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Investment Research

23 August 2013

Weekly Focus 6ZHGHQ Another Asian crisis? We don’t think so Market movers ahead Development in the US bond market is likely to be a key driver for most markets as it serves as a gauge of Fed tapering expectations. The US announces mostly tier-2 data next week, with durable goods orders and consumer confidence the main releases. We expect euro flash CPI to show a further decline in inflation to 1.3% in August, from 1.6% in July. This may give some relief to bond markets. German ifo and euro consumer confidence should see further increases in a sign of strengthening euro area recovery

Contents Market movers ahead ........................................... 2 Global macro and market themes ............ 5 Scandi Update ................................................................ 8 Latest research from Danske Bank ........ 9 Macroeconomic forecast ..............................10 Financial forecast ...................................................11 Calendar ...........................................................................12

This is a busy week in Japan, with the release of industrial production and inflation.

Global macro and market themes Emerging markets have been in focus over the past week. While developments should be watched closely, we do not expect it to develop into another ‘Asian crisis’. A positive surprise in Chinese PMI gave much-needed support to sentiment and recovery in the US and Europe should eventually feed further into emerging markets growth. Stock markets corrected again on the emerging market crisis and rising US bond yields. While the Fed adds volatility in the short term, we are still bullish in the medium term. We look for the increase in bond yields to come to a halt soon.

Financial views Major indices 23-Aug

3M

12M

10yr EUR swap

2.24

2.10

2.40

EUR/USD

134

131

125

ICE Brent oil

110

101

98

23-Aug

6M

12-24M

1657

-5 to +5%

5%-10%

S&P500

Source: Danske Bank

Focus Research: Yellen vs Summers – bird fight, 22 August. Flash Comment: China – HSBC PMI improved markedly in August, 22 August. Flash Comment: Euro area flash PMIs once again better than expected, 22 August. Emerging markets under pressure

US bond yields hold short-term key to risk sentiment

Source: Macrobond Financial

Source: Macrobond Financial

Editors Allan von Mehren +45 4512 8055 [email protected] Steen Bocian +45 45 12 85 31 [email protected]

Important disclosures and certifications are contained from page 15 of this report. www.danskeresearch.com

Weekly Focus

Market movers ahead Global Next week is a relatively data heavy week in the US, as several important releases appear in the calendar. We expect durable goods orders to fall back after last month’s increase, as the volatile transport sector was the main contributor to the increase in June. Pending home sales for July are due to be released on Wednesday and are the first housing market data collected since the increase in mortgage interest rates. Our model predicts a small decline in pending home sales. We will get both Conference Board’s measure of consumer confidence and Michigan consumer confidence, with the former of particular interest as the labour market component might give some indication of the strength of the August employment report. Recent claims data suggests a continued steady improvement in employment, so we will look to see whether the conference board confidence points in the same direction. Finally, the second release of GDP and personal consumption figures will come next week and we expect to see an upward revision in figures. We will also get a few Fed speeches and Bullard will speak a couple of times during the week. In the euro area, flash CPI is released next week. Inflation has fallen over most of 2013 and we expect further declines as wage pressure is low, oil prices decline, agricultural prices increase at a slow pace and the effect of 2012’s tax hikes drops out (see Research: Lower euro area inflation as tax hikes drop out, 18 June, and Research: Lower inflation to keep ECB rates at current or lower levels for two years, 5 August). In August, we expect a decline in inflation to 1.3% from 1.6% in July. Monetary development in the euro area is also likely to attract attention. Monthly loan flows to the private sector have declined since April 2012, with the largest decline in June. German IFO expectations will also be released and we expect an improvement in line with this week’s PMIs, which came out better than expected. This should confirm our view that growth will remain positive in Germany in Q3. Furthermore, we get consumer and business confidence from the European Commission and unemployment in Germany and the euro area.

US industrial production and durable goods orders

Source: Macrobond Financial

Inflation expected to decline in August

Source: Reuters EcoWin

IFO expectations to increase

In Germany, the campaign ahead of the general election on 22 September continues and both Merkel and Steinbruck are scheduled for a number of events. Next week there will also be a number of ECB speeches. In Japan, most economic data for July will be released next week. Overall, the data should confirm that growth in Japan remains relatively strong, although it is slowing slightly compared with the very strong H1 13. Production plans suggest that industrial production seasonally adjusted expanded 3.5% m/m in July but after contracting 3.1% m/m in June. If we take the latest two months as a whole, it suggests that industrial production is still expanding but at a slower pace than in previous months. Softness in industrial production was also evident in the JMMA/market manufacturing PMI in July, which fell to 50.7, from 52.3 in June However, the details were relatively strong and suggesting that JMMA/Markit manufacturing could have improved slightly again to 51.5 in August. Inflation also continued to edge higher in July and we estimate CPI excluding fresh food (the measure that the Bank of Japan targets) increased 0.6% y/y after increasing 0.4% y/y in June. Retail sales and unemployment are released next week.

Source: Reuters EcoWin

In Japan growth in industrial production is expected to ease 20 % 3m/3m 10

% 3m/3m

10

Industrial production

0

0

-10

-10

-20

-20 Real export

-30

-30 02 03 04 05 06 07 08 09 10 11 12 13

Source: Reuters EcoWin

There are no major releases in China next week.

