Important disclosures and certifications are contained from page 17 of this report. www.danskeresearch.com
Investment Research — General Market Conditions
Market movers ahead
In the US, there is a heavy agenda, with the Jackson Hole Symposium running over
this weekend and major economic releases during the week. In terms of US data, we
estimate that job growth slowed to a still-solid 205,000 in August from a growth rate
of 235,000 on average over the past three months. We expect the manufacturing ISM
to decline from 52.7 to 52.2, while the non-manufacturing ISM should fall back to
57.8 in August, from an elevated 60.3 in July.
In the euro area, the main event next week is the ECB meeting. We expect Mario
Draghi to sound dovish, emphasising the open-endedness of the QE programme and
that the ECB is ready to use all available instruments if needed. We do not expect the
ECB to deliver further easing in September.
In the UK, we expect PMI figures for August to show a small decline in PMI services
to 56.8, from 57.4 in July, while we expect PMI manufacturing to increase marginally
to 52.2 in August, from 51.9 in July.
The Chinese stock market has stabilised in recent days. Next week, the main hurdle
for China’s stock market is the release of the official (NBS) manufacturing PMI. We
expect manufacturing PMI to decline to 49.8 in August, from 50.1 in July.
Global macro and market themes
A gradual recovery in China and oil prices should stabilise the emerging market
turmoil.
US and euro growth data still robust.
Rising pressure for more QE from the ECB points to lower yields short term.
Focus
Market Collapse: What now? Policy responses and market implications, 27 August.
Chinese growth important for
emerging markets assets
Oil prices expected to bottom soon
Source: Macrobond Financial Source: Macrobond Financial
.
28 August 2015
Editors Allan von Mehren +45 4512 8055 [email protected] Steen Bocian +45 45 12 85 31 [email protected]
Weekly Focus
China and oil prices are key in the short term
Contents
Market movers ...................................................... 2
Global Macro and Market Themes .......... 6
Scandi update ...................................................... 10
Latest research from Danske Bank
Markets .................................................................... 12
Macroeconomic forecast ............................ 13
Financial forecast .............................................. 14
Calendar .................................................................. 15
Financial views
Source: Danske Bank
Major indices
28-Aug 3M 12M
10yr EUR swap 1.04 1.15 1.50
EUR/USD 113 110 115
ICE Brent oil 48 50 62
28-Aug 6M 12-24M
S&P500 1988 0-5% 5-8%
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Market movers
Global
There is a heavy agenda in the US, with the Jackson Hole Symposium running over
this weekend and major economic releases during the week. In terms of the Fed, the
most interesting speaker is Fed Vice Chair Stanley Fischer (voter, neutral), who is due
to speak on Saturday evening.
In general, US economic data has been solid over the past two months but several factors
could slow growth rates in manufacturing industry over coming months. In particular, data
shows a significant inventory build-up in both the manufacturing and retail sectors in Q2.
While demand continues to look solid and the fall in energy prices should boost private
consumption, we believe an inventory correction is due. Coupled with the negative
impact of a stronger USD and general increase in uncertainty, manufacturing production
and the ISM manufacturing index could weaken short term. For August, we expect the
manufacturing ISM to fall from 52.7 to 52.2, while we expect non-manufacturing ISM
to stay solid but fall back to 57.8 in August, from an elevated 60.3 in July.
In terms of the labour market, the Conference Board’s measure of the labour market (jobs
plentiful less jobs hard to get) has increased to a new cycle high in August, which is an
encouraging sign. However, taking a broader set of labour market indicators into account,
we estimate that job growth slowed to a still-solid 205,000 in August, from a growth rate
of 235,000 on average over the past three months. We estimate that the unemployment
rate declined one notch to 5.2% – not far from the FOMC’s NAIRU estimate of 5.0%.
During the coming week, Boston Fed President Eric S. Rosengren (non-voter, dove)
is due to speak on Tuesday and Richmond Fed President Jeffrey M. Lacker (voter,
hawk) will speak on ‘The Case Against further delay’ on Friday.
In the euro area, the main event next week is the ECB meeting. We expect the ECB to
sound dovish and slightly worried, as the lower oil price and stronger effective EUR are
challenging its outlook for a sustained adjustment in the inflation path. Added to this, the
5Y5Y inflation-linked swap rate suggests that inflation expectations are becoming de-
anchored. Based on this, we expect Mario Draghi to emphasise the open-endedness of the
QE programme and add that the ECB is ready to use all available instruments if needed.
Moreover, he is likely to put a lot more focus on the downside risks to the economic
outlook following the latest development in China together with the sell-off in equities
(see ECB preview: Dovish and slightly worried, 27 August).
Ahead of the meeting, ECB Vice-President Vitor Constâncio is due to speak at Jackson
Hole. He also spoke this week and did not sound particularly dovish, saying inflation
expectations had fallen due to oil prices and that it was not for the ECB to correct for
commodity prices. Hence, focus will be on whether he takes a more dovish stance in line
with comments from the ECB’s chief economist Peter Praet, who also spoke this week.
