1.8%

FX & COMMODITIES
EUR/USD Intraday
118.7
EUR
USD
Max
Min
118.3
119
118
0.4
117.9
117.5
07:30
118.66

+/0.27 07:30
JPY
140.41
140.24

-0.17 1 day

7.26

-0.71
118.3
GBP
NOK
78.13
905.07
78.23
907.09

0.10 1 month
2.02 Year-t-date

7.28
44.92

-12.45
-7.93
117.9
SEK
950.89
954.48
DKK
743.92
743.91 
427.17 
PLN
USD
117.5
07
10
13 16
19 22 01
04


1 month
Year-to-date
Oil, Brent,
$
49.40
17:00
118.39
118.7
-5.96
-2.32
426.67
17:00


Gold, $
1229.78


3.59
-0.01
0.50
+/07:30
07:30
JPY
118.60
118.19

-0.41 1 day

GBP
CHF
151.53
101.44
151.68
101.22


0.15 1 month
-0.22 Year-t-date


CRB
CRB, Raw
1M future
225.57
Industrials
490.27
-0.31 


0.03
-18.18
-4.39
-10.73
-1.84
* The chart plo ts 07:30 - 23:00 Fri and 23:00 Sun to 07:30 M o n
YIELDS & INTEREST RATES
USD-Yields Intraday
USD2Y
Max
0.6
0.59Min
0.5
0
USD10Y
Max
2.0
Min
1.9
0
0.62
0.56
2.02
1.99
1.96
0.53
1.93
07
10
13
16
19
22
USD2Y (lhs)
01
04
Policy Rate
3M
Spread,
bp
17:00
07:30
USD
EUR
0.25
0.05
0.25
0.07
0
2
USD 10Y
USD 30Y
1.96
2.56
1.94
2.53


-2
-3
GBP
DKK
SEK
0.50
0.20
0.00
0.56
0.29
0.26
6
9
26
JPY 10Y
0.29
0.28

-2
07:30(-1)*
17:00
NOK
PLN
1.25
2.00
1.42
1.95
17
-5
DEM 10Y
DKK 10Y
SEK 10Y
0.50
0.81
0.86
0.48
0.75
0.82



-2
-6
-3
NOK 10Y
1.48
1.48

0
PLN 10Y
2.31
2.33

2
USD10Y (rhs)
10Y Yield Spread to Germany
1.84 2.0
1.5
1.45
1.39
0.99
1.0
0.29
0.0
0.5
USD JPY GBP FRF ITL DKK SEK NOKPLN
-0.5
-1.3
2.0
-2.3
1.0
0.270.34
-0.21
0.5
0.0
0.0
-3.3
3.00 Max
0.00 Min
USD2Y
Europe (IG)
HiVol
Xover (N-IG)
64
68
348
-7.3
USD10Y
USD5Y
-0.1
-0.3
-0.5
1.00 Max
0.00 Min
1 month

0

-1

-14
72

0

6
Finan. Sub.
Non-finan.
161

0

13
90
80
70
60
50
40
30
20
10
0
Feb Apr May
Jul Aug Oct Nov Jan
iTraxx Europe (IG) (left axis)
iTraxx Xover (Non IG) (right axis)
-0.7
-0.9
DEM2Y
-1.3
DEM10Y
DEM5YR
D-t-D +/-, bp (right axis)
07:30 (left axis)
1 month ago (left axis)
Swap Spread, bp* *
450
400
350
300
250
200
150
100
50
0
Jan
0.000
-1.300
-1.1
Credit spreads
Finan. Sr.
* Ask pric e
-5.3
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
D-t-D +/-, bp (right axis)
07:30 (left axis)
1 month ago (left axis)
Credit spread, iT raxx s. 11*
1 day

0

0

0
-4.3
0.000
-7.320
-6.3
-0.5
07:30
German Yield Curve
-0.3
2.5
1.5
1.0
0.5
US Yield Curve
3.0
1.5
1.11
+/-, bp
* As of c losing previous trading day
* The chart plo ts 07:30 - 23:00 Fri and 23:00 Sun to 07:30 M o n
2.0
+/-, bp
17:00
07:30
+/-
USD 10Y
JPY 10Y
12
07:30(-1)*
14

17:00
2
+/-
EUR 10Y
DKK 10Y
SEK 10Y
0
27
31
28
34


0
3
NOK 10Y
30
32

2
* As of c losing previous trading day
** Ask pric e
Source: Bloomberg, Danske Bank Markets
4|
12 January 2015
www.danskeresearch.com
Danske Daily
Disclosure
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske
Bank’).
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the
research report accurately reflect the research analyst’s personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority
(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation
Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske 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 Danske
Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any
request that might impair the objectivity and independence of research shall be referred to Research Management
and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do
not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors upon request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis
of relevant assumptions, are stated throughout the text.
Expected updates
Danske Daily 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. Price-related data is calculated
using the closing price from the day before publication.
5|
12 January 2015
www.danskeresearch.com
Danske Daily
General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) (‘Relevant Financial
Instruments’).
The research report has been prepared independently and solely on the basis of publicly available information that
Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not
untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates
and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation
any loss of profits, arising from reliance on this research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in this research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior
written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer
and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S.
Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this
research report in connection with distribution in the United States solely to “U.S. institutional investors”.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence
of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are
not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements
of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial
Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in nonU.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and
auditing standards of the U.S. Securities and Exchange Commission.
6|
12 January 2015
www.danskeresearch.com