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20

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Weekly Focus

Scandi In Denmark, the coming week brings national accounts data for Q2. We expect them to show that the Danish economy grew by 0.2% q/q. In particular, we expect growth to be driven by domestic demand, which is supported by recent months' data for Dankort debit card purchases, suggesting that private consumption is moving in the right direction. The week also brings figures for registered unemployment in July. We expect the number of jobless to fall by 1,000 to 152,000, or 5.8% of the labour force. The Nationalbank will also release its monthly securities statistics and data for foreign portfolio investments in July. Foreign investors scaled back their holdings of Danish bonds in June and even more so their holdings of Danish treasury bills, so it will be interesting to see whether this trend continued in July. Finally, on Tuesday, the government will publish its budget bill for 2014 and a new Economic Report. We may finally see some domestically driven action on Swedish financial markets in the week ahead. Monday’s (at 09:30 CEST) PPI data should not in itself be all that interesting but seen together with Tuesday’s (also at 09:30 CEST) trade balance data it will provide us with the first solid input to Q3 demand. On Wednesday, at 09:00 CEST, we will be able to look deeper into Q3 general activity, as the National Institute for Economic Research publishes its August business and consumer confidence surveys as well as the Economic Tendency Indicator and, indeed, we expect some type of improvement this month as well. Then, on Thursday (at 09:30 CEST) retail sales add to our first feel for Q3 demand growth and we expect this number to come out on the positive side as well but we are wary that exceptionally sunny weather in July could play some tricks with our forecasts (who wants to go shopping when the sun is shining on your face?). In Norway, while economic data over the summer showed signs of improvement, the latest GDP figures showed signs of weakness. The uncertainty surrounding these figures and so capacity utilisation in the economy, means that the upcoming unemployment data will be very important. Further stable unemployment, as seen over the past couple of months, would indicate that growth is still around trend and capacity utilisation has not decreased, which would silence the argument in favour of further rate cuts in Norway. We expect NAV unemployment to fall to 2.7% in August for seasonal reasons and LFS unemployment for June (May-August) to fall to 3.3%, which would support our view of things. The week also brings retail sales figures for July, which will be crucial for gauging how private consumption, and so GDP, will fare in Q3. We estimate growth of 0.4% m/m, which would indicate a good start to the quarter. A fresh batch of stable unemployment data and relatively strong consumption data should get players in the FX market to revise their view of the krone.

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Foreign investors have sold off treasury bills 120 % of total stock 110

Stock of treasury bills held by foreign investors

100 90 80 70 60 2011

2012

2013

Source: Danmarks Nationalbank, Danske Bank

Improving sentiment among Swedes

Source: Macrobond. Danske Bank calculations

Unemployment no longer increasing

Source: Macrobond

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Weekly Focus

Market movers ahead Global movers

Period

Danske

Consensus

Mon

26-Aug

14:30

USD Durable goods orders

Event m/m

Jul

-3.5%

-3.6%

3.9%

Tue

27-Aug

10:00

DEM IFO - business climate

Index

Aug

106.7

106.9

106.2

10:00

DEM IFO - current assessment

Index

Aug

111.0

111.0

110.1

10:00

DEM IFO - expectations

Index

Aug

103.2

103.0

102.4

16:00

USD Consumer confidence

Index

Aug

80.3

79.3

80.3

10:00

EUR M3 money supply

y/y

Jul

2.0%

2.3%

16:00

USD Pending home sales

1:50

JPY

9:55

DEM Unemployment

1:15

JPY

Markit/JMMA manufacturing PMI

1:30

JPY

Unemployment rate

1:30

JPY

CPI - national ex. fresh food

1:50

JPY

Industrial production, preliminary

11:00

EUR Economic confidence

11:00

EUR Consumer confidence, final

11:00

EUR Unemployment

%

Jul

11:00

EUR HICP, preliminary

y/y

Aug

1.3%

11:00

EUR HICP - core, preliminary

y/y

Aug

15:55

USD University of Michigan Confidence, final

Index

9:30

SEK

PPI Trade balance

Wed

28-Aug

Thurs

29-Aug

Fri

30-Aug

Retail trade

m/m

Jul

m/m|y/y

Jul

-0.5%

%

Aug

6.8%

Index

Aug

51.5

%

Jul

Previous

0.1%

-0.4%

-1.3%|-0.1%

-0.2%|1.6%

6.8%

6.8%

3.9%

3.9%

50.7

y/y

Jul

0.6%

0.6%

0.4%

m/m|y/y

Jul

3.5%|…

3.7%|2.0%

-3.1%|-4.6%

Index

Aug

93.6

93.4

92.5

Net bal.

Aug

-16.0 12.1%

12.1%

1.4%

1.6%

1.1%

1.1%

1.1%

Aug

80.2

80.5

80.0

Period

Danske

Consensus

During the week

Scandi movers

Event

Mon

26-Aug

Tue

27-Aug

Wed

28-Aug

Thurs Fri

29-Aug 30-Aug

m/m|y/y

Jul

SEK bn

Jul

9:30

SEK

10:00

DKK Gov. Budget Proposal for 2014

5.0

10:00

DKK Gov. Budget Overview for 2014

9:00

DKK CB's securities statistics

9:00

SEK

Economic Tendency Survey

Index

Aug

9:00

SEK

Manufacturing confidence

Index

Aug

94.5

93.3

9:00

SEK

Consumer confidence

Index

Aug

100.5

100.3

9:00

DKK Gross unemployment s.a.