We will follow the release of August euro area inflation closely, as the oil price has
fallen and the stronger effective EUR is becoming a headwind to inflation. We expect
headline inflation to fall to 0.1% y/y, from 0.2% y/y in July. The lower print is driven
by a larger drag from energy price inflation, as the lower oil price has led to lower
gasoline prices. Core inflation should also fall to 0.9% y/y after surprising on the
upside in July and jumping to 1.0% for the first time since April 2014. Looking ahead,
we expect focus to be on core inflation and any indirect impact of the lower oil price,
as this would be likely to result in further easing from the ECB.
Business inventories built in Q2
Source: US Census bureau, Danske Bank Markets
The ECB will release new projections
Source: ECB, Eurostat, Danske Bank Markets
High deflation risk from oil price fall
Source: Eurostat, Danske Bank Markets
Downside risk to retail sales in the
near term but set to strengthen in H2
Source: Eurostat, European Commission
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In contrast, Euro area retail sales should be supported by the fall in the oil price.
However, the figure for release next week is for July, where the oil price decline had
not yet resulted in lower gasoline prices and thus not improved consumers’
purchasing power. Added to this, consumer confidence declined in July, probably
affected by the ongoing uncertainty about Greece. Based on this, we see downside
risk to the retail sales figure for July but we expect it to strengthen in H2.
German factory orders rebounded in Q2 due to stronger foreign orders, while domestic
orders have been the weak link. The latest uncertainty about China and the equity sell-
off have increased the risk of a continued cautious stance among businesses and,
although the weakness will not be reflected in the figure for July, focus will be on
whether there will be an impact on sentiment in the figures for coming months.
There will also be focus on the first release of the PMIs in the periphery. For the euro
area aggregate, the flash estimate for the service PMI in August increased to 54.3,
from 54.0 in July. However, the German and French flash estimates both showed a
decline of 0.2 index points, implying the increase should be driven by improvements
in the periphery countries. Regarding the manufacturing PMIs, the Italian figure has
increased to the highest level since 2011, while the Spanish figure has declined for
two months in a row.
In the UK, the most important data releases are the PMI figures for August. PMI
services still seems a bit elevated compared with overall growth in services. We
expect a small decline to 56.8 in August, from 57.4 in July. Despite the fall, the index
will still indicate a pickup in growth in services. PMI manufacturing is slightly below
PMI manufacturing in the euro area, so there is room for a small increase but the
scope is limited due to the strong sterling, which puts pressure on the manufacturing
sector in the UK. We expect PMI manufacturing to increase marginally to 52.2 in
August, from 51.9 in July. PMI construction is also due for release.
Bank of England Governor Mark Carney is scheduled to speak at Jackson Hole on
Saturday. No text will be released though.
China will continue be in focus next week. The Chinese stock market has stabilised
in recent days. Next week the main hurdle for China’s stock market will be the
official manufacturing PMI usually published by China’s National Bureau of
Statistics (NBS). The NBS manufacturing PMI is usually less volatile than the
Markit/Caixin Manufacturing PMI, which declined from 47.8 in July to 47.1 in
August. However, the direction for the two manufacturing PMIs tends to be the same.
Hence, this suggests the NBS manufacturing PMI will also decline in August, albeit
less. We expect the NBS manufacturing PMI to decline to 49.8 in August from 50.1 in
July. It is also worth watching the development in the Markit/Caixin service PMI and
the NBS non-manufacturing PMI. Both improved in July, suggesting that the service
industry has so far been resilient to the stock market turmoil that started in June.
In Japan, the main release next week is industrial production for July. We expect
industrial production to decline 0.1% m/m after increasing 1.1% m/m in the previous
month. The overall picture is that industrial production has started to stabilise after a
very weak start to the year. The capital spending survey for Q2 will also be released
next week. The capital spending survey is the most important new input in the first
revision of the GDP data and hence will give an idea of the direction of the first GDP
revision. Lastly, the final estimate for Nikkei/Markit Manufacturing PMI and
Nikkei/Markit service PMI will be released next week.
Periphery PMIs set to increase
Source: Markit PMI, Danske Bank Markets
PMI services still elevated
Source: Markit Economics, ONS
China’s NBS manufacturing PMI
poised to drop below 50 in August
Source: Macrobond Financial, Danske Bank
Markets
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Scandi
In Denmark, the Nationalbank will release its currency reserves data for August.
After four months in which it has intervened to the tune of some DKK142bn, it will
be exciting to see whether the central bank continued to buy kroner in August. From
April to July, the bank bought back roughly half the kroner it sold in January and
February.
Also coming up are GDP figures for Q2. Preliminary indicators have been relatively
negative, with weak figures for both exports and private consumption in Q2. On the
other hand, stockbuilding probably made a positive contribution, but this is unlikely to
be enough to compensate for exports and private consumption, which we expect will
pull down the overall picture. Unfortunately, there are no good indicators of
investment and public consumption, which makes it hard to come up with any exact
estimate, and statistical discrepancies can make the picture even more mixed. On
balance, we predict GDP growth of 0%, with a significant risk of negative growth.
The reason our main scenario is not negative is that there was growth across most of
Europe in Q2 and the Danish economy has tended to mirror developments elsewhere
in Europe in recent quarters. Even if Q2 does turn out to have been weak, we would
see that as a one-off, as underlying growth in the Danish economy still looks positive,
albeit nothing special.
