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

Investment Research � General Market Conditions

Market movers ahead

In the US the focus next week will be on consumer spending. Private consumption

should improve going forward and be the main driver of GDP growth.

US PPI and import prices will provide insight about underlying price pressure on

goods after the oil price decline in July.

In the euro area the GDP growth figure for Q2 should confirm that the recovery

continued, but relying on stronger German activity, not weaker French activity.

Euro-area survey indicators should give a first sign of improvement now that

uncertainty has faded on the back of the Greek deal.

Although the focus in the UK has moved to inflation, wage growth, which is due for

release next week, is still an important determinant for the Bank of England.

In Scandi markets attention will focus on inflation with the release of the Norwegian,

Swedish and Danish figures.

Global macro and market themes

Gasoline prices have been resilient to the oil price drop, resulting in a modest impact

on consumers.

The Fed’s Lockhart provided a hawkish shift in Fed rhetoric which supports our call

for a September hike.

The Fed pricing is still too subdued, and we expect higher short-term US yields and

lower EUR/USD.

The Bank of England is more dovish than expected due to strong sterling and the

lower oil price.

The euro-area periphery countries are recovering, but political uncertainty is looming.

7 August 2015

Editors Allan von Mehren +45 4512 8055 alvo@danskebank.dk Steen Bocian +45 45 12 85 31 steen.bocian@danskebank.dk

Weekly Focus Scandi inflation back in the spotlight

Contents

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

Global Macro and Market Themes .......... 5

Scandi update ....................................................... 9

Latest research from Danske Bank

Markets ................................................................. 10

Macroeconomic forecast ........................... 11

Financial forecast............................................ 12

Calendar ............................................................... 13

Financial views

Source: Danske Bank

Swedish inflation numbers are likely to be a disappointment to the Riksbank

Norwegian core inflation is expected to decline again

Source: Macrobond, Riksbank, Danske Bank

Markets

Source: Macrobond, Norges Bank, Danske Bank

Markets

Major indices

07-Aug 3M 12M

10yr EUR swap 1.04 1.20 1.60

EUR/USD 109 104 110

ICE Brent oil 50 61 72

07-Aug 6M 12-24M

S&P500 2084 0-5% 5-8%

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Market movers

Global

The main release in the US next week is the retail sales figure for July, which is one

of the figures to follow closely ahead of the FOMC meeting in September. Retail

sales have disappointed when considering the boost to consumers’ income from the

oil price decline earlier this year. But looking ahead it should improve and we expect

GDP growth to be driven by solid private consumption which is set to be supported

by continued improvement in the housing markets, a pickup in wage growth and

continued solid employment gains. The first signs of stronger consumer spending

should be seen in the retail sales figures as we expect core retail sales ex autos and gas

to increase 0.5% after it declined 0.2% m/m in June.

Next week brings additional insight into future consumer spending as the August

preliminary University of Michigan consumer confidence figures are due for release.

Consumer confidence improved considerably during Q4 last year and reached the

highest level since 2005. It has moved sideways since November and is expected to

remain at a fairly decent level in August.

PPI and import prices for July should provide information about the underlying price

pressure on goods prices. The inflation data are in focus among market participants as

signs of higher price pressure are important for the Fed’s rate decision. The data will

be particularly interesting after the oil price declined considerably during July.

NFIB small business optimism is also released next week, where the sub-indexes on

wages and hiring plans are of interest.

In the euro area the first estimate of GDP growth for Q2 is due for release and we

expect growth of 0.4% q/q. The growth rate is thus set to be unchanged compared to

Q1, but we expect a different composition of activity. While private consumption was

the main contributor to GDP growth in Q1, consumers were faced with headwind

from a higher oil price in Q2 and our model for private consumption points to growth

of 0.3% q/q down from 0.5% q/q in Q1. On the other hand we expect stronger export

growth in Q2 as exporters should have benefitted from the lagged impact of the

weaker effective euro while stronger growth in the US is also expected to have been

more supportive in Q2.

Across countries German GDP growth should have strengthened to 0.5% q/q in Q1,

up from 0.3% q/q in Q1, whereas the French growth rate is expected to have

weakened to 0.2% q/q from a strong print of 0.8% q/q in Q1. In the periphery

countries the Italian economy has finally started to improve and we look for

unchanged growth of 0.3% q/q in Q2.

We will also get the first survey indicators for August with the release of the Sentix

investor confidence and the German ZEW expectations. Both of these figures

declined slightly in July, but we look for an increase in August due to reduced

uncertainty on the back of the Greek deal.

Consumer spending set to improve

Source: Macrobond Financial, Danske Bank

Markets

Decent US consumers sentiment

Source: Macrobond Financial

Euro-area recovery should have

continued in Q2

Source: Eurostat, Danske Bank Markets

Survey data to improve on Greek deal

Source: Macrobond Financial, Danske Bank

Markets

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In the UK, the most important release is the labour market statistics for June. In

particular, wage growth will attract attention as this is still important for the timing of

the first Bank Rate hike, although the focus has now moved to inflation, see Bank of

England Review: Dovish BoE due to strong sterling and lower oil price, 6 August

2015. Wage growth has picked up in recent months and we expect average weekly

earnings ex bonus (3M) to rise further in June. Still it is likely that the annual growth

rate stayed unchanged due to the volatility in the series (weak figure in March 2014

drops out). The improvement in the labour market has eased off in recent months and

we expect the unemployment rate (3M) to be unchanged at 5.6%, though risk is to the

downside as the single month rate was high in April and May. We do not expect

construction output in June will lead to any revision of the first GDP growth estimate.