9:30

SEK

9:00

DKK GDP, preliminary

10:00 10:00 10:00

NOK Retail sales, s.a.

Jul 95.4

K (%)

Jul

152 (5.8%)

m/m|y/y

Jul

0.5%|4.0%

q/q|y/y

2nd quarter

NOK Unemployment

%

NOK Unemployment (LFS)

% m/m|y/y

Retail sales s.a.

4.0

153 (5.8%)

153 (5.8%)

0.2%|0.4%

0.2%|0.4%

0.0%|-0.7%

Aug

2.7%

2.7%

2.8%

Jun

3.3%

3.4%

3.4%

Jul

0.4%

0.2%

-0.2%

0.6%|3.6%

Source: Bloomberg and Danske Bank Markets

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Previous 0.4%|-4.7%

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Weekly Focus

Global macro and market themes Will the crisis escalate and threaten the global recovery? The obvious comparison currently is with the Asian crisis in 1997/98 where turmoil in Asia was a significant shock to the world economy and led to a temporary slowdown. Although the current turmoil should be taken seriously, we believe there are some important differences as well.

G3 consumption vs EM exports

The Asian crisis was about overheating of many Asian countries as money had been flowing strongly to this region on a positive growth and catching up story. This time around, the problem in EM is not too strong growth but too weak growth. And current account balances are deteriorating not because of rapid increases in imports but because exports are failing due to recession in Europe and sub-trend growth in the US. In 1997/98 most Asian countries had currency pegs to USD. When fears of devaluation started, countries experienced a so-called sudden stop in capital inflows and money was flowing out fast. Funding of current account deficits was no longer possible and currency reserves were drained.

Source: Macrobond Financial

The currency reserves were also much lower in 1997/98 and therefore were quickly depleted until the central banks had to capitulate and let the currencies go. With USD currency pegs most countries also had USD-denominated debt. This made the negative spiral worse once the pegs were left because it meant the value of the foreign debt rose significantly. Today most countries have well developed bond markets and much more financing in local currencies. Because the capital is less of a ‘sudden stop’ and more a gradual bleeding taking place the systemic disruption is also not as big this time. The outflow has so far taken many Emerging Markets assets to cheap levels when viewed with long-term glasses. For example P/E levels in several EM stock markets are lower than in developed markets and in some cases as low as at the peak of the Lehman crisis in 2008. There are of course also some differences that are less favourable. The developed economies are only just rising from the dust and are still fragile. The stock of capital in EM is probably also bigger this time around, meaning the potential total flow may be bigger this time. EM and developing economies now constitute around 50% of the global economy compared with 35% in 1997/98. And they pull 75% of global growth compared with around 50% during the Asian crisis.

Europe finally recovering – a big drag on EM is fading

Source: Macrobond Financial

Overall we believe the EM financial turmoil is not big enough to have a meaningful impact on the global economy. And we do not expect it to become big enough shock for this to happen. An important reason for this is the strengthening recovery we see in the US, Europe and Japan which should start to spill over to EM soon. We saw further confirmation of this in the past week with strong euro PMI and decent readings for US PMI, jobless claims and home sales. However, as with all financial turmoil, it should be watched closely as panic can have its own dynamic and can become self-fulfulling.

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Weekly Focus

Chinese PMI could give important support to EM markets On a positive note we saw an important improvement in the Chinese PMI in August, suggesting that the Chinese slowdown is stabilising and growth might even improve in the second half of the year. It is important in several respects. First, it makes it less likely that Chinese growth will slip even further and result in a hard landing. More commentators and analysts have argued for this – or at least highlighted the risk of it – which has justified higher risk premium in the Chinese stock market. This risk premium should come down now. Second, it is positive news for other EM countries which have China as a main buyer of their commodities and other goods.

Chinese PMI and EM stocks

Is Fed tapering fully priced? Source: Macrobond Financial

There may also be some light regarding the other main factor pressuring EM: Fed tapering and rising US bond yields. On Thursday, we saw another day of quite decent data. US jobless claims showed another solid reading at 336k – only slightly up from last week’s six-year low. And although very slightly higher than the consensus expectation of 330k, the deviation is negligible given the volatility in the data. The number gives further evidence that the US job market continues to improve and hence should increase the likelihood of Fed tapering.

Rate hike path from June-15 to June16 very steep now

Nevertheless, US 10-year treasury yields actually fell slightly following the claims data. It is probably too early to conclude that Fed tapering is fully priced. But it is still a little light in the dark for risk markets in general – and not least EM. We believe the treasury market is now pricing close to as many rate hikes as is possible and look for a stabilisation in bond yields soon. A first hike is priced in March/April 2015 which seems fair in our view. But from June 2015 to June 2016 rate hikes of 120bp are priced. Although not implausible, it has historically been difficult to price a steeper rate path than this two years in advance. We therefore believe that the bond market will soon stabilise. Peripheral bond markets in the euro area continue to perform and hence have not really been affected by the general risk aversion in markets related to Fed tapering. Fundamentals are improving in these countries as signs of recovery are materialising. We look for continued yield spread compression in peripheral markets in the medium term based on improving fundamentals, ECB keeping rates low for a very long time and search for yield.