We do not expect gross unemployment to have changed much since last month and
expect an unchanged rate of 4.7%.
Last up, we have housing prices for June, which will show whether the price increases
in the first five months of the year continued, or whether the market has begun to
cool.
In Sweden, the main event in the week ahead is the Riksbank’s monetary policy
announcement on Thursday (due at 09:30 CEST). Even though our main scenario
suggests the Riksbank will not act until December, we must stress that the all but
certain downward revision to the Riksbank’s inflation forecast will probably be of a
magnitude sufficient to warrant immediate action. Put another way, we see a 50/50
chance of a cut on Thursday. Other than the Riksbank, we are also due to receive
inherently uninformative PMI data (Tuesday and Thursday at 08:30 CEST for
manufacturing and services respectively). Of more interest, we also receive July
industrial orders and production (Friday at 09:30 CEST), which we hope will show
recent, positive, developments have strengthened further.
In Norway, the housing market has tightened further this year despite a weaker
economic outlook and rising unemployment and household borrowing has duly
accelerated. High property prices and high household debt levels also reduce the
central bank’s room to manoeuvre by making further rate cuts more risky. The
coming week brings new data for both housing prices and credit growth. We expect
aggregate credit growth to slow moderately to 5.7% y/y in July but lending to
households to continue to increase. The market may, therefore, become a little more
uncertain about whether Norges Bank will deliver the rate cut that we expect in
September. The week also brings PMI data for August, which will be very interesting
after the sharp fall in June and July.
Nationalbank has bought kroner for
the past four months
Source: Danmarks Nationalbank
Weak growth in Q2
Source: Statistics Denmark, Danske Bank
The Riksbank base effects won’t
materialise – revisions necessary!
Source: SCB, Riksbank. Danske Bank calculations
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Market movers ahead
Source: Bloomberg, Danske Bank Markets
Global movers Event Period Danske Consensus Previous
During the week Sat 29 GBP BoE's Mark Carney speaks
Sat 29 USD Fed's S.Fischer (voter, neutral) speaks
Sat 29 EUR ECB's Constancio speaks at Jackson Hole
Mon 31-Aug 1:50 JPY Industrial production, preliminary m/m|y/y Jul 0.1%I.. 0.1%I0.8% 1.1%|2.3%
Tue 01-Sep 3:00 CNY PMI manufacturing Index Aug 49.8 49.7 50.0
6:30 AUD Reserve Bank of Australia rate decision % 2.0% 2.0% 2.0%
10:30 GBP PMI manufacturing Index Aug 52.2 52.0 51.9
16:00 USD ISM manufacturing Index Aug 52.2 52.8 52.7
Wed 02-Sep 14:15 USD ADP employment 1000 Aug 200K 185K
Thurs 03-Sep 13:45 EUR ECB announces refi rate % 0.05% 0.05% 0.05%
13:45 EUR ECB announces deposit rate % -0.20% -0.20% -0.20%
14:30 EUR ECB's Draghi speaks at press conference
16:00 USD ISM non-manufacturing Index Aug 57.8 58.3 60.3
Fri 04-Sep 8:00 DEM Factory orders m/m|y/y Jul -0.5%I.. -0.6%I0.2% 2.0%|7.2%
14:30 USD Non farm payrolls 1000 Aug 205K 218K 215K
14:30 USD Private payrolls 1000 Aug 200K 215K 210K
14:30 USD Manufacturing payrolls 1000 Aug 2K 5K 15K
14:30 USD Unemployment % Aug 5.2% 5.3% 5.3%
14:30 USD Average hourly earnings, non-farm m/m|y/y Aug 0.2%|2.0% 0.2%|2.1%
Scandi movers
Mon 31-Aug 9:00 DKK GDP, preliminary q/q|y/y 2nd quarter 0.0%I1.4% 0.5%|...
10:00 NOK Norges Bank's daily FX purchases M Sep -700M
10:00 NOK Credit indicator (C2) y/y Jul 5.7% 5.8%
Tue 01-Sep 8:30 SEK PMI manufacturing Index Aug 54.5 55.2
Wed 02-Sep 16:00 DKK Currency reserves DKK bn Aug 583.2
Thurs 03-Sep 8:30 SEK PMI services Index Aug
9:30 SEK Riksbank, rate decision % -0.35% -0.35% -0.35%
9:30 SEK Riksbank holds monetary policy meeting
Fri 04-Sep 9:30 SEK Industrial production s.a. m/m|y/y Jul 0.5%I.. -1.0%|1.2%
9:30 SEK Service production m/m|y/y Jul 1.2%|3.1%
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Global Macro and Market Themes
China and oil prices are key in the short term
It seems that calm has been restored following the dramatic fall-out in equity markets
over the past week triggered by the turmoil in emerging markets (EM). The question is
whether or not this is sustainable (see Market Collapse: What now? Policy responses and
market implications, 27 August). In the short term, we believe two factors will be
decisive.
China: A key driver for EM assets is the development in China. An important factor
behind the current EM rout has been related to the very weak development in China
and fears of a hard landing. The market tends to focus a lot on PMI and has paid less
attention to other data that have pointed to recovery in housing, so the development in
PMI in coming months is important. If PMI fails to recover, the policy response will
be important. It has to be strong enough to convince the market that a recovery will
come eventually.