In China focus will be on industrial production and trade balance figures. Overall, we

expect the impact on growth from the stock market turmoil to be modest, as the stock

market is still small relative to the economy. Nevertheless, it will be important to

watch Chinese data in the coming months to see if the fall in PMI was a blip or a

symptom of a stronger drag from the cross currents facing the economy. If the

Chinese economy does not improve, this could trigger further easing.

Scandi

In Denmark Statistics Denmark will release a raft of interesting data in the coming

week. These include figures for inflation, which we expect to slow from 0.7% in June

to 0.4% in July. Falling oil prices have not led to lower petrol prices, which actually

seem to have climbed 0.5% in July, but other energy prices – most notably for diesel

and electricity – have risen. Food and book prices climbed surprisingly strongly in

June, so we expect them to drop back in July. There is more uncertainty than normal,

however, as it is hard to gauge when big changes in energy prices will show up in the

CPI.

The week will also bring a variety of foreign trade data. We predict a current account

surplus of around DKK13bn in June (before any seasonal adjustment), a slight fall

from DKK16.2bn in May. Both industrial production and exports of goods for June

will be released during the week, and it will be interesting to see whether they both

bounce back after falling in April and May. Higher economic activity in our export

markets and a weaker krone would suggest that both will rise, but even if we are right,

it is still uncertain whether this will be enough to cancel out the drops in April and

May. It is not inconceivable, therefore, that both industrial production and exports

will fall from Q1 to Q2. We predict a trade surplus of DKK7.8bn in June.

In Sweden July inflation (Thursday) will be scrutinised by the markets and the

Riksbank alike. We expect that CPIF inflation, on the back of additional stimulus from

lower energy prices, will undershoot the Riksbank’s forecast by as much as 0.3

percentage points in July. These are the numbers that Mr Ingves and his colleagues will

bring to the September meeting. In addition to that we get a monthly Prospera survey

on markets’ inflation expectations (Wednesday), where one- and two-years have edged

higher during the last few months, albeit still 0.5 and 1.0 percentage points below

target. This will be the final inflation expectations survey ahead of the September

meeting. We do acknowledge the risk/chance that the Riksbank will bring forward a

cut to September instead of waiting. Finally some real data are due for release as well,

for the industry sector (Monday) and for the services sector (Friday). These data are

secondary (tertiary even) with respect to monetary policy and the market.

Wage growth has picked up recently

Source: ONS

Very low inflation

Source: Statistics Denmark

July inflation numbers are likely to be a

disappointment to the Riksbank...

Source: Macrobond Financial

... but the bank may find some comfort

in rising inflation expectations

Source: Macrobond Financial

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The main event in the Norwegian market will be the July inflation data, which will be

published on Monday 10 August. The core-inflation data (CPI-ATE) for June

surprised strongly on the upside rising 0.5% m/m and 3.2% y/y, well above

expectations. According to Bloomberg, economists expected a 2.4% reading. Norges

Bank had a 2.5% forecast for June. The significantly higher number was a result of

surprise jumps in the prices of airline tickets and food. The weaker NOK also played a

role in pushing prices higher.

This time we have assumed that we will see a set-back in the price of airline tickets

after two months with prices rising close to 40%. We have also assumed that food

prices will rise only moderately after the price increases over the last two months.

Hence, we forecast a m/m rise of 0.1%, which corresponds to drop in the y/y rate for

the CPI-ATE measure from 3.2% to 2.6%. Hence, inflation is expected to be more or

less back at the inflation target, but still somewhat above the Norges Bank forecast at

2.2% for July.

However, the number is highly uncertain due to the volatile food and airline ticket

prices in recent months. It is also uncertain how the latest weakening of the currency

will affect the numbers. Hence, we will probably need to see the September numbers

before we can make a firm decision on the inflation pressure in Norway. In respect of

the Norges Bank meeting in September, a reading in line with our expectations should

certainly still keep the door open for a rate cut, if Norges Bank judges that the lower

oil prices will weigh further on the growth outlook.

Market movers ahead

Source: Bloomberg, Danske Bank Markets

Global movers Event Period Danske Consensus Previous

During the week Sat 08 CNY Exports y/y Jul -1.5% 2.8%

Sat 08 CNY Import y/y Jul -8.0% -6.1%

Mon 10-Aug - CNY Money supply M2 y/y Jul 11.7% 11.8%

16:00 USD Fed's LMCI m/m Jul 0.8

18:25 USD Fed's Lockhart (voter, dovish) speaks

Tue 11-Aug - OPC OPEC publishes monthly oil market report Aug

11:00 DEM ZEW expectations Index Aug 34.0 31.0 29.7

14:30 USD Unit labour cost, preliminary q/q 2nd quarter -0.2% 6.7%

Wed 12-Aug - WTO IEA publishes monthly oil market report

1:50 JPY Bank of Japan minutes

7:30 CNY Industrial production y/y Jul 6.6% 6.8%

7:30 CNY Fixed assets investments y/y Jul 11.5% 11.4%

7:30 CNY Retail sales y/y Jul 10.6% 10.6%

10:30 GBP ILO Unemployment rate % Jun 5.6% 5.6% 5.6%

10:30 GBP Average earnings ex bonus (3M) y/y Jun 2.8% 2.8% 2.8%

11:00 EUR Industrial production m/m|y/y Jun -0.5%|… 0.2%|1.7% -0.4%|1.6%

Thurs 13-Aug 13:30 EUR ECB account of monetary policy meeting

14:30 USD Retail sales m/m Jul 0.5% 0.5% -0.3%

14:30 USD Retail sales control group m/m Jul 0.5% 0.5% -0.1%

14:30 USD Import prices m/m|y/y Jul -1.1%|-10.5% -0.1%|-10.0%

Fri 14-Aug 8:00 DEM GDP, preliminary q/q|y/y 2nd quarter 0.5%|… 0.5%|1.5% 0.3%|1.0%

