JUL 23 UniCredit Friday Notes

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23 July 2010 Economics & FI/FX Research

Friday Notes

UniCredit Research page 1 See last pages for disclaimer.

Slowdown ahead

■ Turning. While global GDP growth accelerated up until recently, there isnow mounting evidence pointing to a tangible slowdown. The OECDleading economic indicators, one of the most reliable and most forward-looking yardsticks for the global economy, are already heading clearlysouth (cf. chart below). Their still high level does, however, argue againsta double-dip recession.

■ US. The slowdown is already evident in the hard numbers. Recenteconomic indicators were generally weaker than expected. In the secondquarter, real GDP probably grew at an annual rate of only 2¼% (IV/09:+5.6%). For the first half of 2011, we expect only 2% (pages 3-5).

■ Fed. The central bank is also becoming increasingly concerned about

the economy, since the retarding effects of the inventory cycle and theexpiring fiscal programs will soon be joined by the headwind from higher taxes. There is, therefore, a growing risk that the Fed will initiate itstightening cycle later than projected so far. It may possibly wait untilsummer next year.

■ EMU. In Europe, the spring quarter should have still been pretty good.That, however, is attributable solely to a technical reaction to the poor start to the year because of the cold winter weather and not to therecovery of final domestic demand. But GDP growth is set to slow down,although maybe not as pronounced or as early as projected given therecent upbeat readings of PMIs as well as the German Ifo climate index.

■ ECB. The retarding effects of the inventory cycle and fiscal policy

measures are being joined by external strains. This is increasing the riskthat the ECB will also have to postpone the first rate hike, especially if today's bank stress test results disappoint investors (pages 6-7 & 8-9).

■ Further topics:

– Weekly Comment: Ready, stress, go! (page 2)

– Data outlook: Higher eurozone inflation due to a base effect;US consumers becoming more skeptical (page 10).

– Market outlook: Euro to come under renewed pressure? (page 18)

GLOBAL GROWTH LOSING MOMENTUM

-30

-25

-20

-15

-10

-5

0

5

10

15

01/97 01/99 01/01 01/03 01/05 01/07 01/09

0.89

0.91

0.93

0.95

0.97

0.99

1.01

1.03

1.05

1.07

OECD Industrial production (6M rate of change, in%)

OECD leading indicators (detrended, RS)

longer-term average

Source: Datastream, UniCredit Research

ContentsWeekly Comment____________________________ 2Research Notes _____________________________ 3

Data Monitor_______________________________ 10FI Outlook_________________________________ 17FX Outlook ________________________________ 18CIB View _________________________________ 20CIB Forecasts _____________________________ 21Calendar__________________________________ 24

CIB MACRO FORECASTS

in % yoy 2009 2010 2011

GDP EMU -4.1 1.0 1.3

CPI EMU 0.3 1.5 1.8

GDP Germany -4.9 1.8 1.5

CPI Germany 0.3 1.1 1.6

GDP Italy -5.1 0.9 1.0CPI Italy 0.8 1.6 1.9

GDP US -2.4 3.0 2.4

CPI US -0.3 1.8 2.2

CIB FI/FX FORECASTS

2010/11 30-Sept 31-Dec 31-Mar 30-Jun

EMU 3M (%) 0.95 1.20 1.28 1.35

EMU 10Y (%) 3.00 3.25 3.45 3.50

US 3M (%) 0.60 0.75 1.05 1.55

US 10Y (%) 3.40 3.80 4.20 4.30

EUR-USD 1.24 1.22 1.20 1.18

USD-JPY 91 95 100 106

Oil Price 78 85 80 80

Global Head of Research & Chief Strategist

Thorsten Weinelt, CFA (UniCredit Bank)+49 89 [email protected]

Head of Economics & FI/FX Research

Marco Annunziata, Ph.D. (UniCredit Bank)Chief Economist+44 20 [email protected]

Editor

Nikolaus Keis (UniCredit Bank)+49 89 [email protected]

Editorial deadline

Friday, 23. Jul., 12:00H

Bloomberg

UCGR

Internetwww. research.unicreditgroup.eu




Friday Notes


Ready, stress, go!

Perhaps never before has such a major transparency effort beenprepared and launched with such secrecy. With only a fewhours to go before the publication of the stress test results,we know very little about the assumptions and methodology.Even worse, in the last few days there have been concernsthat the results might not be easily comparable acrosscountries, partly because of heterogeneous assumptions ongovernment bonds – the very concern that forced the publicationof the stress test results in the first place. In addition, politicalleaders from some eurozone countries have been on the wiressuggesting that their banking systems are in a fine shape, andall the banks involved would pass the tests. An IMF reportreleased Wednesday, while based on dated information, was aclear reminder of the reluctant and recalcitrant attitude of manyEuropean policymakers to the idea of publishing the results.

As the whole purpose of the exercise is to increase transparencyand bolster confidence, we have definitely started on thewrong foot. The only thing that has been strengthened so far is the impression that the eurozone is plagued by a lack of coordination that risks undermining even the best intentions,and that national interests continue to trump the commongood. The silver lining however is that this should haveserved as pragmatic expectation management: very fewinvestors now expect the European stress tests to provide a

silver bullet or to even approximate the positive impact thatthe US stress tests had a year ago. The scope for disappointment should therefore have been reduced.

The risk of “accidents” is still significant, however: The biggestrisk is that the stress tests might be perceived as a weak“pro-forma” exercise, or even worse an attempt to whitewashand pretend that all is well. To avoid this risk, governmentswill have to come clean, point to the weakest pockets of their banking systems and initiate remedial action for the mostfragile banks. A secondary risk is that differences of treatmentacross regulatory jurisdictions might increase confusion on

the relative standing of different banking systems, causinghigher volatility in the risk measures of different banks – itwould indeed be a shame if relatively stronger banks foundthemselves even temporarily under heavier pressure simplyfor having been tested with more stringent criteria.

The greatest upside, in my view, still comes from the leeway thatindividual national regulators can exploit in outlining the results of their stress tests. Spain remains the lynchpin: Spanish

policymakers seem to realize that they have perhaps the most togain from greater transparency, they were the first to pushfor publication of the results and they have extended thetests to cover a substantial share of their banking system;today, they should continue on this track by providing asmuch detail as possible on the tests, and outlining the strategy tofollow up on the weaker banks. The Spanish banking system,with a high ratio of loans to total assets, has been particularlyvulnerable to the impact of the recession and in particular tothe contraction in the real estate sector; but on the other hand, itbenefits from a high reliance on retail deposits as a fundingsource (cf. Economic Special by Loredana Federico1). If the

stress tests show that the banking system can absorb theongoing private sector deleveraging – with recapitalizationand government help if and as needed – then the relativelylow level of public debt will look much more reassuring. Andif it looks like the Spanish system is sufficiently resilient, thenrisks of EMU-wide contagion will be substantially reduced.

Realistically, it will take some time for investors to absorband process the information, given that we will have onerelease by the Committee of European Banking Supervisors(CEBS) followed by individual national releases. Depending onthe extent (if any) to which assumptions and methodologies

differ across countries, and on the extent to which the levelof details released differs across countries, it might requirequite a bit of work to figure out the implications for thedifferent banking systems and the eurozone financial sector as a whole. The immediate impact is therefore likely to bestronger for individual institutions, and especially for thoseplaced at the extremes of the distribution, that is bankspassing the tests with flying colors and banks showinginstead a significant shortfall in capital.

Marco Annunziata, Ph.D. (UniCredit Bank)44 20 [email protected]

1 Eurozone: Waiting for the EU-wide stress test




Friday Notes


US economy lost furthermomentum around mid-year

■ The US economy probably expanded 2¼% in the secondquarter. That is considerably less than the 3% we hadexpected thus far. The downward revision became necessarydue to weaker data from three sectors: private consumption,net exports and inventories.

■ Moreover, regional business surveys flag that themanufacturing sector will continue to lose momentum inthe second half of the year. This is a clear indication thatthe support from the inventory cycle is waning.

■ At the beginning of 2011, growth is bound to slow evenfurther, as the expiration of the Bush tax cuts is likely tohurt private consumption expenditures.

Weaker growth in the spring

This coming Friday, the Bureau of Economic Analysis willrelease its advance GDP estimate for the second quarter.We expect an increase of 2.3% annual rate, less than the 3% wehad seen so far.2 The downward revision became necessaryprimarily because of weaker data for private consumption,net exports and inventories.

Initially, it looked as if private consumption expenditures startedthe second quarter on a very strong note: After increasing2.1% in March – the strongest gain since January 2006 –retail sales rose another solid 0.6% in April. Accordingly, wehad until recently still expected that household spendingmight increase by 3+% in the second quarter. In the interim,however, not only was the growth rate for April revised downto 0.3%, but retail sales even reported two consecutivedeclines in May (-1.1%) and June (-0.5%). That was due in partto lower energy prices, which reduces nominal sales at gasstations, and to the expiration of the “cash for appliances“program, which had boosted demand for household

appliances in March and April. But sales in the less volatilecore group, which excludes cars, gasoline and buildingmaterial, have weakened noticeably, too. They even fell anannualized 1½% in the last three months (cf. chart nextcolumn). Apart from the slump during the Great Recession,that is the strongest decline since the statistics began in theearly 90s. Accordingly, we are revising our expectation for 2Q consumption growth down to 2.3% from 2.7%.