Oil prices: Another major factor putting pressure on EM is the sharp decline in oil
prices – and prices for other commodities too. Countries such as Brazil and Russia are
already in deep recession and the pain is growing by the day, with a further fall in
commodity prices. Brazil is heading for recession of -2% this year, the worst
performance in 25 years, and we expect Russia to face a decline of 5% in GDP in
2015. Stress is also rising in the Gulf region and the biggest African economy Nigeria.
A further decline in oil prices might break the camel’s back and lead to a financial
event in one of these countries that could add to fears over EM.
Chinese growth important for emerging market assets
Source: Bloomberg, Danske Bank
Key points
A gradual recovery in China and oil
prices should stabilise the
emerging market turmoil.
US and euro growth data still
robust.
Rising pressure for more QE from
the ECB points to lower yields
short term.
EUR/USD lower.
Very sharp sell-off
Source: Macrobond Financial, Danske Bank
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So, what should we expect on these fronts? When it comes to China, we believe it has
the tools needed to avoid a hard landing and orchestrate a slow recovery in H2. The
moderate easing this week shows it is likely to move gradually and evaluate as it goes
along. China has an aversion to big stimulus plans, as it has its eyes focused on a
continued structural deleveraging and focuses on economic and financial reforms.
However, it is unlikely it will allow a further deterioration of the economy without
stepping harder on the gas, as this could become a threat to social stability and weaken
the Chinese leadership. Regarding oil prices, the short term call is tough, as it depends on
how big the oil glut is in the short term. However, we believe prices are far below
marginal production costs now and that a moderate recovery in China will lead to a very
gradual rise in oil prices over coming quarters.
If the above falls into place, we believe it is enough to stabilise the situation. A joker is
the looming lift-off from the Fed. If markets calm down, the Fed is on track to raise
rates – our forecast is that this will happen in December. This will be another test of the
fragility of EM.
US and euro data still robust
On a positive note, developments in both the US and the euro area continue to be
robust and point to continued recovery. US GDP for Q2 was this week revised up to
3.7% q/q annualised (from 2.3%) and durable goods orders pointed to a recovery of US
investment growth in Q3. Initial jobless claims have also stayed at very low levels
pointing to a robust job market and continued decent growth in Q3.
In the euro area, the German ifo index and French business confidence for August both
increased from solid levels giving support to our case for a moderate rebound in growth
in H2. Real M1 growth also still points to continued recovery into 2016.
The data does not include effects from the latest shock but we don’t believe the latest
turmoil is enough to derail either the US or euro recovery. Our calculations based on
exports to EM and the effect of the currency appreciation versus EM shows that the EM
rout should so far only have a limited effect on economic activity. The unknown is how
big a sentiment effect we might get that could make business reduce investments and
hiring. We do expect some sentiment effect but overall mainly see the turmoil as reducing
growth in the magnitude of 0.1-0.2 percentage points over the coming quarters.
Keep an eye on Russia and Brazil and US oil sector
While the above factors should help facilitate a stabilisation, there are risk factors
that bares close watching. One fear is that a financial event takes place in some of the
above mentioned regions – Latin America, Russia, the Gulf region and Africa (major
commodity exporter). Stress is also rising in the US energy sector as witnessed by the
sharp rise in high yield spreads within the energy sector which constitute close to 20% of
the high yield spectrum. If bankruptcies start to take place it will create negative
headlines that could hit sentiment.
Oil prices expected to bottom soon
Source: Macrobond Financial, Danske Bank
US growth solid
Source: Macrobond Financial, Danske Bank
Euro business confidence trend up
Source: Macrobond Financial, Danske Bank
US high yield spreads moving higher
driven by shock to energy sector
Source: Macrobond Financial, Danske Bank
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Hence apart from the development in China and the oil market, we need to increasingly
focus more broadly on EM as commodity exporters are under increasing pressure from
the drop in both oil and metals prices.
Rising pressure on ECB from deflationary forces
The ECB is facing a rising pressure to increase the asset purchase program as
deflationary forces work to keep inflation far below their target for a prolonged period.
The trade weighted euro has strengthened around 5% over the past six months and the
sharp drop in commodity prices will keep both headline and core inflation below the 2%
target for a long time. Add to this that the markets long term inflation expectations have
fallen again lately to levels far below the ECB’s 2% inflation objective. We believe it
will be too early for the ECB to move already at next week’s meeting, see ECB
preview: dovish and slightly worried, 27 August 2015. But if inflation expectations fail to
move higher again, the euro strengthens further or economic sentiment takes a hit from
the EM turmoil, then the ECB will likely be forced to act by raising the program,
extending the program or both.
This will likely also put more downward pressure on bond yields, although the effect this
week was somewhat contra-intuitive as yields rose alongside a sharp drop in equity
markets. But we believe this is related to EM central banks selling foreign assets to
support their currencies and possible rebalancing by real money investors selling bonds to
buy equities. In the medium term we still look for yields to move higher as the recovery
continues and the output gaps narrow further. But for now the deflationary forces and
speculation in further ECB QE has taken over. These expectations are also seen to keep
peripheral euro bonds well supported and underpin continued search for yield in
corporate credit.