Source: Macrobond Financial

Another stock market correction, but Europe more resilient this time

Stock market corrects – we’re still bullish in medium term Stock markets corrected further over the past week in response to a further rise in bond yields and uncertainty over Fed tapering. As we argued last week, the tapering issue will add volatility in the short term. It feels very much like a replay of the market anxiety in June when the outlook for Fed tapering in the autumn was first more clearly signalled by the Fed. Stock markets corrected but recovered again in the US to make new highs in early August.

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Source: Macrobond Financial

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Weekly Focus

While the short-term picture is still a bit mixed given the uncertainty in EM markets and Fed tapering approaching, we believe the medium-term outlook for equities is strong. Stock markets can generally go higher in two ways: (1) risk premia coming down and hence prices go up without earnings growth, or (2) earnings grow and justify a higher price for given risk premium. So far most of the rally has taken place through declining risk premia due to lower uncertainty and expectations of decent earnings growth in coming years. In this regard, the US is a bit ahead of Europe in terms of falling risk premia. Higher earnings growth is not needed we believe to give further impetus to US stocks. We do expect this to materialise but it takes time to really see it in earnings reports. In Europe there is still scope for further decline in risk premia on top of a pick-up in earnings growth. Hence we favour Europe over the US in equity space. EM is a separate issue. Risk premia are quite high now as mentioned above but uncertainty is also bigger. With a very long-term horizon it looks attractive given valuation but the shortterm picture is very blurred.

EUR/USD in high end of range

Source: Macrobond Financial

EUR/USD stabilising We saw the first signs of stabilisation in EUR/USD this week after the recent increase. At just below 1.34, the cross is trading in the high end of the trading range seen this year. We believe the trading range will hold over the coming months and have a threemonth target of 1.31. Currently the strong euro data and performance of euro peripheral bonds have given support to the euro. However, as we move further into Fed tapering area, the USD should slowly start to be the performer of the two currencies.

Global market views – 3-6M horizon

Asset class

Main factors

Equities We remain bullish o n equities.

US and euro reco very to gain mo re tractio n. Fed tapering sho rt term headwind Earnings revisio ns to gradually be po sitive driver. Fixed inco me to equities ro tatio n has still so me way to go

Bond market Co re bo nd yields mo ve gradually higher, but sho rt-term pause

Glo bal reco very, Fed tapering has been priced.

US to underperfo rm Germany in the sho rt end

US eco no mic o utlo o k stro ng, Fed tapering, ECB o n ho ld fo r very lo ng. Lo ng end is priced fo r this.

P eripheral spreads to tighten gradually

A mple liquidity, search fo r yield, impro ving fundamentals

Credit spread to tighten gradually

A mple liquidity, search fo r yield, stro ng co rpo rate fundamentals

FX EUR/USD - range trading fo r no w. Lo wer next year.

Fed exit mo ves clo ser, but no stro ng do wntrend befo re Fed rate hikes are in sight.

USD/JP Y - further upside

B o J to co ntinue mo netary easing and Fed exit. M arket sentiment.

EUR/SEK - medium and sho rt-term lo wer

Stro ng fundamentals and no rate cut fro m the Riksbank.

EUR/NOK - gradual mo ve lo wer, but sho rt-term jitters

Stro ng fundamentals, but risk o f rate cut fro m No rges B ank and po sitio ning an issue.

Commodities Oil prices stable in H2, lo wer in 2014

M assive supply sho ck fro m US shale and OP EC o ver-pro ductio n to weigh

M etal prices - do wnside risk o n EM wo rries

Co pper to stay vo latile, aluminium to head lo wer as energy co sts co me under pressure

Go ld prices to co rrect lo wer still

P art o f the bubble no w eliminated but mo re declines in sto re o n Fed tapering

A gricultural risks remain o n the upside

Stabilisatio n in the near term but extreme weather events remain a key challenge

Source: Danske Bank Markets

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23 August 2013

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Weekly Focus

Scandi Update Denmark – Unemployment down in Q2 but uncertainty about job creation The week's LFS data for Q2 revealed that the number of jobless fell sharply by 11,000 from Q1 to 196,000, or 6.9% of the labour force. Unlike the official unemployment statistics, the LFS data will be largely unaffected by the reduction in the unemployment benefit period. The survey also showed an increase in employment of 6,000 people from Q1 to Q2. On the other hand, Statistics Denmark's employment data (adjusted for the schoolteacher dispute) were largely unchanged over the same period and have been largely unchanged over the past year. In other words, there is uncertainty about the level of job creation in Denmark at present. Looking ahead, though, things are looking up for the Danish economy. Consumer confidence has continued to improve, climbing from 3.7 in July to 5.7 in August, which is by far the highest level since the crisis struck in 2008 and signals clear growth in consumption. It also suggests that consumers are spending a larger share of their income.

LFS unemployment on its way down

Source: Macrobond

Sweden – What next? International financial markets are again wreaking havoc on investors portfolios and are seemingly disconnecting from fundamentals. Not even in the economically stable and politically correct country of Sweden have markets behaved in an orderly fashion. Like most other countries Sweden is affected by the Fed tapering discourse and it seems Swedish investors are waking up to the fact that should the US economy indeed be on firmer footing there is no reason to believe that the Riksbank should move any slower than the Fed. In addition, hopes of a nascent European recovery and a few luminous domestic outcomes, such as last week’s labour market data, only serve to underline the need to re-price Swedish interest rates (and should push SEK stronger as well but this is less clear cut if it is driven by international investors unloading Swedish assets). Anyway, the incoming data will continue to be important and we do not expect any near-term setbacks, which is why rates should eke out higher levels over the coming few days/weeks.