2See: US: Moderate growth and downside risks, Friday Notes dated

9 July 2010.

RETAIL SALES DECLINE

Retail sales ex autos, gasoline and building material:

annualized 3M change in %

-10

-5

0

5

10

15

Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10

Source: Census Bureau, Thomson Datastream, UniCredit Research

Net exports probably shaved more than half a percentagepoint off growth in the past quarter. While real exports in Apriland May were an annualized 8% above the 1Q average, realimports even increased by 15%. As a result, the real tradedeficit rose in May to its highest level since early 2009 (cf. chart).Even as we expect the real trade deficit to narrow slightly again inJune, net exports probably subtracted 0.3-0.4 percentagepoints more from growth than expected so far.

TRADE DEFICIT RISING STEADILY

Real trade balance (only goods), in USD bn

-70

-65

-60

-55

-50

-45

-40

-35

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10


Last but not least, the inventory build-up has also slowed inrecent months. As a reminder: In 4Q09 and 1Q10, privateinventories added 3.8 and 1.9pp, respectively, to growth.They were, therefore, responsible for two-thirds of the entireGDP growth in these two quarters. In order to continuestimulating growth, the stockpiling would have to acceleratefurther, as the growth contribution is derived from the changeof the inventory change. Recently, however, the stockpilinghas not only failed to accelerate further – it has even slowed




Friday Notes


(cf. chart). In nominal terms, inventories increased by only0.4% and 0.1%, respectively, in April and May, after rising by0.6% and 0.7% at the end of 1Q.

STOCKPILING SLOWING

Business inventories, in % mom

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Jan-09 May-09 Sep-09 Jan-10 May-10

Real Nominal

Source: Census Bureau/BEA, Thomson Datastream, UniCredit Research

The question is, though, how much of this slowdown isattributable to lower prices, because, ultimately, it is the devel-opment of real inventories that is relevant for the contributionto real growth. So far, official data on real inventories areonly available for the month of April. But this too shows a

slowdown. It therefore remains to be seen whether and if so, towhat extent, the most important growth factor of recent monthswas able to contribute again to GDP growth in the secondquarter. Thus far, we expect a positive contribution of 0.4pp.

Less support from the inventory cyclein the second half of the year

Consequently, the US economy entered the second half of theyear with less momentum than previously anticipated. Theloss of dynamic is particularly evident in the manufacturingsector, where business surveys indicate that the slowdowncontinues to intensify. One question in the regional Fed’smanufacturing surveys relates to expectations for new orderssix months hence. In spring 2009, this forward-lookingcomponent had been one of the first to signal the strongincrease in durable goods orders (cf. chart next column).Now, its perceptible decline suggests this boom has run itscourse. We interpret the deterioration in the orders outlookas a clear signal that the support for the economy from theinventory cycle is fading even more quickly than we hadalready anticipated. For that reason, we are adjusting our growth expectations for the second half of the year down to2¼% from 2½%.

COMPANIES EXPECT WEAKER ORDERS

0

10

20

30

40

50

60

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Expectations for new orders 6M hence*

Durable goods orders (annualized 6M change in %, RS)

*Average of the surveys of the New York and Philly Fed


Higher taxes to hurt consumption atthe beginning of 2011

At the beginning of 2011, growth will then probably sloweven further due to the expiration of the Bush tax cuts. If Congress does not act to make these tax cuts permanent, allincome tax, capital gains and dividend tax rates will rise atthe beginning of 2011. President Obama currently plans toextend the tax cuts for households with an annual income of

up to USD 250,000. But the Congressional Budget Office,CBO, estimates that even in this event federal tax revenues – i.e. household tax payments – are bound to increase in 2011by more than USD 80bn; that is no less than 0.75% of currentconsumption expenditures.3 In any event, we expect the(partial) expiration of the tax cuts will hurt householdspending in the first half of 2011. The extent of the strain canof course only be quantified in greater detail once the detailsof the new tax program have been released.

OUR GDP FORECAST FOR THE US

Real GDP and components, in % qoq (annual rate)

II/10 III/10 IV/10 I/11 II/11 2010 2011

GDP 2.3 2.3 2.2 2.0 2.0 2.8 2.1

Consumption 2.3 2.3 2.3 2.0 2.0 2.2 2.2

Investments 5.7 5.2 5.8 5.8 5.9 2.2 5.9

Public spending 0.5 0 1 .0 1 .0 1 .0 0.2 0.8

Source: UniCredit Research

Dr. Harm Bandholz, CFA (UniCredit Bank) +1 212 [email protected]

3 Congressional Budget Office, An Analysis of the President’s Budgetary Proposals

for Fiscal Year 2011, March 2010.




Friday Notes


Eurozone GDP: strong 2Q,slowdown ahead

■ Eurozone GDP likely rose strongly in 2Q, by at least 0.6%qoq (vs. 0.2% in 1Q), with risks til ted to the upside.

■ The solid GDP reading mostly reflects a strong exportperformance, while the contribution of inventories probablydeclined significantly after the whopping 1pp recorded inthe first quarter.

■ Construction witnessed a technical rebound after the verycold winter, but its underlying trend remains weak. Privateconsumption likely remained depressed, dragged down by

a large contraction in car sales.

■ Exports have started to slow, but at a moderate pace so far.We expect GDP growth to ease to around 1% annualizedin 2H, and we continue to see the risk of a double-diprecession as low (around 10%).

2Q GDP up 0.6%, with upside risks

In the eurozone, the second quarter probably witnessed asignificant pick-up in GDP momentum. Our most updatedforecast is for an acceleration to 0.6% qoq (vs. 0.2% in 1Q),recently revised up by 0.1pp to take into account a surprisingly

strong industrial recovery. Moreover, our GDP Tracker signalsthat risks to our call may well be to the upside. Eurostat willrelease the GDP flash estimate on 13 August. Here are themain growth themes for 2Q.

Industry leads the way up

In May, the 3M/3M growth rate of the eurozone IP series stoodat 3.1% (non annualized), while our preferred gauge of industrialactivity – a weighted average of national IP data that allowsneutralizing the often instable seasonal factor estimated byEurostat – signals 2.6%, the second strongest reading in atleast fifteen years. This surge reflects in large part the boostcoming from exports which, judging from a mix of surveysand hard data, probably were up another solid 2-2.5% qoq.In contrast, the contribution of inventories is likely to havemoderated substantially after stocks added one full percentagepoint to GDP growth in 1Q. The residual of the regression of the manufacturing PMI on the new orders-stock ratio seemsto have peaked for this cycle, a signal that inventories’contribution to GDP growth may be starting to ebb. Due tothe increasing signs of easing in global growth, we see theimpulse of exports and inventories moderating in the comingmonths, without final domestic demand being able to take upthe baton. This should lead to a substantial deceleration in GDP

growth in 2H, probably to a pace of only 1% annualized.Business surveys suggest that GDP momentum at the end of

the second quarter/beginning of the third quarter ranged from0.7% qoq (our Composite PMI) to 0.30% (EC survey).Probably, the “true” figure is somewhere in between, meaning

that survey indicators need to fall quite steeply during thesummer before they start signaling downside risks to our GDP projections for 2H. Actually, after the upbeat July flashPMIs and German business climate index, we see risks for the next six months skewed more towards a less pronouncedor delayed slowdown.

Construction bounces back

As widely expected, construction recovered substantially after theweather-related slump of the first quarter. The technicalrebound was particularly evident in Germany, where

construction output in April-May surged by more than 15% vs.1Q, leaving the sector on track to add 0.8pp to domestic quarterlyGDP – implying a +0.2/0.3pp boost for the eurozone as a whole.

GERMAN CONSTRUCTION COMES TO THE RESCUE

-15

-10

-5

0

5

10

15

20

25

30

01/06 01/07 01/08 01/09 01/10

German construction output (in % mom)

German construction output (3M rate of change, %, RS)

Source: Bundesbank, UniCredit Research

Given that the strong rise in eurozone capital goods production inApril-May should be the prelude to at least another smallcapex increase, total fixed investment probably rose stronglyin 2Q, we estimate by 1% qoq, if not more. This would be the

first positive reading in two years. However, the temporarynature of the construction rebound makes it likely that thissector will revert towards its underlying trend already in 3Q,meaning that residential and commercial real estate investmentwill probably resume shrinking during the summer, with theonly support coming from public works

Households remain under pressure

The consumption leg of our GDP Tracker suggests thatweakness in household spending extended into the secondquarter. After having posted a 0.1% qoq drop in the first

three months of the year, consumption probably shrank by asimilar amount in 2Q. Once again, the main drag is likely tohave been car sales, down 7.4% qoq after the end of the




Friday Notes


scrapping premium in France and Italy – our own seasonallyadjusted data indicate a particularly poor performance in the latter country. The retail sales component of our consumption

model shows some tentative signs of life, but the recoveryremains extremely weak, and we don’t expect any meaningfulimprovement to materialize soon. In June, the retail PMIremained below 50 for the sixth consecutive month, while theupward trend in consumer confidence came to a halt in thewake of the announced fiscal tightening across the area.