11:00 EUR GDP, preliminary q/q|y/y 2nd quarter 0.4%|… 0.4%|1.3% 0.4%|1.0%

11:00 EUR CPI m/m|y/y Jul …|0.2% -0.6%|0.2% 0.0%|0.2%

11:00 EUR CPI - core, final % Jul 1.0% 1.0% 1.0%

14:30 USD PPI m/m|y/y Jul 0.1%|-0.9% 0.4%|-0.7%

16:00 USD University of Michigan Confidence, preliminary Index Aug 93.5 93.5 93.1

Scandi movers

Mon 10-Aug 9:00 DKK CPI m/m|y/y Jul -0.3%|0.4% 0.0%|0.7%

9:00 DKK Current account (s.a.) DKK bn Jun 10.8 13.8

10:00 NOK Core inflation(CPI-ATE) m/m|y/y Jul 0.1%|2.6% 0.5%|3.2%

Wed 12-Aug 8:00 SEK Prospera inflation expectations

Thurs 13-Aug 9:30 SEK Underlying inflation CPIF m/m|y/y Jul -0.4%|0.4% -0.2%|0.6%

9:30 SEK CPI m/m|y/y Jul -0.5%|-0.6% -0.3%|-0.4%

Norwegian core inflation to drop in

July

Source: Danske Bank Markets, Norges Bank,

Macrobond Financial

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Global Macro and Market Themes

Gasoline prices resilient to oil price decline

The oil price is back on its downward trend and on Monday it declined below

USD50/bbl for the first time since January. The continued decline this week followed

due to concerns about the global growth outlook together with signs of increasing OPEC

output. Regarding the first, a strengthening of global growth should have supported a

pick-up in commodity prices, but the downward revision of the Chinese Caixin manufac-

turing PMI to the lowest level in two years casted doubt over the global growth outlook.

Despite the lower oil price, gasoline prices in the US and the euro area have been

relatively resilient compared to the movements in the beginning of the year. It is not

unusual to see a larger positive spread between gasoline and oil prices during the summer

months as gasoline prices are supported by the ‘driver season’ particular in the US. The

spread usually narrows after the summer implying there could be a lagged impact on

gasoline prices of the low oil price. However, if the oil price recovers in the mean time,

the impact should be more modest.

The current moderate decline in gasoline prices implies global consumers will only

be little affected by the lower oil price. Hence we expect a smaller private consumption

boost than seen in the beginning of the year where especially euro area activity benefitted

from higher consumer’s purchasing power. Nevertheless, we expect solid global private

consumption. In the US, it should be supported by continued improvement in the housing

markets, solid employment gains and a pickup in wage growth. Consumers in the euro

area are supported by progress in the labour market and an expected improvement in

consumer confidence following the reduced uncertainty on back of the Greek deal.

Secondly, the rigid gasoline prices implies inflation will decline less than suggested

by the decline in the oil price. This has already been seen in the euro area, where HICP

inflation was unchanged at 0.2% y/y in July despite a oil price decline of almost 7%

measured in euros, see Euro area: Core inflation surprises on the upside again. In the

US, the moderate response in gasoline prices should avert a sharp deterioration of

inflation, which could have prevented the Fed from hiking at the September meeting.

US gasoline prices resilient to the drop in the oil price Euro inflation was unchanged in July despite the oil price drop

Source: Bloomberg, Macrobond, Danske Bank Markets Source: Eurostat, Danske Bank Markets

Today’s key points

Gasoline prices have been resili-

ent to the oil price drop resulting

in a modest impact on consumers

Fed’s Lockhart provided a hawkish

shift in Fed rhetoric which sup-

ports our call for a September hike

The Fed pricing is still too subdued

and we expect higher short-term

US yields and lower EUR/USD

Bank of England more dovish than

expected due to strong sterling

and lower oil price

The euro area periphery countries

are recovering but political

uncertainty is looming

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Hawkish shift in Fed rhetoric

In the US the week provided an interesting signal from the Fed about starting the

rate hiking process at the next FOMC meeting in September. In an interview with the

Wall Street Journal the Fed member Lockhart said that the Fed is close to being ready to

hike interest rates and that it would take a significant deterioration in the data to convince

him not to move in September.

In our view, two conditions makes the hawkish comments from Lockhart interesting:

1. Lockhart is considered a dovish member of the FOMC board. Thus his comments

are likely to be a sign that the important core members of the FOMC are moving in

favour of a first rate hike in September.

2. Lockhart is one of the first to speak after last week’s FOMC meeting and hence

his comments give a first impression of the thoughts behind the small, but important

change regarding the anticipation of the first rate hike to the FOMC statement, see

more in US – FOMC: Only ‘some’ further progress needed for September rate hike

The hawkish shift in the Fed rhetoric is in line with our expectations and supports

our call for a September hike. Lockhart’s comments resulted in a bit of a selloff in the

US fixed income where the 2Y treasury yields rose 7bp while in the FX markets, the USD

rallied and EUR/USD traded close to 1.0860 which is the lowest level since mid-July. In

spite of this, we see the current pricing as too subdued and we still expect higher

short-end US bond yields and lower EUR/USD in the short-term.

Later today the job market report for July is released and will be followed closely by

financial market participants. Overall, we are still awaiting decisive data on the US labour

market together with price and wage pressure ahead of the September FOMC meeting

and we expect financial markets to be sensitive to the incoming data in August and

September, see Strategy: Fed not far from its first hike.