Rates on the rise

Source: Macrobond

Norway – GDP better than its reputation The FX market reacted violently to the weak Norwegian GDP figures and sent the krone to its weakest levels in three years. Mainland growth of a meagre 0.2% was way weaker than anticipated and although yields have not fallen far on the back of this, it seems that the FX market is now pricing in an economic downturn in Norway. However, a closer look at the data reveals few signs of weakness. Both business investment and exports of traditional goods climbed again after a couple of slow quarters and there was further strong growth in oil investment despite rumours of a slowdown in oil-related industries. It was only private consumption that underperformed but this was largely as expected given the weak figures for retail sales at the start of Q2. The monthly data suggest that growth in private consumption has in all probability picked up again in Q3. Thus the weak GDP data were due not to weak growth in demand but weak growth in output, particularly in the construction and service sectors. This emerged as a sharp fall in inventory investment in the national accounts data. There is therefore scope for considerable growth in Q3 when this corrects.

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23 August 2013

Investment growth

Source: Macrobond

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Weekly Focus

Latest research from Danske Bank 22/8/13 Flash Comment China: HSBC Manufacturing PMI markedly better than expected, China appears to have bottomed out Today's HSBC manufacturing PMI suggests that Chinese growth has bottomed out. There is now upside risk to our GDP forecast for China.

22/8/13 Flash Comment: Euro area flash PMIs once again better than expected Both manufacturing and service PMI for the euro area have increased for four consecutive months and are now above 50.

22/8/13 Research - Yellen vs Summers: Bird fight This paper discusses the differences in economic policy of Yellen and Summers and in particular if it is fair to call Yellen the most dovish of the two.

21/8/13 Monitor: Japanese investor flows Japanese investors have again become major net buyers of foreign bonds in July and early August.

21/8/13 Flash Comment: FOMC minutes - more detailed QE guidance coming up The minutes from the July FOMC meeting showed that there was broad support to Ben Bernanke's contingent plan for tapering announced at the press conference following the June meeting.

