Danske Daily
March 11, 2009
Editor: Allan von Mehren, +45 45128055, [email protected]
Today's key points
• US stocks rally over 6% on upbeat comments from Citigroup. Bond yields rose further. NOK and SEK gains on higher risk appetite.
• Fed might consider buying treasuries when it meets next week.
• The macro calendar is very thin today. German factory orders and inflation expectations survey in Norway are the only releases of interest.
Markets Overnight
Equity markets were on fire yesterday as Citigroup CEO Vikram Pandit delivered a very upbeat message in an internal memo to all Citigroup employees. Pandit said Citigroup had a strong start to 2009 and had its best profit performance in over a year. The message came as a complete surprise to the market as focus lately rather has been on Citigroups ability to survive as a private bank. The Citigroup share price rose 38% on the day and US stocks rose throughout the session with the S&P 500 ending up 6.4% the strongest daily in-crease since November last year. The rise in risk appetite has also benefited the credit market which saw a tightening of credit spreads. The stock market rally continued in Asia where the S&P future is up close to 1%. Nikkei is up 4.5%.
Japanese machine orders were released overnight and fell 39.5% y/y close to consensus expectations of -40.0%. Metal prices and the Baltic Freight Rate rose again yesterday, inspired by the rise in equity markets and signs of an Asian recovery.
According to the Wall Street Journal (WSJ), the Fed is considering increasing its asset purchase programme. WSJ reports that the Fed may again be looking at buying treasuries after the success of the Bank of England last week in pushing UK yields markedly lower. The Fed is due to meet next week to decide whether new meas-ures should be taken. Bond yields continued to rise yesterday on the back of the sharp rise in equities and con-tinued supply worries. The 10-year US bond yield is again trading above 3.0%.
In the FX market the CHF has weakened a bit further overnight while the JPY and EUR are broadly unchanged. SEK and NOK both strengthened yesterday and overnight on the rise in risk appetite. EUR/SEK and EUR/NOK are trading around 11.29 and 8.85 respectively this morning.
Today's events Period Our forecast Consensus Latest
CNY Trade balance USD bn Feb 28.50 39.11
00:30 AUD Wespac consumer confidence Mar -4.6%
00:50 JPY Machine orders m/m|y/y Jan -5.0%|-40.2%-1.7%|-26.8%
00:50 JPY Domestic CGPI m/m|y/y Feb -0.6%|-1.2% -1.0%|-0.2%
09:30 DKK Current account DKK bn Jan 0.65 3.10
10:00 NOK Norges Bank inflation expectations survey
10:30 GBP Trade balance GBP bln. Jan -3700 -3611
12:00 DEM Industrial orders m/m|y/y Jan -2.5%|.. -1.0%|-26.5%-6.9%|-25.1%
12:00 USD MBA mortgage applications % -12.6
19:00 USD Budget statement USD bn Feb -200.0 -175.6
22:30 NZD PMI Index Feb 42
Global Daily
The improved sentiment on equity markets and focus on supply in the US sent yields higher on both sides of the Atlantic yesterday. US yields continued higher after the close in Europe, and a negative opening could be on the cards in European bond markets this morning.
The US treasury is selling USD18bn in 10-year notes today, so supply will remain in focus along with the equity markets. US 10year treasury yields are back at 3% its highest level since November last year and it will be interesting to see if it moves significantly above this threshold in the coming days.
German factory orders are the only interesting economic data on the agenda today. We expect a decline of 2.7%. This is clearly a bad number for the economy, but it will be less atrocious than the collapse in factory orders seen in recent months.
The tendency in FX markets was clear yesterday; while equity prices soared, defensive, low-risk currencies were left in the cold and high-beta currencies rallied. It seems like the pound can depreciate in both negative and positive markets, while the euro tends to be positively correlated with risk appetite, at least against the US dollar. Ahead of the German factory orders data today (12:00 CET), we prefer not to be long euros, as the numbers are set to exhibit the abrupt downturn in European activity. Long USD positions are on the other hand not recommended prior to the release of the US budget statement (19:00 CET). Once again, focus in FX mar-kets will probably be elsewhere than on scheduled data releases.
Scandi Daily
The SEK outperformed all other G10 currencies yesterday in a genuine equity rally despite data showing that industrial production and orders merely collapsed and the activity index plunged. In fact, there is no worse development in industrial production on record in Sweden. This illustrates exactly what has been the problem for the SEK for a very long time; markets have simply been too downbeat to foster a SEK comeback even though almost everybody has agreed that the currency has been substantially undervalued and possessed huge potential. A couple of days with steadily positive, but less aggressive, stock markets and EUR/SEK can easily drop below 11, where it eventually belongs.