Dovish BoE due to strong sterling and lower oil price

Bank of England’s announcement Thursday was more dovish than anticipated. As

expected the MPC members were divided on whether or not to raise interest rates

immediately – the first time since December 2014. The split vote was 8-1 as Ian

McCafferty voted in favour of increasing the Bank Rate. However, both we and other

analysts had expected a 7-2 vote so this result was actually to the dovish side.

The minutes revealed that there are ‘range of views among MPC members’ on

important topics, likely reflecting that data point in different directions. According to

the minutes, there were different views on (1) ‘the margin of spare capacity’, (2) ‘risks to

inflation’ and (3) ‘costs and benefits of moving policy sooner or waiting longer’.

The case for an interest rate rise is, in our view, still building, and for now we stick

to our view that BoE will hike in Q4 15, most likely in November, despite the dovish

BoE. The likelihood for this to happen has of course declined. We generally see five pre-

conditions for BoE to increase interest rates. Hence, while unemployment is back to

normal, wage growth is increasing and the growth outlook is solid, the BoE still wants to

see stabilising/higher CPI inflation before hiking as the MPC members are still not

confident with respect to the short-term inflation. The lower oil price and strong sterling

imply that it is not unlikely that inflation will drop below zero again and are thus the main

reason for the quite dovish BoE. If inflation surprises on the upside in the coming months

‘some’ members could vote in favour of increasing the Bank Rate soon as hinted at in the

minutes. In other words, focus is now on inflation figures.

Dovish Fed member turns hawkish

Source: Danske Bank Markets

Pre-conditions for BoE raising rates

Source: Danske Bank Markets

Very low inflation concerns BoE

Source: Bloomberg, Danske Bank Markets

GBP/USD to decline on relative rates

Source: Bloomberg, Danske Bank Markets

HAWKISH NEUTRAL DOVISH

Plosser S. Fischer (B) Yellen (B)

R. Fischer Vacant Brainard (B)

George Vacant Dudley

Lacker Tarullo (B) Lockhart

Mester Williams Evans

Bullard Powell (B) Rosengren

KockerlakotaBold: voting right, (B): Board member

Condition Status

Unemployment < or = NAIRU √Wages > 2 % √?Solid growth outlook (above trend 0.5% q/q) √CPI inflation stabilised / moving higher ?No financial stress √

7 | 7 August 2015 www.danskeresearch.com

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Due to our non-consensus BoE call we still project a significant rise in UK interest rates

in the coming months and we expect the GBP yield curve to flatten driven by the 0-5Y

segments. We still expect EUR/GBP to trade lower in the coming months driven by

relative interest rates. We target 0.69 in 3M to 6M. Relative rates is also expected to be an

important driver for GBP/USD in H2. We target GBP/USD at 1.51 in 6M.

The dovish BoE could be a premonition of a dovish Fed, as it also faces a strong

currency and a low oil price. However, as we argue above, the low oil price should have

limited impact on inflation and should not prevent the Fed from hiking in September.

Periphery recovery, but political uncertainty is looming

In the euro area focus has been on the economic situation in the periphery countries.

The composite PMI, new orders index increased in Italy, Spain and Ireland. In Ireland it

is at an all-time-high underscoring that the country is set to be the fastest growing euro

area country with GDP growth of 4.5% this year, see Ireland: It is better than good – just

waiting for Moody’s upgrade. The Spanish recovery also remains on track and growth

should be above 3.0% for the first time in eight years.

Interestingly Italy is catching up with the other periphery countries after struggling

with recession in 2014. The improved growth outlook follows a combination of factors

which should benefit both the household and corporate sector. These include labour mar-

ket reforms, a broadly neutral government fiscal stance, the low energy costs, a decline in

cost of borrowing, the weaker effective euro and importantly less political uncertainty.

In most of the other periphery countries political risks are looming. Both Spain and

Portugal will hold general elections this year and they will attract attention in particular in

light of the uncertainty following the Greek election. In Portugal, where the election is to

be held on 4 October, there is no real anti-austerity party with strong support, hence

uncertainty should be relatively limited.

On the other hand, the Spanish election to be held before 20 December will attract a

lot of attention as opinion polls previously suggested the euro sceptic Podemos could

be the largest party. Importantly, Podemos’s popularity has faded in 2015 and as the

economic situation in Spain continues to improve the popularity could fade further.

Currently Podemos looks to be the third largest party, and hence it will be seated in the

parliament and affect negotiations going forward.

Recovery in euro periphery continues

Source: Markit PMI, Danske Bank Markets

Support to Italy by a number of factors

Source: Eurostat, Markit PMI,

Podemos’s popularity has faded in 15

Source: Danske Bank Markets

0

10

20

30

40

50

0

10

20

30

40

50

2011 2012 2013 2014 2015

%%

People's Party Podemos Spanish socialist worker's party

Spanish opinion polls

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Global market views

Source: Danske Bank Markets

Asset class Main factors

Equities

M oderately positive on 3m horizon, positive on 12m horizon Rebound in US growth, euro recovery continues. M onetary easing from ECB, BoJ and PBoC support equities.

Bond market

Core yields: Bund yields moderately higher. US yields higher Fed hike approaching and inflation rising. German bonds supported by ECB QE, but liquidity is an unknown.

US-Euro spread: Wider Policy divergence and a closing of the surprise gap to drive spreads wider

Peripheral spreads to tighten gradually from here QE continue to support the periphery . Greece remains a risk factor

Credit spread to remain stable, but with bouts of vo latility Added liquidity from ECB, stable fundamentals and search for yield

FX

EUR/USD - lower ahead of first Fed hike, but rebound further out Divergence in growth and monetary-policy outlook still warrant downside in 3-6M

USD/JPY - Higher as Fed is re-priced Relative monetary policy and Japanese outflows will remain supported by pension reform

EUR/SEK - Break of 9.50 warns of further gains in short term Battle between Riksbank and ECB for now, in medium term EUR/SEK to fall on Swedish growth outperformance

EUR/NOK - choppy short-term, then lower Poor liquidity caps downside potential short-term, then lower on o il price, positioning and rel. fundamantals

Commodities

Oil prices - range bound near-term, recovery in H2 Higher global growth, supply consolidation to support recovery this year.