CAR SALES ON A STEEP DOWNWARD TREND

-20

-15

-10

-5

0

5

10

15

20

25

01/04 01/05 01/06 01/07 01/08 01/09 01/10

Car registrations (in % mom)

Car registrations (i3M rate of change, %, RS)

Source: Eurostat, UniCredit Research

The positive news is that employment is stabilizing, theunemployment rate is flattening out, and precautionarysavings have started to ease, mirroring the labor marketimprovement. Once the car-related drag begins to fade,probably starting already in the summer, private consumptionshould first stabilize, and then resume growing, though at avery modest pace. Fiscal consolidation and slowing wagedynamics leave no room for any meaningful spending recoverythroughout the forecast horizon.

Low risk of a double-dip recession

With increasing signs of moderating world growth, the downward

trend in eurozone business surveys, particularly the export-related components, deserves close monitoring in the comingmonths in order to assess the risk of a double-dip recession.In this respect, the export orders index of the factory PMI isthe key variable to watch, because its informative content byfar beats the one of the export assessment reported by theEC survey and by any other national manufacturing survey –among which Belgium’s BNB ranks first with a comfortablemargin. Moreover, the PMI export orders outperform also thefirst principal component extracted from a large dataset of

industrial surveys, both national and referred to the wholeeurozone. For the time being, the PMI is telling us thatexports have started to slow – the export orders index

peaked in March at 58.8 and in July was down to 55.1 – butthe deceleration is unfolding at a moderate pace and fromvery strong levels.

PMI SHOWS A STILL STRONG EXPORT PERFORMANCE

-10

-8

-6

-4

-2

0

2

4

6

01/98 01/00 01/02 01/04 01/06 01/08 01/10

Exports (in % qoq)

PMI-based Model

July 2010

Source: Markit, UniCredit Research

Taken at face value, the survey signals 9% annualizedexport growth at the beginning of the third quarter, whichprovides a good buffer in the face of an orderly slowdown in

global growth in the months ahead. We continue to think thatchances of a renewed dip into recession are slim, somewherearound 10%.

Marco Valli (UniCredit Bank Milan) +39 02 8862-8688,[email protected]




Friday Notes


ECB not under stress

■ Interbank rates have entered an upward trend that led to amoderate tightening of monetary conditions. However, thisdoesn’t worry the ECB, given that the rate increase istotally demand driven, i.e. by a drop in excess liquidity.

■ We analyze two scenarios for interbank rates and theECB strategy after the publication of stress test results.

■ If stress test results turn out to be a roughly neutral factor for financial markets, the trend of diminishing excess liquidityshould continue, and so will the upward trajectory of interbank rates.

■ If the market reacts negatively to the publication of stresstest results, tensions in the money market will most likelyresume, leading to an increase of the average liquidity needof the banking sector as a whole. This should contribute tostop, if not reverse, the rise in interbank rates.

■ In the case that this automatic stabilization mechanism doesn’tprove enough to stem tensions in money market rates, theECB will probably extend the provision of unlimitedliquidity to six or even twelve months.

(Slightly) tighter monetary conditions

The recent increase in euro area money market rates comes at acritical juncture, when signs of slowing global growth are becom-ing increasingly clear and stress test results loom. After thetrough at the end of March at 0.63%, the 3M Euribor rate hasclimbed to around 0.90%, with an acceleration of the upwardtrend after the expiry of the first 12M LTRO on 30 June(cf. chart). So far, the impact on the economy of higher interbank rates is equivalent to a 25bp hike in the refi rate attimes of normal functioning of monetary policy.

3M LIBOR: RECENT DYNAMICS

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

01/09 04/09 07/09 10/09 01/10 04/10 07/10

3M Euribor (%) 3M USD Libor (%)

3M GBP Libor (%)

Source: Bloomberg, UniCredit Research

We see two main issues here. The first one is whether theECB may soon start feeling uncomfortable with this trend of rising short-term rates, particularly now that the Fed has

signaled some downside risks to US growth and inflation.The second one deals with the interbank rate path and theECB strategy after the publication of bank stress test results.

ECB not worried by higher interbankrates

The answer to the first question was given by Trichet in the 8 Julypress conference. Back then, he openly stated that higher interbank rates are totally demand driven and do not reflect achange in the ECB’s monetary policy stance, given theECB’s unchanged commitment to provide unlimited liquidity at

1W and 3M maturities. We think this is a sensible argumentand the ECB can’t be accused of remaining passive on thisfront. In fact, while the first leg of the upward trajectory inEuribor rates was mostly due to resurfacing counterparty riskin the wake of the escalating debt crisis – and here the ECBreacted properly on 10 June by initiating three more 3Mrefinancing operations with full allotment – the second leg of the Euribor adjustment, which started in July, has beentotally driven by a drop in excess liquidity as banks bid lessfunds than the ones expiring (cf. chart). In other words, short-term rates are now drifting towards the refi rate to reflect theperceived better shape of the financial sector, also visible in

the diminishing appeal of the ECB’s overnight facility.

EXCESS LIQUIDITY IN THE EMU

-100

-50

0

50

100

150

200

250

300

350

400

01/07 07/07 01/08 07/08 01/09 07/09 01/10 07/10

Excess liquidity (in EUR bn)

Excess liquidity smoothed (in EUR bn)


This sort of adjustment mechanism is exactly what the ECBhad in mind when it adopted the fixed-rate, full-allotmentpolicy, and the central bank can therefore afford to berelatively relaxed about moderately higher interbank rates atthis stage. After all, the monetary policy stance remainsstrongly expansionary, as recently emphasized by some

ECB officials. Remember that at the height of the crisis, theECB decided not to lower the refi rate all the way down tozero; instead, the bank held the policy rate at 1%, but allowed




Friday Notes


for an endogenous further easing in monetary conditions byflooding the market with liquidity and lowering the ECBdeposit rate to 0.25%, widening the spread with the refi.

Responding to elevated uncertainty and counterparty risk,the banking sector took up an enormous amount of excessliquidity, so that short-term market rates fell substantiallybelow the refi. For the ECB this served two purposes. First, itallowed the bank to bolster its anti-inflation reputation byarguing that it was not following the Fed and the BoE to azero interest rate policy (ZIRP); second, it set the stage for an eventual initial tightening of monetary conditions withoutthe need to hike the refi. This is what seems to be happeningnow, as some improvement in underlying conditions results inan endogenous tightening of the monetary stance. This hastwo advantages: first, it avoids the political noise associated

with a policy rate move; second, it can be automaticallyslowed or reversed if conditions change, as the ECB is stilloffering unlimited liquidity.

Stress tests and interbank rates:a scenario analysis

Let’s now come to the ECB strategy after the publication of stress test results. We see two main possible scenarios:

1. Stress test results turn out to be a roughly neutral factor for financial markets, with investors not particularly concerned

by the absence of a sovereign default scenario and not-too-aggressive haircuts assumptions. This could happen either because the absence of the sovereign default scenariohas been widely anticipated and therefore represents nosurprise to forward looking financial markets, or becausefinancial markets are truly convinced that the actual sovereignrisk in the euro area has materially declined after the ECBstarted buying government bonds. In either case, thestress test results would be seen as a fairly reliable proxy for the soundness of the financial sector, and the plausibilityof these results would be reflected in the fact that not allthe banks pass the test but approximately 10-20% of themrequire new capital. In this relatively benign environment,

the trend of diminishing excess liquidity should continue –though probably not in a smooth and linear fashion – andso will the upward trajectory of interbank rates. Note thatthe process would involve some volatility: as some bankswould fail the test, markets would watch how their situation isbeing addressed, whether with attempts to raise newcapital on the market, or via direct government intervention.The sooner and the faster these situations are addressed,the lower the volatility will be. The ECB would then bemonitoring the situation closely but refraining from anyactive intervention. Most likely, there won’t be any 3Moperation beyond the three already announced for 3Q,

with the final one taking place at the end of September with maturity at year-end, when there will also be theexpiry of EUR 97bn of liquidly from the last 12M LTRO.

This means that at the beginning of 2011 unlimited liquidity willbe available only at regular 1W MROs. Under theseassumptions, the upward trend of the 3M Euribor rate will

probably see a bump at the end of September when therewill be the simultaneous expiry of 3M, 6M and 12M operationsfor a total of EUR 225bn: regardless of how much of thisliquidity will be rolled over in the 3M auction, the maturityof outstanding liquidity will shorten noticeably. All in all,the 3M Euribor should rise above the refi already in 4Q10(which is our current view). At that point, carefully calibratedrhetoric hinting at a prolonged period of stable policy ratesshould allow the ECB to stabilize money market rates justabove the refi rate for some time. A clear upward trend ininterbank rates will probably resume only late next year, inanticipation of the first refi rate hike that we see at end-2011.