In Norway we received inflation data yesterday and it turned out, once again, that core inflation is far higher than expected. This underlined our long-held view that although the Norwegian economy will suffer from the global crisis, it is in a better economic situation with higher domestic cost pressures than most places else-where. While we still expect another 50bp cut by Norges Bank bringing the folio rate down to 2% flat, we have a hard time seeing Norges Bank keeping up with other central banks and cutting further than that.
There are no major key macro figures due out today in Scandinavia. Inflation expectations in Norway and La-bour Market Board data for unemployment in Sweden are both due, but neither is likely to be a market mover. Rather, the fate of the Scandinavian markets is likely to be dictated by factors such as the equity market and possible news of crisis management in the CEE countries.
Fixed Income FX +/-, bp USD 10Y Ï 3 USD 30Y Ï 4 JPY 10Y Ï 1 +/-, bp DEM 10Y Ï 7 DKK 10Y Ï 8 SEK 10Y Ï 6 NOK 10Y Ï 2 PLN 10Y Ï 0
* As of closing previous trading day
17:00 07:30(-1)* 1.31 07:3 0 3.74 6.43 3.00 3.40 17:0 0 3.00 2.72 2.78 6.43 3.72 1.32 3.68 2.94 3.76 2.97 3.32 EUR USD -0.93 JPY -0.97 GBP Ï 0.29 NOK -4.74 SEK -3.77 DKK Ï 0.03 PLN -4.02 USD JPY -0.02 GBP -1.45 CHF Ï 1.00 07:30 98.37 138.42 98.39 115.40 136.97 116.41 17:00 125.48 127.51 92.43 745.02 1133.36 467.43 17:00 463.40 92.14 890.47 745.04 1129.59 885.73 124.51 126.59 07:30 Ð Ð Ð Ð Ð Ð Ð
Today's market data
+
D JST OXX5 0 Ï
M a x 6 .5 M a x 5 .8 OMXC 20 Ï
Min -0 .1 Min -0 .5 OMXS3 0 Ï
OSE B X Ï
+ D OW JON E S Ï
N ASD A Q Ï
1 m o nth 1 m on th S& P500 Ï
Ye ar-to- date Ye ar-to- date N IKKE I ( 07:3 0) Ï
EU R +/
U SD -0.9 3
JPY -0.9 7 1 day Ï
Ma x 1 2 9 GB P Ï 0.2 9 1 m onth Ï
Min 1 2 6 N OK -4.7 4 Year -t-date Ï
SEK -3.7 7 D KK Ï 0.0 3 PLN -4.0 2 U SD +/ JPY -0.0 2 1 day 1 m o nth GB P -1.4 5 1 m onth
Ye ar-to- date CH F Ï 1.0 0 Year -t-date Ï
+/-, bp
U SD USD 10Y Ï 3
Max 1 .1 Max 3 .1 EU R USD 30Y Ï 4
Min 0 .9 Min 2 .9 GB P JPY 10Y Ï 1 D KK SEK +/-, bp N OK D EM 10Y Ï 7 PLN D KK 10Y Ï 8 SEK 1 0Y Ï 6 N OK 10Y Ï 2 PLN 10Y Ï 0
* A s o f c lo sin g pre vio u s tra ding d a y
3 .0 0M ax # # # 4 .0 0M ax # ##
0 .0 0M in # # # 1 .0 0M in # ##
+/- ,bp
U SD 10Y Ï 2 USD 10Y Ï 0 E ur ope Ð -11 59 JPY 10Y Ï 1 JPY 10Y -1 H iVol Ð -24 61 C rosso ve r Ð -39 192 +/- ,bp EU R 10Y Ï 6 EU R 10Y -1 D KK 10Y Ï 7 D KK 10Y -2 Ð -11 85 SEK 1 0Y Ï 4 SEK 1 0Y -3 F in an. Su b. Ð -14 227 N OK 10 Y Ï 2 N OK 10Y Ï 0 N o n-fin an. Ð - 1 42 PLN 10Y - 6
* A s o f c lo sin g pre viou s tra din g da y * A s o f c lo sin g pre vio u s tra ding d a y
* As k price ** A s k pric e ** A sk pric e