EUR/USD lower
The EUR is increasingly acting as a funding currency seeing appreciation in a risk off
environment and weakening when risk appetite returns. This was also evident this week.
As we are still moderately positive on the stock market and see the Fed hiking rates in
December, we believe a further decline in EUR/USD is in the cards. Our forecast on 3m
and 6m is for the cross to decline to 110 before recovering to 115 in 12m, see also FX
Strategy: The Fed, oil and revised FX forecasts, 24 August, 2015.
Brazil and Russia already in recession
before latest commodity price decline
Source: Macrobond Financial, Danske Bank
Euro 5Y5Y inflation expectations
falling again
Source: Macrobond Financial, Danske Bank
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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 The change in the Chinese FX policy regime has led to a fear of further growth slowdown in emerging
markets but, given the recent correction in equity markets globally, this should be priced in by now.
The driver for equity markets ahead is growth and the outlook in Japan, the US and Europe are still intact.
Add to this that the monetary policies of the ECB, PBoC, BoJ and BoE are still supportive for equity markets.
Bond market
Core yields: Bund yields lower short term, higher medium term Pressure for ECB QE rising, medium-term Fed hikes and lower unemployment.
US-Euro spread: Wider Policy divergence.
Peripheral spreads set to tighten gradually from here QE, improving fundamentals, search for yield.
Credit spreads set to remain stable but with bouts of vo latility Added liquidity from the ECB set to support spreads. Greece, China and the US rate hike could cause instability.
FX
EUR/USD – lower in 3-6M , range-trading thereafter USD strength postponed but not cancelled. USD strength set to return as first Fed hikes draw closer.
USD/JPY – range near-term – higher as Fed is repriced Relative monetary policy will continue to support the cross.
EUR/SEK – stuck between 9.30 and 9.60 near term, lower medium term Battle between Riksbank and ECB for now, further out EUR/SEK set 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 recovery, positioning and rel. fundamantals.
Commodities
Oil prices – range bound near-term, recovery in H2 Higher global growth, supply consolidation set to support recovery this year.
M etal prices trending higher Chinese growth concerns a near-term negative factor, supply side risks.
Gold prices set 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
First step towards normalisation of Danish monetary policy
On Wednesday afternoon the Nationalbank announced that “there is no longer a need for
the extraordinary measures that were launched following the capital inflow at the
beginning of the year”. As a result, the Ministry of Finance has decided, on the central
bank’s advice, to start issuing government bonds again from October 2015. The
Nationalbank also decided to lower its current account limits for banks from DKK174bn
to DKK63bn, which means that a smaller share of banks’ surplus liquidity can now be
deposited at 0.00% rather than -0.75%. To our eyes, this is a first step towards the
normalisation of Danish monetary policy, and we expect the Nationalbank to raise the CD
rate during the autumn. See also Fixed Income Strategy: Denmark to resume government
bond sales in October.
The week also brought a new Economic Survey where the Ministry of Finance left its
growth forecast for the Danish economy effectively unchanged with only a marginal
downward revision from 1.7% to 1.5% this year and from 2.0% to 1.9% next year. These
expectations are largely in line with our own. The government also revised down its
forecast for the budget balance by DKK27.6bn, due mainly to a less positive view of
pension yield tax revenue. It is worth noting, however, that revenue from this tax, which
is based on pension funds’ earnings, can fluctuate widely, and so nothing is set in stone
here.
Finally the week brought the monthly employment statistics for June that showed an
increase of 2,900 from May to June in the number of people in work and so an increase of
9,600 people from Q1 to Q2. This stands in stark contrast to the LFS data, which showed
a decrease of 7,000 people in Q2, so it will be interesting to see what the “official”
employment figures are when they are released on Monday together with the national
accounts.
Sweden – Oscillations not only in financial markets
The past week’s data was a mixed bag, when trade balance data demonstrated an
unexpected loss of momentum whereas retail sales made an impressive – albeit totally
predictable – weather-related jump. The trade balance is now lower than for the same
period last year, something we haven’t seen since the beginning of the year, and which
bears close attention over the coming months. However, for now, we choose to consider it
normal economic volatility. We expect next months’ outcomes to be closely watched for
a normalization in both retail sales and trade balance data.
Positive growth outlook
Source: Ministry of Finance, Danske Bank
Normalization ahead?
Source: SCB. Danske calculations.
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Norway – Weaker but no crisis
The week’s economic data came out marginally on the positive side. Unemployment is
rising, but still at a moderate rate, employment is continuing to grow, and private
consumption has picked up again over the summer despite a dive in consumer confidence.
The oil investment survey also showed that the industry still expects a more moderate
decrease in investment next year than this year. That said, the survey was conducted
before the latest drop in oil prices and therefore has less informational value than normal.
There is no doubt that growth in Norway is slowing, but the situation is nowhere near as
bleak as the industrial indicators are suggesting thanks to the stabilising factors in the
Norwegian economy. The reason why we nevertheless expect Norges Bank to cut interest
rates again in September is that oil prices are back below USD 50/bbl. The only thing that
could stop a rate cut now would be a surprise improvement in the regional network
survey published on 11 September.