M etal prices trending higher Chinese growth concerns a near-term negative factor, supply side risks.

Gold prices to correct lower still Trending down as first Fed hike draws closer. Geopolitical concerns a supportive factor.

Agricultural risks remain on the upside Trending up again, El Niño weather this year is key upside risk.

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Scandi update

Denmark – further decrease in currency reserves

The currency reserve data for July showed a further decrease of DKK43.0bn, of which

DKK40.2bn was down to intervention purchases of DKK. This left the reserves at

DKK583.2bn at the end of the month, equivalent to 30% of GDP. The currency reserves

ballooned at the beginning of the year when the Nationalbank intervened to the tune of

DKK275bn in January and February to stop the DKK getting too strong. Over the past

four months, on the other hand, the central bank has intervened the other way to the tune

of DKK142.6bn. Since the reserves are still substantial, and we would imagine that the

central bank would like to see them back around the levels seen at the end of last year, we

expect the bank to intervene further before opting for a unilateral rate hike. That said, we

still anticipate a unilateral Danish rate hike later this year, with the CD rate rising from its

current -0.75% to -0.50% at the end of the year.

Low interest rates have been a key factor in the sharp rise in property prices this year. The

latest data from Statistics Denmark show that house and apartment prices climbed further

in May to levels 7.0% and 10.6% higher respectively than a year before. The apartment

market is particularly busy, with prices now back to pre-crisis levels.

The number of repossessions is at a normal level but the number of bankruptcies is still

high considering how the Danish economy has improved and how low interest rates are.

Sweden – real economy is doing relatively well

Last week brought only PMI figures in terms of Swedish macro developments. Both the

industry and services sectors gained momentum but both indices also remained within the

well established range of 52-56 and 54-58 respectively. So basically the outcomes added

no new information on how the economy is doing, which is relatively good with GDP

outgrowing trend and most peers in the second quarter.

Norway – manufacturing sector remains weak

Last week showed that the condition of the manufacturing sectors remains weak amid the

oil price collapse. Although the July manufacturing PMI rebounded from the lowest level

since 2009 a headline figure of 45.8 still suggests a further decline in the industrial sector.

What is more, of the 1.6 point increase in the index 1.3 point was due to higher

inventories, thereby worsening the order-inventory balance. Indeed, of the five sub-

components, the index for inventories was the only index above 50 (an index above 50

indicates an improvement). Overall the data increase the probability of a September rate

cut from Norges Bank.

The week also brought the monthly figures on house prices from Real Estate Norway.

After last month’s positive surprise this week’s release showed a monthly decline of 0.3%

seasonally adjusted. As a result, the yearly level of house price increases has now almost

returned to Norges Bank’s forecast from the June meeting. While this should be re-

assuring for central bank governor Olsen, the figure also showed a further divergence in

regional house prices with Oslo residential buildings rising 11.7% y/y against the national

average of 6.7% y/y. This marked the largest percentage point difference since 2004 and

partly reflects the reduction in economic activity in the oil-heavy regions (e.g. Stavanger).

Fourth successive month of

intervention

Source: Danmarks Nationalbank

Swedish economy is doing relatively

well, outgrowing trend and peers

Source: Macrobond Financial

The manufacturing sector is still

struggling

Source: Macrobond Financial

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Latest research from Danske Bank Markets

6/8 Bank of England Review: Dovish BoE due to strong sterling and lower oil price

Today’s announcement from Bank of England was more dovish than expected. The split

vote was 8-1 (Danske Bank: 7-2, consensus: 7-2).

4/8 Flash Comment Denmark: DKK40.2bn in FX intervention in July

Danish FX reserves dropped DKK43.0bn to DKK583.2bn in July on the back of

DKK40.2bn in FX intervention by Danmarks Nationalbank.

11 | 7 August 2015 www.danskeresearch.com

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Macroeconomic forecast

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

Macro forecast, Scandinavia

Denmark 2014 1.1 0.6 1.4 3.7 0.3 2.6 3.8 0.6 5.1 1.8 45.2 6.32015 1.7 1.9 1.0 0.2 -0.4 3.4 1.9 0.7 4.7 -1.0 38.6 7.12016 2.1 1.9 0.3 3.2 0.1 4.9 4.6 1.7 4.4 -2.1 37.9 6.8

Sweden 2014 2.3 2.4 1.9 7.4 0.2 3.3 6.6 -0.2 7.9 -2.1 43.9 5.72015 2.3 2.0 1.6 5.3 0.1 3.8 4.9 0.2 7.8 -1.8 44.5 5.42016 2.3 2.0 1.1 3.6 0.0 5.3 5.2 1.5 7.6 -0.9 44.8 5.4

Norway 2014 2.2 2.0 2.7 0.6 0.2 2.7 1.9 2.0 3.5 - - -2015 1.5 1.9 2.3 -1.8 0.7 1.6 3.4 2.1 4.0 - - -2016 2.3 2.0 2.2 1.9 0.1 1.5 3.0 2.0 3.8 - - -

Macro forecast, Euroland

Euroland 2014 0.9 1.0 0.6 1.1 -0.1 3.7 4.0 0.4 11.6 -2.4 92.0 2.52015 1.5 1.7 1.1 2.5 0.0 3.8 4.6 0.2 11.0 -2.1 91.8 2.62016 2.0 1.1 0.7 5.5 0.0 4.2 4.1 1.4 10.2 -1.7 90.6 2.5