2. The market reacts negatively to the publication of stress testresults, either because the stress scenarios are perceivedas too benign (and consequently the capital need is seenas too low to be reliable), or because the coverage isconsidered insufficient to identify all the critical positionswithin individual countries (we recall that results will cover at least 50% of each national banking sector); or becausedifferences in methodology and assumptions at the nationallevel are too significant to allow for a meaningful cross-countrycomparability of results. The third appears at the time of writing as the biggest risk, and the Committee of European

Bank Supervisors (CEBS) has not yet been able to clarifywhether stress assumptions differ across countries, especiallyas regards the treatment of sovereign bonds. If this is thecase, tensions in the money market will most likely resume,leading to an increase of the average liquidity need of thebanking sector as a whole. With the ECB still committedto provide unlimited liquidity, higher demand will lead tohigher excess liquidity in the system, contributing to stop,if not reverse, the rise in interbank rates. In the case thatthis automatic stabilization mechanism doesn’t proveenough to stem tensions in money market rates, the ECBhas two options: lowering the refi rate, which we deem asvery unlikely, or extending the provision of unlimited liquidity

to six or even twelve months. The announcement of anew 6M operation in the late summer will imply some risksof a later-than-currently projected start to the tighteningcycle, while a 12M operation would probably be consistentwith a delay of rate hikes into 2012.

Marco Annunziata, Ph.D. (UniCredit Bank) +44 20 [email protected]





Friday Notes


Data Monitor Europe – Preview of the coming week

Tuesday, 27 July

EMU, M3 M3 GROWTH NEAR THE ZERO LEVEL

June CIB Cons. May Apr

in % yoy -0.1 -0.1 -0.2 -0.2

-2

0

2

4

6

8

10

12

14

16

01/99 01/01 01/03 01/05 01/07 01/09

M3 (in % yoy)

Loans to private sector (3M rate of change, smoothed, in %)

ECB's M3 growth reference value

M3 annual growth rate is expected to hover in the zeroneighborhood also in June (up to -0.1% from the -0.2%of the previous month), with a slight increase in themonthly flow, which should come back into positiveterritory. Improvement will be widespread over allcomponents, involving both loans to the household

sector (to show some stabilization) and loans to non-financial corporations.

Source: Thomson Datastream, UniCredit Research

GERMANY, GFK CONSUMER CLIMATE LITTLE MOVEMENT IN CONSUMER CONFIDENCE

July CIB Cons. June May GfK Index

Index 3.6 3.6 3.5 3.5

-5

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

The start of budget consolidation slated for the comingyear and the hike of social insurance contributions areweighing on households’ income expectations. In contrast, job fears have continued to decline, resulting in a higher willingness to consume. Overall, therefore, we currentlyexpect no material movements in the consumer cl imate.

Source: GfK, UniCredit Research

Wednesday, July 28

GERMANY, CONSUMER PRICES CORE RATE REMAINS MUTED (IN % YOY)

July CIB Cons. June May

in % mom 0.1 -- 0.1 0.1

in % yoy 1.0 1.2 0.9 1.2

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

01/05 07/05 01/06 07/06 01/07 07/07 01/08 07/08 01/09 07/09 01/10

Headline inflation Core rate (ex energy & food)

Energy prices trended lower in the course of the month.In contrast, prices for package tours should have followedthe seasonal pattern and spiked at the beginning of themain vacation period. Overall, we expect a slight uptickin consumer prices both mom and yoy. Core inflationshould be relatively unchanged at just over ½%.

Source: Federal Statistical Office, UniCredit Research




Friday Notes


Thursday, 29 July

EMU, ECONOMIC CONFIDENCE ECONOMIC CONFIDENCE STILL CLOSE TO THE CYCLE HIGH


99.7 99.0 98.7 98.4

60

70

80

90

100

110

120

01/99 01/01 01/03 01/05 01/07 01/09

-40

-30

-20

-10

0

10

20

EC economic sentiment

EC consumer confidence (RS)

The ESI (Economic Sentiment Indicator) is expected tocontinue its moderate recovery trend in July. We expectto see further modest signs of improvement in theindustry and services components, while we alreadyknow from the preliminary estimate released yesterdaythat consumer confidence posted a nice increase. Giventhat in the recent recovery phase the EC survey rose

less than the PMIs, it is plausible to assume that, evenwhen the PMIs will resume easing, the downward trend inthe ESI will be more moderate than the one of the PMIs.


GERMANY, UNEMPLOYMENT FURTHER IMPROVEMENT (UNEMPLOYED IN MN)

July CIB Cons. Jun May

in ‘000 mom, sa -15 -15 -21 -41

in ‘000 mom, nsa 20 -- -89 -164

2.5

3.0

3.5

4.0

4.5

5.0

5.5

01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 01/08 01/10

not seasonally adjusted

seasonally adjusted

Corporate hiring plans signal an ongoing, across-the-board improvement on the labor market. However, thestart of the summer vacation period in some federalstates should already have triggered a limited uptick in thenot adjusted number for July. Adjusted for seasonal factors,we expect the thirteenth consecutive monthly decline.

Source: Federal Employment Agency, UniCredit Research

ITALY, BUSINESS CONFIDENCE BUSINESS CONFIDENCE POINTS SLIGHTLY SOUTH


96.0 96.5 96.1 96.2

65

70

75

80

85

90

95

100

105

110

115

120

01/99 01/01 01/03 01/05 01/07 01/09

ISAE-Business confidence


Business confidence is expected to retrace marginallyin July. The support coming from ongoing resilience of neworders – especially foreign – will be offset by the negativeimpact that should stem from a slight pick-up in inventoriesand by the potential stabilization of the productionoutlook.




Friday Notes


Friday, 30 July

EMU, CONSUMER PRICES INFLATION IS SET TO RE-ACCELERATE IN JULY


in % mom -0.5 -- 0.0 0.1

in % yoy 1.6 1.8 1.4 1.6

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

01/99 01/01 01/03 01/05 01/07 01/09

Consumer prices (seasonally adjusted, in % yoy)

Core rate (seasonally adjusted, in % yoy)

In July, the headline inflation rate is expected to resumerising due to an energy base effect. Risks to our 1.6%forecast are to the downside. Food inflation exitednegative territory in June and is likely to continue on a wellestablished moderate upward trajectory. Endogenousprice pressures remain very weak and the trend in coreinflation remains downwards.

Source: Eurostat, UniCredit Research

ITALY, CONSUMER PRICES BACK ON THE RISE


in % mom 0.2 -- 0.0 0.1

in % yoy 1.5 1.5 1.3 1.4

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

01/99 01/01 01/03 01/05 01/07 01/09

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

4.4

CPI (in % mom ) CPI (in % yoy, RS)

After having marginally slowed also in June, Italianinflation is expected to back on the rise to 1.5%,interrupting the easing trend since April. The main swing

factor is likely increasing gas prices, which should drive upthe housing component. We see 2010 inflation at 1.6%.

Source: Istat, UniCredit Research

Tullia Bucco (UniCredit Bank Milan)+39 02 [email protected]

Chiara Corsa (UniCredit Bank Milan) +39 02 [email protected]

Alexander Koch, CFA (UniCredit Bank) +49 89 378-13013

[email protected]

Chiara Silvestre (UniCredit Bank Milan)[email protected]





Friday Notes


Data Monitor US – Preview of the coming week

Monday, 26 July

NEW HOME SALES DEMAND FOR NEW HOMES AT RECORD-LOWS


In thousands annualized 325 320 300 446

200

400

600

800

1000

1200

1400

1600

01/00 01/02 01/04 01/06 01/08 01/10

New home sales (in thousands, saar)

6-month moving average

Following the expiration of the homebuyer tax credit,new home sales plunged to a new all-time low in May! For June, we expect only a minor rebound. The assumed levelof an annualized 325k units would still be the second-lowest since statistics began in 1963. That shows that,without the tax credit, demand for homes is still lackluster.


Tuesday, 27 July

S&P/CASE SHILLER HOME PRICE INDEX HOUSE PRICES CONTINUE TO EDGE UP

May CIB Cons. Apr Mar In % yoy

In % yoy 5.1 3.7 3.8 2.3

-25

-20

-15

-10

-5

0

5

10

15

20

01/00 01/02 01/04 01/06 01/08 01/10

Deflation

Inflation The widely followed S&P/Case Shiller home price indexrose 3.8% over the last twelve months, the highest yoyrate since autumn 2006. And due to a positive basiseffect, we expect the yoy rate to accelerate further tomore than 5%, which would be the highest level sinceAugust 2006. On a monthly basis, however, the pace of theprice increases has slowed again of late. This moderationis likely to intensify in the coming months due to the endof the tax credit for homebuyers. In general, we continueto expect that huge (shadow) inventories of unsoldhomes will prevent a significant house price appreciationfor the time being. Source: Thomson Datastream, UniCredit Research




Friday Notes


CONSUMER CONFIDENCE – CONFERENCE BOARD CONSUMER CONFIDENCE SLIPPED FURTHER

July CIB Cons. June May Consumer confidence index

51.0 51.8 52.9 62.7

20

35

50

65

80

95

110

125

140

155

01/00 01/02 01/04 01/06 01/08 01/10

Conference Board University of Michigan

The Conference Board’s consumer confidence index fellto a three-month low in June. The major factors behindthe deterioration in the mood of households were aweaker economic and labor market outlook, a weaker stock market, and the oil spill in the Gulf of Mexico.While the oil spill has apparently been stopped, other problems are still looming. The daily Rasmussen Surveyconfirmed that consumer sentiment declined further in July.