Unemployment on the up
Source: Macrobond
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Latest research from Danske Bank Markets
27/8 Flash Comment - ECB preview: Dovish and slightly worried
Main focus on the drop in 5Y5Y inflation expectations that are again far below the ECB’s
2%-target
26/ 8 Flash Comment - Russian rouble: insulating free float
Rouble weakens on oil and Chinese woes. The central bank stays on the sidelines.
Russia’s budget is at risk on overvalued rouble.
25/8 Flash Comment: China - Financial markets force PBoC to ease
Peoples Bank of China (PBoC) today cut its leading interest rate by 25bp and the reserve
requirement ratio (RRR) for commercial banks by 50bp.
13 | 28 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 1.4 1.6 1.1 1.5 0.0 3.9 4.5 0.1 11.1 -2.1 91.8 2.62016 2.0 1.1 0.7 4.9 0.0 4.2 4.1 1.2 10.3 -1.7 90.6 2.5
Germany 2014 1.6 1.2 1.2 3.3 -0.1 3.7 3.4 0.8 5.0 0.2 74.5 7.12015 1.6 2.1 1.8 2.1 0.0 4.6 5.5 0.3 4.9 0.0 72.4 7.12016 2.5 1.6 0.8 6.5 0.0 5.0 5.3 1.8 4.7 0.2 69.6 6.7
France 2014 0.2 0.7 1.5 -1.2 -0.1 2.4 3.9 0.6 10.3 -4.4 95.5 -1.92015 1.0 1.6 1.5 -0.5 0.0 5.7 6.4 0.0 10.3 -4.5 98.1 -1.92016 0.9 0.8 0.5 3.1 0.0 3.6 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 2.7 -0.6 5.3 0.0 3.4 3.8 1.6 6.2 -4.1 101.0 -2.32015 2.5 3.1 0.6 4.3 0.2 1.9 5.4 0.2 5.4 -2.9 104.0 -2.52016 2.7 2.9 0.9 5.2 -0.2 4.5 4.6 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 3.0 2.6 2.0 8.6 -0.2 0.5 2.4 1.5 6.2 -5.1 88.5 -5.42015 2.6 2.5 0.7 6.1 0.0 2.4 3.9 0.2 5.5 -4.0 87.6 -4.82016 2.5 2.3 -1.0 7.5 0.0 4.7 4.7 1.2 5.3 -2.3 86.8 -4.0
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
14 | 28 August 2015 www.danskeresearch.com
Weekly Fo
cus
Weekly Focus
Financial forecast
Source: Danske Bank Markets
Bond and money markets
Currencyvs USD
Currencyvs DKK
USD 28-Aug - 661.6
+3m - 677.7
+6m - 677.7+12m - 648.3
EUR 28-Aug 112.8 746.3
+3m 110.0 745.5
+6m 110.0 745.5+12m 115.0 745.5
JPY 28-Aug 120.9 5.47
+3m 120.0 5.65
+6m 124.0 5.47+12m 127.0 5.10
GBP 28-Aug 154.1 1019.2
+3m 157.0 1050.0
+6m 157.0 1065.0+12m 160.0 1035.4
CHF 28-Aug 96.2 687.8
+3m 99.1 683.9
+6m 100.0 677.7+12m 97.4 665.6
DKK 28-Aug 661.6 -
+3m 677.7 -
+6m 677.7 -+12m 648.3 -
SEK 28-Aug 844.1 78.4
+3m 854.5 79.3
+6m 845.5 80.2+12m 782.6 82.8
NOK 28-Aug 828.0 79.9
+3m 863.6 78.5
+6m 840.9 80.6+12m 765.2 84.7
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) EM under pressure from change in China's FX policy 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 44 48 53 58 60 62 50 58
ICE Brent 55 63 50 52 57 62 64 65 55 62
Copper 5,808 6,043 5,200 5,400 5,600 5,700 5,800 5,900 5,613 5,750
Zinc 2,091 2,188 1,875 2,000 2,025 2,050 2,075 2,100 2,039 2,063
Nickel 14,410 13,065 10,500 12,000 12,500 13,000 13,500 14,000 12,494 13,250
Aluminium 1,813 1,787 1,600 1,750 1,800 1,850 1,900 1,950 1,738 1,875
Gold 1,219 1,193 1,125 1,110 1,115 1,120 1,125 1,130 1,162 1,123
Matif Mill Wheat (€/t) 190 182 195 205 210 210 210 205 193 209
Rapeseed (€/t) 360 370 395 390 405 420 435 435 379 424
CBOT Wheat (USd/bushel) 523 505 520 550 570 580 590 600 525 585
CBOT Corn (USd/bushel) 385 367 385 400 420 420 420 420 384 420CBOT Soybeans (USd/bushel) 990 966 960 925 950 975 1,000 1,025 960 988
High
Medium
Medium 0-8%
Medium 0-5%
0-3%
0-8%Medium 0-%
890
485
1.04
1.401.55
2.00
2.30
2.40
2.402.60
0.25
-
--
2.60
1.601.75
1.40
1.33
1.30
1.38
1.15
1.351.50
-
--
1.97
2.30
0.57
365
28-Aug
43
10,060
5,140
1,752
1,127
162
48
1,560
20162015
Currencyvs EUR
2-yr swap yield
Risk profile3 mth.