Germany 2014 1.6 1.2 1.1 3.4 -0.1 3.8 3.3 0.8 5.0 0.2 74.5 7.12015 2.3 2.4 1.1 3.0 0.0 5.7 5.3 0.4 5.0 0.0 72.4 7.12016 2.6 1.6 0.8 6.8 0.0 4.9 5.3 2.1 4.7 0.2 69.6 6.7

France 2014 0.4 0.6 1.9 -1.6 -0.1 2.7 3.8 0.6 10.2 -4.4 95.5 -1.92015 0.7 1.1 1.0 -0.7 0.0 4.6 4.2 0.0 10.4 -4.5 98.1 -1.92016 1.0 0.8 0.4 3.1 0.0 3.4 4.0 1.3 10.2 -4.7 99.8 -2.2

Italy 2014 -0.4 0.3 -0.9 -3.2 0.3 2.4 1.6 0.2 12.7 -3.0 132.2 1.52015 0.5 0.8 0.5 -0.7 0.0 4.3 2.6 0.0 12.6 -2.7 133.8 1.52016 1.4 0.7 0.4 3.4 0.0 4.3 3.8 1.4 12.4 -2.2 132.7 1.8

Spain 2014 1.4 2.4 0.1 3.4 -0.1 4.2 7.6 -0.2 24.5 -5.6 98.1 0.52015 2.4 2.7 -0.7 5.3 0.0 5.1 5.8 -0.7 23.2 -4.5 101.2 0.72016 2.6 1.9 0.4 6.8 0.0 4.5 4.9 1.3 21.7 -3.7 100.6 0.9

Finland 2014 -0.1 -0.2 0.2 -5.1 - -0.4 -1.4 1.0 8.7 -3.2 59.3 -1.92015 0.5 0.6 0.0 -2.0 - 2.0 1.0 0.2 9.2 -3.1 62.0 -1.02016 1.4 0.5 -0.5 3.0 - 4.0 2.5 1.0 9.0 -2.7 63.5 -0.7

Macro forecast, Global

USA 2014 2.4 2.5 -0.2 5.3 0.0 3.2 4.0 1.6 6.2 -4.1 101.0 -2.32015 2.3 3.1 0.6 3.7 0.1 2.5 5.7 0.5 5.4 -2.9 104.0 -2.52016 2.7 2.9 0.9 5.1 -0.1 4.6 4.7 2.2 5.0 -2.6 103.0 -2.6

Japan 2014 -0.1 -1.4 0.3 2.6 0.1 8.4 7.4 2.4 3.6 -7.0 245.0 0.52015 1.0 0.0 0.9 0.8 0.2 7.6 5.0 1.0 3.3 -6.5 245.0 2.22016 1.4 1.4 1.2 1.2 -0.1 6.0 7.4 1.6 3.1 -6.2 246.0 2.0

China 2014 7.4 - - - - - - 2.0 4.3 -1.1 40.7 1.82015 6.8 - - - - - - 1.7 4.2 -0.8 41.8 2.42016 6.7 - - - - - - 2.3 4.2 -0.8 42.8 2.3

UK 2014 2.8 2.5 2.1 7.8 -0.2 0.6 2.2 1.5 6.2 -5.4 88.7 -4.82015 2.8 2.5 0.7 6.1 0.0 2.4 3.9 0.3 5.5 -4.6 90.1 -4.32016 2.8 2.3 -1.0 7.5 0.0 4.7 4.7 1.6 5.3 -3.6 91.0 -3.6

Current

acc.4

GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3

Public

budget4

Public

debt4

Year

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3

Public

budget4

Current

acc.4

Public

debt4

Current

acc.4

Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Infla-

tion1

Unem-

ploym.3

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

12 | 7 August 2015 www.danskeresearch.com

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Financial forecast

Source: Danske Bank Markets

Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 07-Aug - 682.0

+3m - 716.8

+6m - 703.3+12m - 677.7

EUR 07-Aug 109.4 746.2

+3m 104.0 745.5

+6m 106.0 745.5+12m 110.0 745.5

JPY 07-Aug 124.8 5.47

+3m 125.0 5.73

+6m 126.0 5.58+12m 127.0 5.34

GBP 07-Aug 155.0 1057.0

+3m 149.0 1065.0

+6m 151.0 1065.0+12m 153.0 1035.4

CHF 07-Aug 98.1 695.5

+3m 100.0 716.8

+6m 100.0 703.3+12m 100.0 677.7

DKK 07-Aug 682.0 -

+3m 716.8 -

+6m 703.3 -+12m 677.7 -

SEK 07-Aug 873.5 78.1

+3m 903.8 79.3

+6m 877.4 80.2+12m 818.2 82.8

NOK 07-Aug 826.3 82.5

+3m 836.5 85.7

+6m 801.9 87.7+12m 763.6 88.8

Equity Markets

Regional

Price trend12 mth.