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23 August 2013

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Weekly Focus

Macroeconomic forecast Macro forecast, Scandinavia Year

GDP 1

Private cons.1

Public cons.1

Fixed inv.1

Stock build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public budget4

Public debt4

Current acc.4

Denmark

2012 2013 2014

-0.4 0.1 1.5

0.5 0.4 1.2

0.7 0.8 0.5

-0.1 1.7 1.8

-0.4 0.3 -0.2

0.2 -0.8 3.5

1.0 1.9 2.4

2.4 0.8 1.7

6.1 5.9 5.9

-4.0 -1.9 -1.1

45.6 45.0 43.4

5.6 4.6 5.1

Sweden

2012 2013 2014

0.7 1.7 2.0

1.5 2.7 2.1

0.7 1.0 0.8

3.2 -2.7 3.3

-1.1 0.2 0.2

0.8 -0.8 3.9

0.0 -2.2 4.6

0.9 0.1 1.5

8.0 8.6 8.4

-0.6 -1.1 -0.9

37.7 37.7 37.8

6.7 7.8 8.3

Norway

2012 2013 2014

3.4 2.7 3.0

3.0 3.0 3.5

1.8 2.7 2.2

8.0 6.5 4.7

0.5 0.0

1.8 -3.1 1.1

2.4 1.8 3.9

0.8 1.7 1.8

3.2 3.3 3.3

-

-

-

Macro forecast, Euroland Year

GDP 1

Private cons.1

Public cons.1

Fixed inv.1

Stock build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public budget4

Public debt4

Current acc.4

Euroland

2012 2013 2014

-0.5 -0.6 1.0

-1.2 -1.0 0.0

-0.1 -0.3 -0.2

-3.9 -5.0 0.7

-0.7 -0.1 0.1

2.9 1.9 3.8

-0.9 -0.7 2.4

2.5 1.4 1.4

11.4 12.1 12.3

-3.5 -3.1 -2.9

93.1 95.5 95.8

1.4 2.4 2.5

Germany

2012 2013 2014

0.9 0.5 2.3

0.6 0.5 1.4

1.4 0.8 0.9

-4.9 -1.2 4.9

0.0 0.0 0.0

4.3 2.6 4.8

2.2 2.5 4.5

2.0 1.5 1.6

5.5 5.2 4.9

0.1 -0.2 0.0

82.4 81.1 79.0

6.3 6.0 5.6

France

2012 2013 2014

0.0 -0.4 0.7

0.0 0.2 1.1

1.4 0.6 0.0

0.0 -1.0 1.4

1.4 -0.4 0.0

2.3 1.8 4.4

-0.3 1.1 4.3

2.1 0.9 1.3

10.2 11.2 11.5

-4.7 -4.0 -4.2

90.8 94.2 96.4

-1.9 -1.6 -1.8

Italy

2012 2013 2014

-2.2 -1.6 1.1

-4.2 -1.9 1.1

-1.0 -0.5 -0.4

-9.2 -4.7 2.0

-0.4 0.0 0.0

1.9 3.0 4.0

-7.4 1.6 4.1

3.0 1.4 1.2

10.6 12.0 12.3

-2.4 -3.2 -2.6

124.2 130.9 132.0

-0.7 0.6 0.8

Spain

2012 2013 2014

-1.4 -1.6 -0.6

-2.2 -2.8 -0.7

-3.7 -3.6 -2.0

-8.7 -7.8 -2.0

0.5 0.0 0.0

3.1 5.8 4.8

-5.0 -0.8 3.5

1.9 1.8 0.9

24.9 27.2 27.6

-6.7 -6.5 -6.9

88.4 96.0 102.0

-1.9 1.0 2.5

Finland

2012 2013 2014

-0.2 -0.4 1.5

1.6 0.3 0.8

0.8 0.5 0.2

-2.9 -4.0 2.5

-

-1.4 -1.0 3.0

-3.7 -2.0 2.0

2.8 1.4 1.7

7.7 8.4 8.3

-1.9 -2.0 -1.5

53.0 57.0 58.5

-1.9 -1.5 -1.2

Macro forecast, Global Year

GDP 1

Private cons.1

Public cons.1

Fixed inv.1

Stock build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public budget4

Public debt4

Current acc.4

USA

2012 2013 2014

2.8 1.6 3.0

2.2 1.9 2.6

-1.0 -2.2 -0.7

8.3 5.2 9.3

0.2 0.0 0.1

3.5 2.8 7.7

2.2 2.6 7.3

2.1 1.6 1.6

8.1 7.6 6.8

-7.0 -5.3 -3.7

100.0 101.8 100.9

-3.0 -3.1 -3.2

Japan

2012 2013 2014

2.0 2.0 1.4

2.2 1.6 0.5

2.7 1.6 0.6

4.2 3.6 1.0

0.0 0.0 0.0

-0.1 1.6 7.5

5.5 1.8 3.5

-0.1 0.2 2.1

4.4 4.2 4.1

-7.9 9.3 -8.4

229.7 238.6 245.0

1.0 0.9 1.6

China

2012 2013 2014

7.8 7.4 7.7

-

-

-

-

-

-

2.7 2.7 3.1

4.3 4.3 4.1

-1.3 -1.9 -1.7

22.2 19.6 17.2

2.3 2.9 3.4

UK

2012 2013 2014

0.0 1.1 2.0

0.8 1.4 1.5

2.7 0.9 -0.7

-0.4 -3.6 5.1

-0.3 0.0 0.0

-0.1 1.0 4.9

2.3 -1.0 3.4

2.8 2.8 2.5

8.0 7.8 7.5

-5.2 -6.5 -6.0

90.5 94.9 98.6

-3.5 -2.5 -2.5

Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.

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Weekly Focus Sweden

Financial forecast Bond and money markets USD

23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m 23-Aug +3m +6m +12m

EUR

JPY

GBP

CHF

DKK

SEK

NOK

Key int. rate 0.25 0.25 0.25 0.25 0.50 0.50 0.50 0.50 0.10 0.10 0.10 0.10 0.50 0.50 0.50 0.50 0.00 0.00 0.00 0.00 0.20 0.20 0.30 0.40 1.00 1.00 1.00 1.00 1.50 1.50 1.50 1.50

3m interest rate

2-yr swap yield

10-yr swap yield

Currency vs EUR

0.26 0.30 0.35 0.40 0.22 0.25 0.30 0.45 0.15 0.20 0.20 0.20 0.51 0.50 0.55 0.70 0.02 0.05 0.05 0.05 0.27 0.30 0.40 0.55 1.21 1.25 1.30 1.50 1.72 1.82 1.82 1.85

0.58 0.50 0.70 0.95 0.66 0.60 0.70 0.80 0.28 0.25 0.35 0.45 0.86 0.85 1.00 1.15 0.24 0.30 0.30 0.45 0.89 0.80 0.90 1.00 1.68 1.60 1.70 1.85 2.13 2.10 2.20 2.35

3.09 2.90 3.10 3.30 2.24 2.10 2.30 2.40 0.98 0.95 0.95 1.05 2.82 2.80 2.90 3.10 1.66 1.60 1.60 1.75 2.49 2.30 2.50 2.60 2.98 2.80 2.80 2.90 3.51 3.20 3.30 3.45

133.6 131 128 125 132.1 129 132 138 85.5 84.0 82.0 84.0 123.5 126 124 124 745.9 746 746 746 872.6 840 830 820 812.1 770 765 760

Currency vs USD 133.6 131 128 125 98.8 99 103 110 156.3 155 156 149 92.4 96 97 99 558.2 569 583 597 653.0 641 648 656 607.7 588 598 608

Currency vsSEK 652.99 641 648 656 872.6 840 830 820 6.6 7 6 6 1020.2 1000 1012 976 706.8 667 669 661 117.0 113 111 110 107.5 109 108 108

Risiko profil 3 mdr.

Pris trend 3 mdr.

Pris trend 12 mdr.