Wednesday, 28 July

DURABLE GOODS ORDERS SLOWER GROWTH IN NEW ORDERS


In % mom 0.5 0.8 -0.6 2.9

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

01/00 01/02 01/04 01/06 01/08 01/10

Durable goods (in % yoy)

All goods (in % yoy)

Durable goods orders fell in May, following five consecutivemonthly increases. The decline was caused by a 30% dropin civilian aircraft orders. The core group of nondefense

capital goods orders ex aircraft, in contrast, rose another 2.1% in May, more than reversing the 2.7% decline inApril. The latest regional manufacturing surveys signal,however, that the manufacturing sector has started tolose some momentum, due to fading support from theinventory cycle and lackluster capex spending. Accordingly,we expect a more moderate increase in new orders for June.


Thursday, 29 July

BEIGE BOOK NO NEED TO ACT

Key interest rates in %

0

1

2

3

4

5

6

7

8

01/99 07/00 01/02 07/03 01/05 07/06 01/08 07/09 01/11

Fed funds target rate

3M Eurodollar

3M Eurodollar FRAs

CIB forecast (3M)

CIB forecast

The Beige Book summarizes comments received frombusinesses and other contacts in the twelve Fed districts.The latest report stated, “economic activity continued to

improve […], although many Districts described the pace

of growth as “modest” . While the current report shouldreiterate that the economy continues to improve, theoverall tone could be a bit more cautious. The latestmanufacturing surveys, for example, declined significantly inNew York and Philadelphia, signaling that the massivesupport from the inventory cycle is fading. In addition,we are interested in the assessment of the labor marketsituation, particularly any reports about the transitionfrom temporary to permanent workers.





Friday Notes


Friday, 30 July

REAL GDP, ADVANCE ONGOING BUT MORE MODERATE GROWTH

II/10 CIB Cons. I/10 IV/09

in % qoq annualized 2.3 2.5 2.7 5.6

in % yoy 3.2 -- 2.4 0.1

-8

-6

-4

-2

0

2

4

6

8

01/00 01/02 01/04 01/06 01/08 01/10

Real GDP (in % qoq, ann.)

Longterm average

CIB forecast

The US economy likely expanded for the fourth straightquarter. We expect that real GDP grew an annualized 2.3%in the second quarter. While private consumption, businessfixed investment and inventories added to growth, netexports likely were a drag (for more information, pleasesee my research note).


EMPLOYMENT COST INDEX LABOR COST PRESSURE TO STAY BENIGN

II/10 CIB Cons. I/10 IV/09

in % qoq 0.4 0.5 0.6 0.4

1

2

3

4

5

6

7

8

I/02 I/03 I/04 I/05 I/06 I/07 I/08 I/09 I/10

Employment cost index (in % yoy)

Wages & salaries (in % yoy)

Benefits (in % yoy)

The Employment Cost Index, ECI, rose in the firstquarter at the fastest pace since autumn 2008. Thatincrease was largely triggered by a 1.4% rise in privateindustry benefits. Wages & salaries, in contrast, edged

up by a moderate 0.4%. Due to the still significantunderutilization of the labor force, upward pressure onwages & salaries and benefits should have remainedbenign in 2Q.


Dr. Harm Bandholz, CFA (UniCredit Bank)+1 212 672 [email protected]




Friday Notes


Review Europe

German Ifo: The party goes onThe Ifo business climate index unexpectedly jumped from101.8 to 106.2. It was the strongest increase since reunification.The rise was driven by a massive increase not only in thecurrent situation component from 101.1 to 106.8, butexpectations were also up very strongly from 102.4 to 105.5,reversing two preceding declines and climbing to the highestlevel since October 1994. Export expectations were reportedto have stabilized at last month's high level. The strongimprovement was broad based among sectors.

The latest Ifo survey and the release of advance PMI data

allow for only one comment: Wow! The German businessmodel still remains in full swing at the beginning of thesecond half of the year. Driven by the recent very briskdemand from abroad, industry is recovering impressivelyfrom the preceding slump. Auto producers are currently evenreporting that extra shifts are necessary to work off neworders, and order books in machinery appear already wellfilled for this year. Subsequently, domestic business has alsobeen stabilizing again, reflected in higher sentiment readingsfor construction and above all trade – supported by thefurther improvement in the labor market conditions. And Ifofurther highlighted that especially the beverage industry

profited from the FIFA World Cup and the heat wave. All inall, after the unanimously expected strong rebound of theeconomy in spring, the environment for the second half of the year looks more solid than initially anticipated. Thetailwind still remains very strong.

IFO INDEX

75

80

85

90

95

100

105

110

115

120

1995 1997 1999 2001 2003 2005 2007 2009

Overall climate

Expectations

Current conditions

Source: Ifo, UniCredit Research

The German economy is likely to maintain a solid momentumfor the rest of this year. With the latest sharp rebound indomestic business confidence figures, we see marked

upside risks to our GDP forecast of 2.0% (adjusted) for 2010.Nevertheless, although a deceleration in the economicdynamic is likely to be postponed, it still remains inevitable.The important impulses from abroad are about to lose steam,as clearly indicated by the latest noticeable downward trendin the OECD leading indicators. Temporary support factorsare phasing out and also the upswing in Emerging Asia isgoing to shift down a gear. But this is definitely no reason toend the party now.

Alexander Koch, CFA (UniCredit Bank)+49 89 [email protected]




Friday Notes


Fixed Income Outlook

■ Currencies and bond markets extensively follow the scriptof the US bank stress test release.

■ Risk of rising yields in core countries of the euro zonetherefore persists, and tactical duration immunization stilllooks meaningful.

On schedule: Currencies…

Last week, we focused on the issue of the stress test results,and with just a few hours before the scheduled release(18:00 CET) this issue is naturally still a hot item. Neither Moody’s one-notch downgrade of the Irish rating to Aa2 nor

a "dovish" speech by Bernanke were able to budge currenciesand bond markets from the path, outlined last week, which isbased on the experiences of the US stress test at thebeginning of May 2009. For that reason, we are also dedicatingthis note to a comparison "then and now" in even greater detail. Our current recommendations are clearly delineatedanyway. The decision of our equity market colleagues toupgrade the banking sector on tactical considerations servesas a proxy here. There is an explicit and extremely closecorrelation between movements in the key currencies. TheUSD index, but also the EUR-USD exchange rate, is trackingthe trends of May 2009 with great precision. The movement

is naturally also benefiting from the recently intensifying"double dip/deflation" debate in the US, while the ECB iswallowing in underlying optimism.

USD-INDEX THEN AND NOW

Percentage change in the 20 trading days before and after the stresstest release

-10

-8

-6

-4

-2

0

2

4

-20 -15 -10 -5 0 5 10 15 20

US stress test release EU stress test release


EUR-USD EXCHANGE RATE THEN AND NOW

Percentage change in the 20 trading days before and after the stresstest release

-4

-2

0

2

4

6

8

10

-20 -15 -10 -5 0 5 10 15 20



...and bonds

Last but not least, bond markets are also trading within theanticipated ranges. It doesn’t matter whether one looks at the10Y Bund yield, 10Y EUR swap rate or aggregated 7-10Yyields in the EGB universe; it is the calm before the storm.

10Y BUND YIELD THEN AND NOWChange (in bp) in the 20 trading days before and after the stress testrelease

-20

-10

0

10

20

30

40

50

60

-20 -15 -10 -5 0 5 10 15 20



Since we do not assume a worst-case scenario (refinancingrequirement in individual countries is so high that recoursemust be made to the EUR 750bn aid package), the next twoweeks will probably be dominated by moderately risingyields. Bottom line: It only remains to stress once again therecommendation we made last week. Benchmark-orientedinvestors should neutralize any active duration exposure – atleast in the short term.

Michael Rottmann (UniCredit Bank)+49 89 378 [email protected]




Friday Notes


Forex Outlook

■ View: Mixed US data releases should be the driver nextweek and contribute to further USD stabilization.

■ EUR: Investors’ reaction to the stress test results andincreasing risk aversion due to softening US economicdata releases might increasingly weigh on EUR-USD.

■ GBP: EUR-GBP might remain trapped in the 0.83-0.85 band,while some further softening in cable to around 1.52-1.51is a buy opportunity.

Stress-testing FX investors

Tonight’s disclosure of the EU Bank Stress Test results shouldfinally lift the veil on which European banks will need to raiseadditional capital following weeks of speculation, whichhardly helped the EUR to develop further upside potential.The never-ending speculation, first on the methodologiesand parameters to be applied in the stress test, then onwhich banks have passed or failed the test and, eventually,on when and in what way the results will be disseminatedunnerved FX investors and contributed to halt the EUR-USDrecovery.

Worries about the US economy will easily continue to be the

major driver in the FX market in the coming weeks followingthis week’s softening in US housing data. However, themarket reaction to downbeat US economic figures might bechanging as equity markets now are trading sideways after their strong recovery during the first part of July. A negativeequity market reaction to economic data releases and asubsequent increase in risk aversion, as has already partlyoccurred following Bernanke's semi-annual monetary policyreport to Congress this week, could eventually turn the tide infavor of some USD recovery. Bernanke’s testimony, underliningthat the economic outlook remained unusually uncertain andthat the Fed was prepared to take more policy action if needed, fomented fears of economic weakness in the USand consequently allowed the greenback to stabilize. Thewinner of the week was the JPY, which again benefited fromthe US growth worries and which resisted BoJ interventionfears, notwithstanding its current strength.