Price trend3 mth.
2.35
2.22
2.60
0.84
0.09
0.13
1.03
-0.66
0.32
0.10
0.100.20
1.25
73.2
2.95
70.072.0
109.0
110.0112.0
110.0
110.0115.0
132.0
136.4146.1
112.8
-
-
--
136.3
745.5
745.5745.5
952.2
934.1
880.0
940.0
925.0
930.0900.0
950.0
108.5
746.3
71.0
1.50
-0.25
1.011.15
1.00
-0.35
1.551.95
1.25
1.401.75
-
-
1.20
-0.35
-0.20
1.10
0.20
0.200.30
-
--
-0.21
-0.30
-0.35
10-yr swap yield
-0.32
0.05
0.050.05
3m interest rate
1.00
0.05
0.10
0.50
-0.75
0.05
-0.01
0.55
0.811.18
0.75
0.75
1.00
-0.85-0.85
-0.35
0.10
-0.06
Key int.rate
0.25
0.25
0.501.00
0.75
-0.85
0.05
0.05
0.100.10
0.50
1.00
-0.45
1.00
-0.45-0.45
0.05
0.75
0.33
-0.03
0.09
0.59
360
-0.30
-0.73
-
--
-0.05
-0.08
-0.05
0.54
0.781.35
-0.01
-0.01
0.20
0.15
15 | 28 August 2015 www.danskeresearch.com
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Weekly Focus
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 36
During the week Period Danske Bank Consensus Previous
Sat 29 USD Jackson Hole symposium "Inflation dynamics and monetary policy"
Sat 29 GBP BoE's Mark Carney speaks
Sat 29 USD Fed's S.Fischer (voter, neutral) speaks
Sat 29 EUR ECB's Constancio speaks at Jackson Hole
Monday, August 31, 2015 Period Danske Bank Consensus Previous
- DEM Retail sales m/m|y/y Jul 1.0%I.. 1.3%I1.5% -2.3%I5.1%
1:50 JPY Industrial production, preliminary m/m|y/y Jul 0.1%I.. 0.1%I0.8% 1.1%|2.3%
7:00 JPY Housing starts y/y Jul 11.0% 16.3%
9:00 DKK GDP, preliminary q/q|y/y 2nd quarter 0.0%I1.4% 0.5%|...
9:00 DKK Gross unemployment s.a. K (%) Jul 125.5K (4.7%) 126K (4.7%)
9:30 SEK Wages (blue collars/white collars) y/y Jun 2.0%
10:00 NOK Norges Bank's daily FX purchases M Sep -700M
10:00 NOK Credit indicator (C2) y/y Jul 5.7% 5.8%
11:00 EUR CPI, preliminary y/y Aug 0.1% 0.1% 0.2%
11:00 EUR CPI - core % Aug 0.9% 0.9% 1.0%
11:00 ITL HICP, preliminary m/m|y/y Aug ..I0.2% -2.0%|0.3%
12:00 EUR Portugal, GDP, final q/q|y/y 2nd quarter 0.4%|1.5%
15:45 USD Chicago PMI Index Aug 54.8 54.7
Tuesday, September 1, 2015 Period Danske Bank Consensus Previous
- USD Total Vechicle Sales m Aug 17.30M 17.46M
3:00 CNY PMI manufacturing Index Aug 49.8 49.7 50.0
3:00 CNY PMI non-manufacturing Index Aug 53.9
3:35 JPY Nikkei Manufacturing PMI, final Index Aug 51.9
3:45 CNY Caixin Manufacturing PMI, final Index Aug 47.2 47.1
3:45 CNY Service PMI Index Aug 53.8
6:30 AUD Reserve Bank of Australia rate decision % 2.0% 2.0% 2.0%
8:30 SEK PMI manufacturing Index Aug 54.5 55.2
9:00 NOK PMI manufacturing Index Aug 47.5 45.8
9:15 ESP PMI manufacturing Index Aug 54.3 53.6
9:30 CHF PMI manufacturing Index Aug 49.9 48.7
9:45 ITL PMI manufacturing Index Aug 54.8 55.3
9:50 FRF PMI manufacturing, final Index Aug 48.6 48.6 48.6
9:55 DEM PMI manufacturing, final Index Aug 53.2 53.2 53.2
9:55 DEM Unemployment % Aug 6.4% 6.4% 6.4%
10:00 EUR PMI manufacturing, final Index Aug 52.4 52.4 52.4
10:30 GBP PMI manufacturing Index Aug 52.2 52.0 51.9
10:30 GBP Broad money M4 m/m|y/y Jul -0.5%|-0.3%
11:00 ITL GDP, final q/q|y/y 2nd quarter 0.2%I.. 0.2%|0.5%
11:00 EUR Unemployment % Jul 11.1% 11.1% 11.1%
14:30 CAD GDP m/m|y/y Jun 0.3%I.. -0.2%|0.5%
15:45 USD Markit manufacturing PMI, final Index Aug 52.9 52.9
16:00 USD ISM manufacturing Index Aug 52.2 52.8 52.7
16:00 USD ISM prices paid Index Aug 39.0 44.0
16:00 USD Construction spending m/m Jul 0.8% 0.1%
19:10 USD Fed's Rosengren (non-voter, dovish) speaks
Wednesday, September 2, 2015 Period Danske Bank Consensus Previous
- OTH Earnings - Time Warner, Standard Chartered, Societe Generale, UniCredit