Regionale rekommendationer

Medium Medium Medium Medium

-5 to +5% -5 to +5% -5 to +5% -5 to +5%

5%-10% 5%-10% 10%-15% 5%-10%

Neutral Underweight Overweight Neutral

Equity markets Regional USA Emerging markets (USD) Europe (ex. Nordics) (EUR) Nordics

Företagsvinster överraskning Struck är osäkerheten i Asien återhämtning, attraktiv värdering Stark konjunktur profil

Commodities 2013 NYMEX WTI ICE Brent Copper Zinc Nickel Aluminium Gold Matif Mill Wheat CBOT Wheat CBOT Corn CBOT Soybeans

23-Aug 105 110 7,320 1,974 14,430 1,884 1,376 185 633 493 1,332

Q1 94 113 7,958 2,054 17,376 2,041 1,631 245 737 715 1,449

Q2 94 103 7,200 1,875 15,080 1,875 1,425 225 700 660 1,465

Q3 89 101 6,800 1,850 14,500 1,800 1,150 222 690 650 1,450

2014 Q4 89 100 6,775 1,835 14,200 1,770 1,000 229 695 655 1,460

Q1 89 99 6,760 1,825 14,000 1,745 975 232 700 660 1,470

Q2 89 98 6,745 1,815 13,800 1,720 950 234 705 665 1,480

Q3 89 97 6,735 1,805 13,600 1,700 925 236 710 670 1,490

Average Q4 89 96 6,725 1,795 13,400 1,680 900 238 715 675 1,500

2013 92 104 7,183 1,904 15,289 1,871 1,302 230 706 670 1,456

Source: Danske Bank Markets

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23 August 2013

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2014 89 98 6,741 1,810 13,700 1,711 938 235 708 668 1,485

Weekly Focus

Calendar Key Data and Events in Week 35 Monday, August 26, 2013

Period

Danske Bank

Consensus

NZD

Trade balance

NZD M

Jul

414

9:30

SEK

PPI

m/m|y/y

Jul

0.4%|-4.7%

10:00

EUR

Bundesbank's Weidmann speaks in Berlin

14:30

USD

Durable goods orders

m/m

Jul

20:00

DKK

Press release with information of the states financing needs from the Ministry of Finance

Tuesday, August 27, 2013 7:00

JPY

Small business confidence

9:30

SEK

Trade balance

10:00

DEM

10:00 10:00

Period

-3.5%

-3.6%

3.9%

Danske Bank

Consensus

Previous

Index

Aug

SEK bn

Jul

5.0

IFO - business climate

Index

Aug

106.7

106.9

106.2

DEM

IFO - current assessment

Index

Aug

111.0

111.0

110.1

DEM

IFO - expectations

Index

Aug

103.2

103.0

102.4

10:00

DKK

Gov. Budget Proposal for 2014

10:00

DKK

Gov. Budget Overview for 2014

12:50

USD

Fed's Willams (non-voter, dove) speaks

13:00

EUR

ECB's Coeure speaks in Sweden

13:00

DKK

Gov. Economic Survey, Aug. 2013

15:00

USD

S&P Case Shiller House price index

Index

Jun

16:00

USD

Consumer confidence

Index

Aug

80.3

79.3

80.3

19:00

EUR

ECB's Asmussen spekas Period

Danske Bank

Consensus

Previous

7.1

7.0

Wednesday, August 28, 2013 Net bal.

49.4 4.0

156.14

8:00

DEM

GfK Consumer Confidence

9:00

DKK

CB's securities statistics

Sep

9:00

SEK

Economic Tendency Survey

Index

Aug

9:00

SEK

Manufacturing confidence

Index

Aug

94.5

93.3

9:00

SEK

Consumer confidence

Index

Aug

100.5

100.3

10:00

EUR

M3 money supply

y/y

Jul

11:00

EUR

ECB announces allotment in 7-day (USD)

13:00

USD

MBA Mortgage Applications

16:00

USD

Pending home sales

m/m

Jul

Jul 95.4

-0.5%

2.0%

2.3%

0.1%

-0.4%

Source: Danske Bank Markets

12 |

Previous

0:45

23 August 2013

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Weekly Focus

Calendar - continued

Thursday, August 29, 2013

Danske Bank

Period

Consensus

Previous

1:50

JPY

Retail trade

m/m|y/y

Jul

-1.3%|-0.1%

-0.2%|1.6%

1:50

JPY

Large retailers' sales

y/y

Jul

-0.5%

3.5%

8:45

FRF

Business confidence

Index

Aug

95

9:00

ESP

GDP, final

q/q|y/y

2nd quarter

-0.1%|-1.7%

9:00

ESP

HICP, preliminary

1.9%

9:00

DKK

Confidence indicator, industry s.a.

9:00

DKK

Gross unemployment s.a.

9:15

EUR

ECB's Nowotny speaks on panel

9:30

SEK

Retail sales s.a.

9:30

SEK

Current Account

9:55

DEM

Unemployment

10:00

NOK

Wage index manufacturing

10:45

EUR

EU's Rehn gives keynote on new growth in Europe in Alpbach

11:00

ITL

Business confidence

14:00

DEM

HICP, preliminary

14:30

USD

GDP (second release)

q/q ann.

14:30

USD

Initial jobless claims

1000

14:30

USD

Personal Consumption (second release)

14:30

USD

GDP Price Deflator (second release)

14:50

USD

Fed's Bullard (voter, dove) speaks

18:00

EUR

Bundesbank's Mersch speaks in Hamburg

20:00

USD

Fed's Lacker (non-voter, hawk) speaks

y/y

Aug

Net. bal.