The main driver next week should again be important USdata releases. Housing and durable goods orders data at thebeginning of the week might be relatively upbeat, but lower readings of US consumer confidence, 2Q GDP and theChicago PMI may again lead to spikes in risk aversion,especially if the Fed Beige Book will display a worsening inUS economic conditions. This might stabilize the greenback

further as quite good US corporate earnings currently fail tosignificantly lift risk appetite in favor of other currencies.

EUR-USD: again stressed by US data?

The stress tests clearly put the piecemeal approach of EU

policy makers and regulators in dealing with EU financialissues once more in the limelight. Furthermore, they mightfail to actually dissipate fears about the effective resilience of EU banks in case downside scenarios to the economy shouldreally materialize. Markets might consider the purportedmethodologies and parameters employed as too soft againstthe backdrop of current EMU government bond spreads.This apparently soft approach to improving financial sector stability in Europe hardly helped the medium-term prospectsof the EUR. Indeed, the recovery in EUR-USD, which wasunderway since the beginning of June, stalled this week,although the eurozone PMIs surprisingly firmed again.

Therefore, rejection at the 1.30 level might already favor again a more bearish outlook on the cross. The loss of momentum in EUR-USD might as well be partly ascribable toincreasing worries on the state of the US economy, whichthis week started to help again the greenback as explainedabove, following an intermediate period in which bad USdata were considered EUR positive. The eurozone’s owneconomic data releases such as the firming July flash CPIand the still declining German jobless numbers might not beenough to awaken renewed interest in EUR-USD next week,although here much will obviously depend on how FXinvestors actually will receive the stress test results. A warmwelcome for the results could indeed lead to renewed tests

of the 1.30 level and above, but in our view this would againrepresent an attractive selling opportunity for a medium-termtarget at 1.25, once the 1.2735 base would be broken. Onthe other hand, and probably slightly more likely, the markettonight could be disappointed by the stress test outcome andin this case, although a major part of the results haveprobably already been leaked via media reports, we expectEUR-USD to trade relatively swiftly through the 1.2735 basenext week for an initial 1.25 target thereafter.

EUR-GBP caught in the 0.83-0.85 band

The BoE minutes for July revealed no big surprises as theMPC voted 7-1 in favor of keeping rates steady, with AndrewSentance again being the lone dissenter, favoring an earlyrate hike. However, as he seems unlikely to find other MPCmembers to join him in the hawkish camp, we change our BoE call and expect the BoE to leave the base rateunchanged at 0.5% during the reminder of this year beforeraising it slightly to 0.75% in 1Q11. However, we still favor sterling over the EUR and the greenback for the remainder of the year and beyond. Having said that, on a 6M horizon,EUR-GBP might be less prone to a fall below 0.80 with BoErates on hold, while cable still should rise to 1.57 or slightlyabove. In the medium term, EUR-GBP should still continue

to oscillate in the 0.83-0.85 band, even following the firmer UK retail sales and GDP readings this week, as no top-tier




Friday Notes


data will be published in the UK next week and as both theUK and the eurozone will continue to be characterized by their fair share of budget woes in the medium term. Regarding

GBP-USD, the outlook may be slightly more straight-forward.Although in the near term the weakening of US data releasescould put the important 1.5150 support level at risk if riskaversion should increase, we consider the 1.51-1.52 area as quiteattractive to return long again in cable. UK fundamentalsshould continue to outpace US ones and subsequently1.5450 should become a distinct possibility in cable in themedium term.

Dr. Stephan Maier (UniCredit Bank Milan)+39 02 8862 [email protected]




Friday Notes


CIB View – Our Global Picture

Global economy■ The Great Recession ran its course last autumn. Realworldwide GDP growth even accelerated up until spring. Itwas, however, no more than a technical rebound after thepreceding economic collapse that is already facing another setback. But we do not expect a double-dip recession.Global economic growth should not re-accelerate beforelate next year.

■ For 2010, we expect real GDP to rise 4.4% on a PPP basis(2011: +4.1%; 2009: -1%). Economic activity in industrializedcountries should post only a modest 2.4% increase (2011:+2%), after having contracted by 3.1% in 2009. China andEmerging Asia, which were the first to achieve a trendreversal last year, will clearly remain at the top of thegrowth league.

US

■ After exiting the Great Recession last autumn, real GDPgrowth accelerated to a strong 5.6% in 4Q09 and asatisfactory 2.7% in 1Q10, respectively. But this pace of expansion was not sustainable. Growth was primarily fuelledby the re-stocking process as well as the advance effectsdue to federal fiscal programs such as the "cash for

clunkers" program. It was therefore borrowed growth fromthe future. Hence, we expect growth to decelerate further toward 2% in 1H11 before gaining momentum again latenext year. For 2010 as a whole, we expect real GDP to growby 2.8% (2011: 2.1%; 2009: -2.4%).

■ The current US growth moderation argues against a risein the Fed funds rate any time soon. We expect the Fed tostick to its Zero Interest Rate Policy (target rate currentlyat 0%-0.25%) this year, followed by a first rate hike during1H11. This will be preceded by a further gradual removal of its Quantitative Easing measures.

Eurozone

■ The eurozone exited its deepest recession since WWIIalso in autumn last year. But it was primarily theturnaround in the inventory cycle, the growth effects of economic stimuli programs and improving net exports thatlent a helping hand. After a weather-related rebound lastquarter, the exceptionally slow pace of the recovery shouldcontinue. But we do not expect the EMU-wide economy tofall back into recession again. Eurozone GDP should growby only 1% this year, after having contracted by 4.1% lastyear. For 2011, we expect EMU-wide GDP growth of 1¼%.

■ Taking into account the recent escalation of the sovereigndebt crisis together with the weak foundation of the currentrecovery, the ECB should leave its key interest rate

unchanged at currently 1% well into next year. We expectthe first hike in 4Q11 (25 bp). But the central bank will continueto remove excess liquidity again at a measured pace.

Government bond markets

■ The expected US monetary tightening in 1H 2011 inconjunction with growing risk appetite will send governmentUS bond yields higher (again) later this year, albeit moderately.Combined with the growing supply of Treasuries, long-term US yields (10Y) should reach the 3.80% level at theend of this year and 4.30% by end-June 2011. 10Y Bundyields should barely rise over the next couple of months,reaching 3¼% at the end of this year and 3.50% sixmonths later.

Exchange rates

■ The debt crisis should continue to weigh on the eurobeyond short-term fluctuations. We expect EUR-USD toweaken again, testing the 1.20 mark in 1Q11. Headwindis also coming from the widening of the transAtlanticinterest rate & yield spread since the Fed will start itstightening cycle well before the ECB. We also expect theJPY to weaken over the next year or so. USD-JPY should

rise to the 100 mark at the end of March next year.

OUR MACRO FORECASTS

in % yoy 2009 2010 2011

GDP EMU -4.1 1.0 1.3

CPI EMU 0.3 1.5 1.8

GDP Germany -4.9 1.8 1.5

CPI Germany 0.3 1.1 1.6

GDP Italy -5.1 0.9 1.0

CPI Italy 0.8 1.6 1.9

GDP US -2.4 3.0 2.4

CPI US -0.3 1.8 2.2

OUR FI/FX & OIL PRICE FORECASTS

2010/11 30-Sept 31-Dec 31-Mar 30-Jun

EMU 3M (%) 0.95 1.20 1.28 1.35

EMU 10Y (%) 3.00 3.25 3.45 3.50

US 3M (%) 0.60 0.75 1.05 1.55

US 10Y (%) 3.40 3.80 4.20 4.30

EUR-USD 1.24 1.22 1.20 1.18

USD-JPY 91 95 100 106

Oil Price 78 85 80 80




Friday Notes


Macro ForecastsGDP, real (%, yoy) 2004 2005 2006 2007 2008 2009 2010f 2011f

World economy * 4.7 4.3 4.9 5.0 3.0 -0.6 4.4 4.1Industrialized countries * 2.9 2.5 2.8 2.5 0.5 -3.1 2.4 2.0

US 3.6 3.1 2.7 2.1 0.4 -2.4 2.8 2.1

Euro area 1.9 1.8 3.1 2.8 0.4 -4.1 1.0 1.3

Germany ** 0.7 0.9 3.4 2.6 1.0 -4.9 1.8 1.5

France 2.3 2.0 2.4 2.3 0.1 -2.5 1.4 1.3

Italy 1.4 0.8 2.1 1.4 -1.3 -5.1 0.9 1.0

Spain 3.3 3.6 4.0 3.6 0.9 -3.6 -0.4 0.6

Austria 2.5 2.5 3.5 3.5 2.0 -3.5 1.3 1.4

UK 3.0 2.2 2.9 2.6 0.5 -4.9 1.2 1.8

Switzerland 2.5 2.6 3.6 3.6 1.8 -1.4 2.0 1.5

Sweden 3.5 3.3 4.6 3.4 -0.6 -5.1 2.7 2.1

Japan 2.7 1.9 2.0 2.4 -0.7 -5.3 2.7 1.8

Developing countries * 7.4 7.0 7.9 8.3 6.0 2.4 6.7 6.4

Asia 8.6 9.0 9.8 10.6 7.7 6.9 9.2 8.3

China 10.1 10.4 11.6 13.0 9.6 9.1 10.5 9.0

India 7.9 9.1 9.7 9.3 6.4 5.7 9.4 8.4Latin America 6.0 4.7 5.7 5.7 4.2 -1.8 4.8 4.0