Regional recommen-dations

USA (USD) Strong USD, muted earnings growth, expensive valuation 5-8% Underweight

Emerging markets (local curr) Commodity-universe under pressure 0-5% Underweight

Japan (JPY) Reflation, corporate governance, earnings growth, fair value 10-15% Overweight

Europe (ex. Nordics) Reflation, earnings growth, cheap EUR, fair value 10-15% OverweightNordics Earnings growth, expensive valuation 5-10% Overweight

Commodities

Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

NYMEX WTI 49 58 65 64 64 67 70 70 59 68

ICE Brent 55 63 61 69 69 72 75 75 62 73

Copper 5,808 6,043 5,700 5,900 6,000 6,100 6,200 6,300 5,863 6,150

Zinc 2,091 2,188 2,150 2,200 2,225 2,250 2,275 2,300 2,157 2,263

Nickel 14,410 13,065 14,250 15,500 15,750 16,000 16,250 16,500 14,306 16,125

Aluminium 1,813 1,787 1,800 1,950 2,000 2,050 2,100 2,150 1,838 2,075

Gold 1,219 1,193 1,100 1,110 1,115 1,120 1,125 1,130 1,156 1,123

Matif Mill Wheat (€/t) 190 182 205 210 215 215 210 205 197 211

Rapeseed (€/t) 360 370 410 410 410 425 425 425 388 421

CBOT Wheat (USd/bushel) 523 505 550 580 600 610 620 630 540 615

CBOT Corn (USd/bushel) 385 367 410 420 430 430 430 430 395 430CBOT Soybeans (USd/bushel) 990 966 1,000 1,000 1,000 1,025 1,050 1,050 989 1,031

0.31

-0.02

0.10

0.59

383

-0.30

-0.74

-

--

-0.05

-0.10

-0.05

0.62

0.871.45

-0.01

-0.01

0.20

0.15

Key int.rate

0.25

0.50

0.751.25

1.00

-0.85

0.05

0.05

0.100.10

0.50

1.00

-0.40

1.00

-0.45-0.45

0.05

0.75

10-yr swap yield

-0.24

0.05

0.050.05

3m interest rate

1.25

0.05

0.10

0.50

-0.75

0.05

-0.01

0.65

0.831.26

1.00

1.00

1.25

-0.85-0.85

-0.35

0.10

-0.07

0.20

1.30

0.15

0.150.25

-

--

-0.18

0.05

-0.30

1.652.00

1.30

1.551.95

-

-

1.30

0.00

-

1.40

0.00

1.151.23

1.25

-0.35

109.4

-

-

--

136.5

745.5

745.5745.5

955.7

904.0

840.0

940.0

850.0

930.0900.0

870.0

107.3

746.2

70.0

72.0

104.0

106.0110.0

104.0

106.0110.0

130.0

133.6139.7

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Price trend3 mth.