Aug

K (%)

Jul

152 (5.8%)

m/m|y/y

Jul

0.5%|4.0%

SEK bn

2nd quarter

%

Aug

q/q

2nd quarter

Index

Aug

m/m|y/y

Aug

…|1.8%

…|1.8%

0.4%|1.9%

2nd quarter

2.1%

2.3%

1.7%

q/q ann.

2nd quarter

1.8%

1.8%

1.8%

q/q ann.

2nd quarter

0.7%

0.7%

-2 153 (5.8%)

0.6%|3.6% 67.9

6.8%

6.8%

23 August 2013

6.8% 0.2% 91.7

336

Source: Danske Bank Markets

13 |

153 (5.8%)

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Weekly Focus

Calendar - continued

Friday, August 30, 2013

Danske Bank

Period

Consensus

1:05

GBP

Gfk Consumer confidence

Index

Aug

-15

-16

1:15

JPY

Markit/JMMA manufacturing PMI

Index

Aug

51.5

50.7

1:30

JPY

Household spending

å/å

Jul

0.2%

-0.4%

1:30

JPY

Unemployment rate

%

Jul

3.9%

3.9%

1:30

JPY

Job-to-applicant ratio

Jul

0.93

0.92

1:30

JPY

CPI - national

y/y

Jul

0.7%

0.2%

1:30

JPY

CPI - national ex. fresh food

y/y

Jul

0.6%

0.4%

1:30

JPY

CPI - Tokyo

y/y

Aug

0.5%

0.4%

1:30

JPY

CPI - Tokyo ex fresh food

y/y

Aug

0.4%

0.3%

1:45

USD

Fed's Bullard (voter, dove) speaks

1:50

JPY

Industrial production, preliminary

m/m|y/y

Jul

3.7%|2.0%

-3.1%|-4.6%

7:00

JPY

Housing starts

y/y

Jul

8:00

DEM

Retail sales, real s.a.

m/m|y/y

Aug

9:00

CHF

KOF Swiss leading indicator

9:00

DKK

GDP, preliminary

0.6%

3.5%|…

Index

Aug

q/q|y/y

2nd quarter

14.3%

15.3%

0.7%|…

0.4%|…

-0.8%|-2.8%

1.33

1.23

0.2%|0.4%

0.2%|0.4%

0.0%|-0.7%

9:30

SEK

Wages (blue collars/white collars)

y/y

Jun

10:00

NOK

Unemployment

%

Aug

2.7%

2.7%

10:00

NOK

Unemployment (LFS)

%

Jun

3.3%

3.4%

10:00

ITL

Unemployment

%

Jul

10:00

NOK

Retail sales, s.a.

m/m|y/y

Jul

10:30

GBP

Mortgage approvals

1,000

Jul

10:30

GBP

Broad money M4

m/m|y/y

Jul

11:00

EUR

Economic confidence

Index

Aug

93.6

11:00

EUR

Consumer confidence, final

Net bal.

Aug

-16.0

1.3%

11:00

EUR

Industrial confidence

Net bal.

Aug

-10.4

11:00

EUR

Services confidence

Net bal.

Aug

-6.9

11:00

EUR

Unemployment

%

Jul

11:00

EUR

HICP, preliminary

y/y

Aug

11:00

EUR

HICP - core, preliminary

y/y

Aug

11:00

ITL

HICP, preliminary

m/m|y/y

Aug

11:00

EUR

Business climate indicator

Index

Aug

12:00

EUR

ECB announces 3-year LTRO repayment

14:30

USD

PCE core

m/m|y/y

14:30

USD

Personal income

m/m

14:30

USD

Personal spending

14:30

USD

14:30 15:00

2.8% 3.4% 12.1%

0.4%

0.2% 59.5

-0.2% 57.7 0.1%|1.5%

93.4

92.5

-9.6

-10.6

12.1%

12.1%

1.3%

1.4%

1.6%

1.1%

1.1%

1.1%

1.0%|…

-1.8%|1.2%

-0.42

-0.34

-0.53

Jul

0.1%|1.2%

0.2%|1.3%

0.2%|1.2%

Jul

0.2%

0.2%

0.3%

m/m

Jul

0.4%

0.3%

0.5%

PCE deflator

m/m|y/y

Jul

0.2%|1.5%

0.2%|1.5%

0.4%|1.3%

CAD

GDP (monthly)

m/m|y/y

Jun

-0.5%|…

0.2%|1.6%

USD

Fed's Bullard (voter, dove) speaks

15:45

USD

Chicago PMI

Index

Aug

53.0

52.3

15:55

USD

University of Michigan Confidence, final

Index

Aug

80.2

80.5

80.0

Period

Danske Bank

Consensus

Previous

0.6%|3.3%

0.8%|3.9%

During the week Mon 26 - 31

DEM

German election campaigns

Tue 27 - 30

GBP

Nationwide House Prices

m/m|y/y

Aug

-7.8

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 Bank Markets

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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. 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 authorized 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 Services Authority (UK). Details on the extent of the regulation by the Financial Services Authority are available from Danske Bank upon 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 high quality research based on research objectivity and independence. These procedures are documented in the research policies of Danske Bank. Employees within the Danske Bank Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to the Research Management and the Compliance Department. Danske Bank 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 over-all 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.

Disclaimer This research has been prepared by Danske 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 which Danske Bank considers to be reliable. Whilst 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.

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The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgment 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 the 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.on request. Copyright (C) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

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