- PLN Polish central bank rate decision % 1.5% 1.5% 1.5%
3:30 AUD GDP q/q|y/y 2nd quarter 0.4%I2.2% 0.9%|2.3%
9:00 DKK House and apartment prices Jun
9:30 SEK Current account SEK bn 2nd quarter 80.6
10:30 GBP PMI construction Index Aug 57.5 57.1
11:00 EUR PPI m/m|y/y Jul -2.2%|-0.1%
13:00 USD MBA Mortgage Applications %
14:15 USD ADP employment 1000 Aug 200K 185K
14:30 USD Unit labour cost, final q/q 2nd quarter -0.7% 0.5%
16:00 DKK Currency reserves DKK bn Aug 583.2
16:00 USD Factory orders m/m Jul 0.7% 1.8%
16:30 USD DOE U.S. Crude Oil Inventories K
16 | 28 August 2015 www.danskeresearch.com
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Calendar
Source: Danske Bank Markets
Continued
Source: Danske Bank Markets
Calendar
Source: Danske Bank Markets
Continued
Source: Danske Bank Markets
Source: Danske Bank Markets
Thursday, September 3, 2015 Period Danske Bank Consensus Previous
3:30 AUD Retail sales m/m Jul 0.4% 0.7%
3:30 AUD Trade balance AUD m Jul -3100M -2933M
3:35 JPY Markit service PMI Index Aug 51.2
7:30 FRF ILO unemployment % 2nd quarter 10.3%
8:30 SEK PMI services Index Aug
9:15 ESP PMI Services Index Aug 59.6 59.7
9:30 SEK Riksbank, rate decision % -0.35% -0.35% -0.35%
9:30 SEK Riksbank holds monetary policy meeting
9:45 ITL PMI service Index Aug 53.5 52.0
9:50 FRF PMI service, final Index Aug 51.8 51.8 51.8
9:55 DEM PMI service, final Index Aug 53.6 53.6 53.6
9:55 DEM PMI composite, final Index Aug 54.0 54.0 54.0
10:00 EUR PMI services, final Index Aug 54.3 54.3 54.3
10:00 EUR PMI composite, final Index Aug 54.1 54.1 54.1
10:30 GBP PMI services Index Aug 56.8 57.5 57.4
10:30 GBP PMI composite Index Aug 56.6
11:00 EUR Retail sales m/m|y/y Jul 0.4%I.. 0.7%I.. -0.6%|1.2%
13:45 EUR ECB announces refi rate % 0.05% 0.05% 0.05%
13:45 EUR ECB announces deposit rate % -0.20% -0.20% -0.20%
14:30 EUR ECB's Draghi speaks at press conference
14:30 USD Initial jobless claims 1000
14:30 USD Trade balance USD bn Jul -4430.0 -4384.0
15:45 USD Markit service PMI, final Index Aug 55.2
15:45 USD Markit composite PMI, final Index Aug 55.0
16:00 USD ISM non-manufacturing Index Aug 57.8 58.3 60.3
Friday, September 4, 2015 Period Danske Bank Consensus Previous
- EUR Moody's may publish Portugal's debt rating
3:30 JPY Labor cash earnings y/y Jul 2.4% -2.5%
8:00 DEM Factory orders m/m|y/y Jul -0.5%I.. -0.6%I0.2% 2.0%|7.2%
8:45 FRF Consumer confidence Index Aug 94.0 93.0
9:00 DKK Forced sales (s.a.) Number Aug
9:00 DKK Bankruptcies (s.a.) Number Aug
9:15 CHF CPI m/m|y/y Aug -0.2%|-1.4% -0.6%|-1.3%
9:30 SEK Industrial production s.a. m/m|y/y Jul 0.5%I.. -1.0%|1.2%
9:30 SEK Service production m/m|y/y Jul 1.2%|3.1%
9:30 SEK Industrial orders m/m|y/y Jul 2.5%|11.8%
14:10 USD Fed's Lacker (voter, hawkish) speaks
14:30 USD Non farm payrolls 1000 Aug 205K 218K 215K
14:30 USD Private payrolls 1000 Aug 200K 215K 210K
14:30 USD Manufacturing payrolls 1000 Aug 2K 5K 15K
14:30 USD Unemployment % Aug 5.2% 5.3% 5.3%
14:30 USD Average hourly earnings, non-farm m/m|y/y Aug 0.2%|2.0% 0.2%|2.1%
14:30 USD Average weekly hours Hours Aug 34.5 34.6
14:30 CAD Net change in full time employment 1000 Aug -17.3
The editors do not guarantee the accurateness of figures, hours or dates stated above
For furher information, call (+45 ) 45 12 85 22.
17 | 28 August 2015 www.danskeresearch.com
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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
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