2.70

2.32

2.85

0.96

0.10

0.14

1.14

-0.67

0.30

0.10

0.100.20

1.45

70.6

3.05

70.0

368

07-Aug

45

10,850

5,185

1,867

1,094

180

50

1,593

20162015

1.20

1.301.60

-

--

2.08

2.20

0.60

Medium 0-%

987

507

1.04

1.701.95

2.11

2.30

2.40

2.302.60

0.29

-

--

2.70

1.551.85

1.45

1.37

1.60

1.39

High

Medium

Medium 0-8%

Medium 0-5%

0-3%

0-8%

13 | 7 August 2015 www.danskeresearch.com

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Calendar

Calendar

Source: Danske Bank Markets

Continued

Source: Danske Bank Markets

Calendar

Source: Danske Bank Markets

Continued

Source: Danske Bank Markets

Source: Danske Bank Markets

Key Data and Events in Week 33

During the week Period Danske Bank Consensus Previous

Sat 08 CNY Exports y/y Jul -1.5% 2.8%

Sat 08 CNY Import y/y Jul -8.0% -6.1%

Sat 08 CNY Trade balance USD bn Jul 54.7 46.5

Sun 09 CNY PPI y/y Jul -5.0% -4.8%

Sun 09 CNY CPI y/y Jul 1.5% 1.4%

Monday, August 10, 2015 Period Danske Bank Consensus Previous

- CNY Money supply M2 y/y Jul 11.7% 11.8%

- CNY New Yuan loans CNY bn. Jul 725 1279.1

- CNY Aggregate financing CNY bn. Jul 1006.7 1858.1

- GLO Palm Oil Production Tons M Jul 1.76M

- GLO Palm Oil Stockpiles Tons M Jul 2.15M

- GLO Palm Oil Exports Tons M Jul 1.70M

1:50 JPY Bank lending y/y Jul 2.5%

7:00 JPY Consumer confidence Index Jul 41.7

8:00 JPY Eco Watchers Survey Outlook (Current) Index Jul 53.5|51.0

9:00 DKK CPI m/m|y/y Jul -0.3%|0.4% 0.0%|0.7%

9:00 DKK Current account (s.a.) DKK bn Jun 10.8 13.8

9:00 DKK Current account (not s.a.) DKK bn Jun 13.0 16.2

9:00 DKK Trade balance ex ships DKK bn Jun 7.8 7.9

9:00 DKK Exports m/m Jun 5.0% -1.3%

9:00 DKK Industrial production m/m Jun 3.0% -3.6%

9:30 SEK Industrial production s.a. m/m|y/y Jun -0.1%|3.3%

9:30 SEK Industrial orders m/m|y/y Jun -0.2%|5.9%

10:00 NOK Core inflation(CPI-ATE) m/m|y/y Jul 0.1%|2.6% 0.5%|3.2%

10:00 NOK CPI m/m|y/y Jul 0.3%|2.6%

10:00 NOK PPI m/m|y/y Jul 0.3%|-4.9%

10:00 GLO LME Stocks

10:30 EUR Sentix Investor Confidence Index Aug 22.0 20.0 18.5

16:00 USD Fed's LMCI m/m Jul 0.8

18:25 USD Fed's Lockhart (voter, dovish) speaks

22:00 GLO Crop Condition %

Tuesday, August 11, 2015 Period Danske Bank Consensus Previous

- OPC OPEC publishes monthly oil market report Aug

1:50 JPY Money supply M2 y/y Jul 3.9% 3.8%

3:30 AUD NAB business conditions Index Jul 11.0

10:00 GLO LME Stocks

10:00 ITL HICP, final m/m|y/y Jul …|0.4% ...|0.4%

11:00 DEM ZEW current situation Index Aug 64.3 64.0 63.9

11:00 DEM ZEW expectations Index Aug 34.0 31.0 29.7

12:00 USD NFIB small business optimism Index Jul 95.3 94.1

14:30 USD Unit labour cost, preliminary q/q 2nd quarter -0.2% 6.7%

18:00 GLO DOE Short-Term Crude Outlook Aug 62.04

14 | 7 August 2015 www.danskeresearch.com

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Continued

Source: Danske Bank Markets

Wednesday, August 12, 2015 Period Danske Bank Consensus Previous

- OTH Earnings - Time Warner, Standard Chartered, Societe Generale, UniCredit

- WTO IEA publishes monthly oil market report

1:50 JPY Bank of Japan minutes

1:50 JPY PPI m/m|y/y Jul -0.1%|-2.9% -0.2%|-2.4%

2:30 AUD Westpac Consumer Confidence Index (% m/m) Aug 92.2|-3.2

6:30 JPY Industrial production, final m/m|y/y Jun 0.8%|2.0%

6:30 JPY Tertiary industry index m/m Jun 0.1% -0.7%

7:30 CNY Industrial production y/y Jul 6.6% 6.8%

7:30 CNY Fixed assets investments y/y Jul 11.5% 11.4%

7:30 CNY Retail sales y/y Jul 10.6% 10.6%

8:00 SEK Prospera inflation expectations

8:00 SEK PES Unemployment % Jul 3.9%

10:00 GLO LME Stocks

10:30 GBP ILO Unemployment rate % Jun 5.6% 5.6% 5.6%

10:30 GBP Average earnings (3M) y/y Jun 2.8% 3.2%

10:30 GBP Average earnings ex bonus (3M) y/y Jun 2.8% 2.8% 2.8%

11:00 EUR Industrial production m/m|y/y Jun -0.5%|… 0.2%|1.7% -0.4%|1.6%

13:00 USD MBA Mortgage Applications %

16:30 GLO DOE U.S. Crude Oil Inventories K

20:00 USD Budget statement USD bn Jul

Thursday, August 13, 2015 Period Danske Bank Consensus Previous

1:01 GBP RICS House Price Balance % Jul 42 40

1:50 JPY Machine orders m/m|y/y Jun -4.8%|17.4% 0.6%|19.3%

8:00 DEM HICP, final m/m|y/y Jul …|0.1% 0.3%|0.1% 0.3%|0.1%

8:45 FRF HICP m/m|y/y Jul …|0.3% -0.5%|0.3% -0.1%|0.3%

9:00 ESP HICP, final m/m|y/y Jul …|-0.1% …|-0.1% -1.6%|-0.1%

9:30 SEK Underlying inflation CPIF m/m|y/y Jul -0.4%|0.4% -0.2%|0.6%

9:30 SEK CPI m/m|y/y Jul -0.5%|-0.6% -0.3%|-0.4%

10:00 GLO LME Stocks

13:30 EUR ECB account of monetary policy meeting

14:30 USD Retail sales m/m Jul 0.5% 0.5% -0.3%

14:30 USD Retail sales control group m/m Jul 0.5% 0.5% -0.1%

14:30 USD Retail sales less autos m/m Jul 0.4% 0.4% -0.1%

14:30 USD Retail sales less autos and gas m/m Jul 0.5% 0.5% -0.2%

14:30 USD Import prices m/m|y/y Jul -1.1%|-10.5% -0.1%|-10.0%

14:30 USD Initial jobless claims 1000

Friday, August 14, 2015 Period Danske Bank Consensus Previous

0:45 NZD Retail sales q/q 2nd quarter 0.5% 2.7%

7:30 FRF GDP, preliminary q/q|y/y 2nd quarter 0.2%|… 0.3%|… 0.6%|0.8%

8:00 DEM GDP, preliminary q/q|y/y 2nd quarter 0.5%|… 0.5%|1.5% 0.3%|1.0%

9:30 SEK Service production m/m|y/y Jun -0.5%|1.6%

10:00 ITL GDP, preliminary q/q|y/y 2nd quarter 0.3%|… 0.3%|0.6% 0.3%|0.1%

10:00 GLO LME Stocks

10:30 GBP Construction output m/m|y/y Jun 2.3%|3.3% 2.3%|3.3% -1.3%|1.3%

10:30 EUR Portugal, GDP, preliminary q/q|y/y 2nd quarter 0.4%|1.5%

11:00 EUR GDP, preliminary q/q|y/y 2nd quarter 0.4%|… 0.4%|1.3% 0.4%|1.0%

11:00 EUR CPI m/m|y/y Jul …|0.2% -0.6%|0.2% 0.0%|0.2%

11:00 EUR CPI - core, final % Jul 1.0% 1.0% 1.0%

14:30 USD PPI m/m|y/y Jul 0.1%|-0.9% 0.4%|-0.7%

14:30 USD PPI core m/m|y/y Jul 0.1%|0.5% 0.3%|0.8%

15:15 USD Capacity utilization % Jul 78.0% 77.8%

15:15 USD Industrial production m/m Jul 0.3% 0.2%

15:15 USD Manufacturing production m/m Jul 0.3% 0.0%

16:00 USD University of Michigan Confidence, preliminary Index Aug 93.5 93.5 93.1

19:00 GLO Baker Hughes U.S. Rig Count

The editors do not guarantee the accurateness of figures, hours or dates stated above

For furher information, call (+45 ) 45 12 85 22.

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Disclosure This research report has been prepared by Danske Bank Markets, 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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