Brazil 5.7 3.2 3.8 5.7 5.1 -0.2 7.1 4.2

Central and Eastern Europe 7.5 6.1 7.2 6.9 4.0 -5.9 3.0 4.1

Russia 7.2 6.4 7.7 8.1 5.6 -7.9 3.4 5.0

Consumer prices, CPI (%, yoy) 2004 2005 2006 2007 2008 2009 2010f 2011f

US 2.7 3.4 3.2 2.9 3.8 -0.3 1.5 1.7

core rate (ex food & energy) 1.8 2.1 2.5 2.3 2.3 1.7 1.0 1.2

Euro area, HICP 2.1 2.2 2.2 2.1 3.3 0.3 1.5 1.7


Germany 1.7 1.6 1.6 2.3 2.6 0.3 1.1 1.4

France 2.1 1.7 1.7 1.5 2.8 0.1 1.5 1.5

Italy 2.2 2.0 2.1 1.8 3.3 0.8 1.6 1.9

Spain 3.0 3.4 3.6 2.8 2.8 4.1 1.5 1.6

Austria 2.1 2.3 1.5 2.2 3.2 0.5 1.8 2.0

UK 1.3 2.0 2.3 2.3 3.6 2.1 3.2 2.6

Switzerland 0.8 1.2 1.1 0.7 2.4 -0.5 1.1 1.1

Sweden 0.4 0.5 1.4 2.2 3.5 -0.3 1.5 1.5

Japan 0.0 -0.3 0.2 0.0 1.4 -1.3 -1.0 -0.3

GDP, real (%, qoq) I/09 II/09 III/09 IV/09 I/10f II/10f III/10f IV/10f

US (annualized) -6.4 -0.7 2.2 5.6 2.7 2.3 2.3 2.2

Euro area -2.5 -0.1 0.4 0.1 0.2 0.6 0.3 0.2

Germany -3.5 0.4 0.7 0.2 0.2 0.9 0.5 0.4

France -1.4 0.2 0.3 0.5 0.1 0.5 0.3 0.2

Italy -2.9 -0.3 0.4 -0.1 0.4 0.2 0.2 0.2

Spain -1.7 -1.0 -0.3 -0.1 0.1 0.0 0.0 0.1

Austria -2.1 -0.5 0.7 0.3 -0.1 0.7 0.5 0.5

UK -2.6 -0.7 -0.3 0.4 0.3 0.5 0.4 0.4

Switzerland -1.1 -0.1 0.5 0.9 0.4 0.6 0.4 0.3

Sweden -3.0 0.7 -0.3 0.4 1.4 0.3 0.4 0.5

Japan -2.8 0.7 0.3 0.4 0.2 0.2 0.3 0.4

Consumer prices, CPI (%, yoy) I/09 II/09 III/09 IV/09 I/10f II/10f III/10f IV/10f

US -0.2 -1.0 -1.6 1.5 2.4 1.8 1.0 0.9


Euro area, HICP 1.0 0.2 -0.4 0.4 1.1 1.5 1.6 1.7


Germany 0.8 0.2 -0.2 0.4 0.8 1.1 1.1 1.4

France 0.6 -0.2 -0.4 0.4 1.3 1.6 1.5 1.5

Italy 1.5 0.9 0.1 0.7 1.3 1.4 1.6 1.9

Spain 0.5 -0.7 -1.0 0.2 1.2 1.5 1.4 1.8

Austria 1.1 0.3 0.0 0.6 1.4 2.0 1.9 1.9

UK 3.0 2.1 1.5 2.1 3.3 3.5 3.1 2.9

Switzerland 0.0 -0.7 -1.0 -0.2 1.1 1.2 1.0 1.1

Sweden 0.8 -0.5 -1.2 -0.4 1.0 1.3 1.6 1.9

Japan -0.1 -1.0 -2.2 -1.8 -1.1 -1.3 -1.0 -0.8

Comments: *The GDP shares used for aggregation are based on the purchasing-power-parity (PPP) valuation of country GDPs** Real GDP 2010 unadjusted: +1.9% GDP = Gross Domestic Product, HICP = Harmonized Index of Consumer Prices, CPI = Consumer Price Index, f = forecast




Friday Notes


Interest & Exchange Rate Forecasts (I)

INTEREST RATE FORECASTS (%, END QUARTER)2010/11 current end-Q3 end-Q4 end-Q1 end-Q2

Eurozone bond market

Refi rate 1.00 1.00 1.00 1.00 1.00

3M Euribor 0.88 0.95 1.20 1.28 1.35

2Y 0.69 0.85 1.05 1.15 1.30

5Y 1.60 1.83 2.10 2.30 2.40

10Y 2.65 3.00 3.25 3.45 3.50

30Y 3.34 3.60 3.80 3.95 4.00

10Y swap spread (in bp) 26 25 25 25 20

US Treasury Market

Fed funds target rate 0.13 0.25 0.25 0.75 1.25

3M USD Libor 0.50 0.60 0.75 1.05 1.55

2Y 0.56 0.85 1.30 2.00 2.40

5Y 1.68 2.11 2.55 3.15 3.45

10Y 2.94 3.40 3.80 4.20 4.30

30Y 3.96 4.25 4.60 4.70 4.75

10Y swap spread (in bp) 0 10 15 20 20

Japan

Target rate 0.10 0.10 0.10 0.10 0.10

3M JPY Libor 0.24 0.30 0.35 0.40 0.40

10Y JGB 1.08 1.40 1.50 1.60 1.65

United Kingdom

Repo rate 0.50 0.50 0,50 0.75 1.50

3M GBP Libor 0.74 0.80 0.95 1.20 1.85

10Y Gilt 3.35 3.55 3.70 3.90 4.00

Switzerland

3M CHF Libor mid target rate 0.25 0.25 0.25 0.50 0.75

3M CHF Libor 0.14 0.10 0.30 0.60 0.85

10Y Swissie 1.42 2.00 2.25 2.45 2.35

EXCHANGE RATE FORECASTS (END QUARTER)

2010/11 current end-Q3 end-Q4 end-Q1 end-Q2

EUR-USD 1.2880 1.24 1.22 1.20 1.18

EUR-JPY 112.01 113 116 120 125

EUR-GBP 0.8408 0.82 0.78 0.75 0.72

EUR-CHF 1.3443 1.29 1.27 1.30 1.33

USD-JPY 86.97 91 95 100 106

GBP-USD 1.5318 1.52 1.57 1.60 1.63

USD-CHF 1.0438 1.04 1.04 1.08 1.13

COMMODITY PRICE FORECASTS


Oil price (Brent, USD/b) 75.70 78 85 80 80

DJ commodity price index 261.62 290 310 310 310




Friday Notes


Interest & Exchange Rate Forecasts (II)

INTEREST RATE FORECASTS (%, END QUARTER)2010/11 current end-Q3 end-Q4 end-Q1 end-Q2

Sweden

Key rate 0.50 0.50 0.75 1.00 1.50

3M rate 0.88 0.95 1.10 1.55 2.00

10Y government bond yield 2.68 3.20 3.65 3.90 4.15

10Y spread to Bunds (in bp) 3 20 40 45 65

Norway

Key rate 2.00 2.25 2.50 2.75 3.00

3M rate 2.68 2.80 3.00 3.20 3.40



Canada

Key rate 0.75 0.75 0.75 1.00 1.253M rate 0.94 1.00 1.10 1.30 1.50



Australia

Key rate 3.50 4.75 5.00 5.25 5.25

3M rate 4.95 5.05 5.30 5.50 5.50



New Zealand

Key rate 2.75 3.00 3.25 3.50 3.50

3M rate 3.33 3.40 3.70 3.85 4.00



EXCHANGE RATE FORECASTS (END QUARTER)


EUR-SEK 9.4086 9.50 9.45 9.40 9.35

EUR-NOK 7.9500 7.70 7.65 7.60 7.55

EUR-CAD 1.3344 1.20 1.22 1.28 1.30

EUR-AUD 1.4409 1.33 1.30 1.29 1.30

EUR-NZD 1.7742 1.68 1.63 1.60 1.62

USD-SEK 7.3047 7.66 7.75 7.83 7.92

USD-NOK 6.1729 6.21 6.27 6.33 6.40

USD-CAD 1.0362 0.97 1.00 1.07 1.10

AUD-USD 0.8938 0.93 0.94 0.93 0.91

NZD-USD 0.7260 0.74 0.75 0.75 0.73

EUR-USD 1.2880 1.24 1.22 1.20 1.18




Friday Notes


Economic Event & Data Release Calendar – The week afterTime Consensus

Date (ECB) Country Indicator Period CIB est. (Bloomberg) Prev. period

02 August to 06 August 2010

Mon, 02 Aug '10 9:30 SZ Manufacturing PMI (index) Jul 65.7

9:45 IT Manufacturing PMI (index) Jul 54.3

9:50 FR Manufacturing PMI (index) Aug 53.7

9:55 GE Manufacturing PMI (index) Aug 61.2

10:00 EMU Manufacturing PMI (index) Aug 56.5

10:30 UK Manufacturing PMI (index) Jul 57.5

16:00 US Construction spending (in % mom) Jun -0.2

16:00 US ISM manufacturing (index) Jul 56.2

18:00 IT New car registration (in % yoy) Jul -19.1

20:00 IT Budget balance (EUR bn) Jul 4.3

Tue, 03 Aug '10 UK House price (HBOS, in % 3M yoy) Jul 6.3

9:15 SZ Consumer price index (in % yoy) Jul 0.5

11:00 EMU Producer price index, PPI (in % yoy) Jun 3.1

14:30 US PCE core inf lation (in % mom) Jun 0.2 0.2

14:30 US Personal expendi tu res ( in % m-om) Jun 0.2 0.2

14:30 US Personal income (in % mom) Jun 0.3 0.4

16:00 US Pending home sales (in % mom) Jun -30.0

16:00 US New orders (in % mom) Jun -1.4

23:00 US Auto sales (in mn) Jul 11.08

Wed, 04 Aug '10 9:45 IT Services PMI (index) Jul 51.5

9:50 FR Services PMI (index) Aug 61.3

9:55 GE Services PMI (index) Aug 57.3

10:00 EMU Composite PMI (index) Aug 56.7

10:00 EMU Services PMI (index) Aug 56

10:30 UK Services PMI (index) Jul 54.4

11:00 EMU Retail sales (volume, in % mom) Jun 0.1

14:15 US ADP employment index (change in thousands mom) Jul 13

16:00 US ISM Non-manufacturing (index) Jul 53.8

Thu, 05 Aug '10 12:00 GE Industrial orders (in % mom) Jun -0.5

13:00 UK Bank of England repo ra te ( in %) Jul 23 0.5 0.5

13:45 EMU ECB refi rate (in %) Jul 23 1.0 1.0

14:30 EC Trichet Speaks at ECB Monthly News Conference

Fri, 06 Aug '10 7:45 SZ Unemployment rate (in %) Jul 3.9

8:45 FR Budget balance (EUR bn) Jun -67.9

8:45 FR Trade balance (EUR bn) Jun -5.5

10:00 IT Industrial production (in % mom) Jun 1.0

10:30 UK Producer price index, manuf. products (in % mom) Jul -0.3

10:30 UK Industrial production (in % mom) Jun 0.7

11:00 IT Real GDP (in % yoy) Q2 0.5

11:00 IT Real GDP (in % qoq) Q2 0.4

12:00 GE Industrial production (in % mom) Jun 2.6

12:00 GE Industrial production (in % yoy) Jun 12.4

14:30 US Unemployment rate (in %) Jul 9.5

14:30 US Non-farm payrolls (change in thousands mom) Jul -12521:00 US Consumer credit (USD bn) Jun -9.1

*Asterisked releases are scheduled on or after the date shown; sa = seasonal adjusted, nsa = not seasonally adjusted, wda = working day adjusted




Friday Notes

UniCredit Research page 25

Disclaimer

Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness andaccuracy of which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. We reserve the

right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice.This analysis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for anyfinancial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribefor any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not besuitable for certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The investments discussedmay fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments.Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investmentinstrument or security under discussion are not explained in their entirety.

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e) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 101000, RussiaRegulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia

f) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, 34394 Levent, Istanbul, TurkeyRegulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey

g) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1000 Sofia, BulgariaRegulatory authority: Financial Supervision Commission (FSC), 33 Shar Planina str.,1303 Sofia, Bulgariah) Zagrebačka banka, Paromlinska 2, HR-10000 Zagreb, CroatiaRegulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 10000 Zagreb, Croatia

i) UniCredit Bank, Na Príkope 858/20, CZ-11121 Prague, Czech RepublicRegulatory authority: CNB Czech National Bank, Na Př íkopě 28, 115 03 Praha 1, Czech Republic

j) Bank Pekao, ul. Grzybowska 53/57, PL-00-950 Warsaw, PolandRegulatory authority: Polish Financial Supervision Authority, Plac Powstańców Warszawy 1, 00-950 Warsaw, Poland

k) UniCredit Bank, Prechistenskaya emb. 9, RF-19034 Moscow, RussiaRegulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia

l) UniCredit Bank, Šancova 1/A, SK-813 33 Bratislava, SlovakiaRegulatory authority: National Bank of Slovakia, Stefanikovo nam. 10/19, 967 01 Kremnica, Slovakia

m) Yapi Kredi, Yapi Kredi Plaza D Blok, Levent, TR-80620 Istanbul, TurkeyRegulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey

n) UniCredit Tiriac Bank, Ghetarilor Street 23-25, RO-014106 Bucharest 1,RomaniaRegulatory authority: CNVM, Romanian National Securities Commission, Foişorului street, no.2, sector 3, Bucharest, Romania

o) ATFBank, 100 Furmanov Str., KZ-050000 Almaty, KazakhstanAgency of the Republic of Kazakhstan on the state regulation and supervision of financial market and financial organisations, 050000, Almaty, 67 Aiteke Bi str., Kazakhstan

POTENTIAL CONFLICTS OF INTEREST

UniCredit Bank AG acts as a Specialist or Primary Dealer in government bonds issued by the Italian, Portuguese and Greek Treasury. Main tasks of the Specialist are toparticipate with continuity and efficiency to the governments' securities auctions, to contribute to the efficiency of the secondary market through market making activity andquoting requirements and to contribute to the management of public debt and to the debt issuance policy choices, also through advisory and research activities.

ANALYST DECLARATION

The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly.

ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST

To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch,UniCredit Securities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank haveestablished the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interestarising are managed by legal and physical and non-physical barriers (collectively referred to as “Chinese Walls”) designed to restrict the flow of information between onearea/department of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCreditMenkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank and another. In particular, InvestmentBanking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and non-physical boundariesfrom Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than as a matter of client facilitation or deltahedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and other material interests is made in theresearch. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporatefinance activities, or other activities other than the sale of securities to clients.




Friday Notes

UniCredit Research page 26

ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED

Notice to Austrian investorsThis document does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any securities and neither this documentnor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.

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Notice to Italian investorsThis document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n. 16190 approved by CONSOB on October 29, 2007.In the case of a short note, we invite the investors to read the related company report that can be found on UniCredit Research website www.research.unicreditgroup.eu.

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Friday Notes

UniCredit Research*Thorsten Weinelt, CFAGlobal Head of Research & Chief Strategist

+49 89 [email protected]

Dr. Ingo HeimigHead of Research Operations

+49 89 [email protected]

Economics & FI/FX Research

Marco Annunziata, Ph.D., Chief Economist+44 20 [email protected]

Economics & Commodity Research

Global Economics

Dr. Davide Stroppa, Global Economist+39 02 [email protected]

European Economics

Andreas Rees, Chief German Economist+49 89 [email protected]

Marco Valli, Chief Italian Economist+39 02 [email protected]

Stefan Bruckbauer, Chief Austrian Economist+43 50505 [email protected]

Tullia Bucco+39 02 [email protected]

Chiara Corsa+39 02 [email protected]

Dr. Loredana Federico+39 02 [email protected]

Alexander Koch, CFA+49 89 [email protected]

Chiara [email protected]

US Economics

Dr. Harm Bandholz, CFA+1 212 672 [email protected]

Commodity Research

Jochen Hitzfeld+49 89 378-18709

[email protected]

Nikolaus Keis+49 89 378-12560

[email protected]

EEMEA Economics & FI/FX Strategy

Gyula Toth, Head of EEMEA FI/FX Strategy+43 50505 823-62, [email protected]

Cevdet Akcay, Ph.D., Chief Economist, Turkey+90 212 319-8430, [email protected]

Matteo Ferrazzi, Economist, EEMEA

+39 02 8862-8600, [email protected] Gourov, Economist, EEMEA+43 50505 823-64, [email protected]

Hans Holzhacker, Chief Economist, Kazakhstan+7 727 244-1463, [email protected]

Marcin Mrowiec, Chief Economist, Poland+48 22 656-0678, [email protected]

Vladimir Osakovsky, Ph.D., Head of Strategy and Research, Russia+7 495 258-7258 ext.7558, [email protected]

Rozália Pál, Ph.D., Chief Economist, Romania+40 21 203-2376, [email protected]

Kristofor Pavlov, Chief Economist, Bulgaria+359 2 9269-390, [email protected]

Goran Šaravanja, Chief Economist, Croatia+385 1 6006-678, [email protected]

Pavel Sobisek, Chief Economist, Czech Republic+420 2 211-12504, [email protected]

Jan Toth, Chief Economist, Slovakia+421 2 4950-2267, [email protected]

Global FI/FX Strategy

Michael Rottmann, Head+49 89 378-15121, [email protected]

Dr. Luca Cazzulani, Deputy Head, FI Strategy+39 02 8862-0640, [email protected]

Chiara Cremonesi, FI Strategy+44 20 7826-1771, [email protected]

Dr. Stephan Maier, FX Strategy+39 02 8862-8604, [email protected]

Armin Mekelburg, FX Strategy+49 89 378-14307, [email protected]

Roberto Mialich, FX Strategy+39 02 8862-0658, [email protected]

Kornelius Purps, FI Strategy+49 89 378-12753, [email protected]

Herbert Stocker, Technical Analysis+49 89 378-14305, [email protected]

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JUL 23 UniCredit Friday Notes

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Transcript of JUL 23 UniCredit Friday Notes