So urce : Bloom b erg 7:30(-1 ) og 17:00 ref ers to the pre viou s (trad e) day
CRB , Raw In dustrials CRB 1M f uture - 2.48 -1 3.13 07:30 9 8.37 138.42 98.39 115.40 13 6.97 11 6.41 U SD 2 Y US D1 0 Y 44.3 4 0.3 8 0.0 6 17:00 125.48 S T OCK S 127.51 5.4% 3.26 - 1.2 5 897 .90 -0 .26 9 2.43 07:30 -41 .09 15 .85 3M 745.02 1133.36 467.43 17:00
YIELD S & IN T ERES T R AT ES
1 7:00 46 3.40 207 .64 07:30 6926 1358 1 08 07:30(-1 )* 1.3 1 18 7 7 -21 .90 -18.3% C lo se 1703 222 651 6.4% 4.6% 720 7376 0 7:30 3.4% 5.8% 7.1% 5.7% 4.6%
FX & COM MO DIT IES
- 20.3% - 13.7% -14.2% 216 3.7 4 6.4 3 3.00 3.40 1 7:00 3.00 2.7 2 C lo se 2.78 92.14 1 01 1 41 Sprea d, b p 890.47 Policy R ate 74 5.04 112 9.59 88 5.73 0.2 5 Go ld , $ Oil, Bre nt, $ 12 4.51 12 6.59 07:30 6.43 3.72 1.32 1.91 19 3.6 8 4.37 37 2.9 4 61 0.5 0 1.33 1.69 3.76 1.18 2.9 7 4.0 0 2.5 0 3.3 2 3.11
Cr edit s prea d, iT rax x s. 10 *
3 33.9 5 2.2 5 1.5 0 .9 3 .2 8 3.7 4 1.0 0 Sw ap Sp read , bp ** Sw ap Rates* * 3.23 1.28 17:00 07:30 1 7:00 0 7:30 3.2 1 1.2 7 3.12 36 - 4 34 F in an. Sr . 25 - 4 3.35 3.60 1 m onth 119 7 205 355 4.2 8 07:30(-1 )* 56 07:3 0 1 da y 3.0 9 3.5 4 3.2 9 17:00 07:30(- 1)* 25 - 5 35 - 6 1 7:00 391 390 56 37 5.23 5.2 9 4.31 418 Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ï Ð Ï Ï Ð Ð Ï Ð Ï Ï Ð -0 .7 -8 .4 - 0 - 7 S& P500 Intrad ay , % -0.1 0 0.9 0 1.9 0 2.9 0 3.9 0 4.9 0 5.9 0 15 16 1 7 1 8 1 9 2 0 21 Ti me E uros to xx In tr ada y, % -0 .50 1 .50 3 .50 5 .50 09 10 11 1 2 1 3 1 4 15 16 1 7 1 8 1 9 Tim e
Gre y l in e i nd ic a tes c lo sin g o f Da n is h m a rke ts G re y li ne in d ic at e s op e n in g of US ma rke ts
EU R/USD Intraday 1 26 .0 1 26 .5 1 27 .0 1 27 .5 1 28 .0 1 28 .5 1 29 .0 0 7 10 1 3 16 1 9 22 0 1 04 Tim e U SD-Yield s In trada y 0.9 2 0.9 4 0.9 6 0.9 8 1.0 0 1.0 2 1.0 4 1.0 6 07 10 13 1 6 1 9 2 2 01 04 Time 2.8 0 2.8 5 2.9 0 2.9 5 3.0 0 3.0 5 U SD 2Y (left a xis ) U SD 10 Y (right a xis ) US Yield Curve 0 0 . 5 1 1 . 5 2 2 . 5 3 0 .0 0 0 .0 2 0 .0 4 0 .0 6 0 .0 8 0 .1 0
Ge rman Yield Curve
1 1. 5 2 2. 5 3 3. 5 4 0 .00 0 .02 0 .04 0 .06 0 .08
1 0Y Yie ld S prea d to G erm a ny
-0.0 048 -1 .68 0 .1 130.6 24 1. 49 4 0 .3 72 -0.2 31 0. 79 1 3 .3 58 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0
USD JPY G BP F RF ITL D KK SEK NOK PL N
D-t- D +/- (r ig h t a x is) 0 7:30 ( left ax is ) 1 m on th a go (l e ft a xi s) US D 2Y USD5 Y U S D 10Y D-t-D +/- (r ig ht a x is) 0 7:30 (l eft ax is) 1 m on th ag o (l eft a xi s) DE M 2Y D E M5 Y D EM 1 0 Y D A N S K E B A N K 4
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Financial models and/or methodology used in this report
Danske Daily is a publication that comments on the important key macroeconomic data and events in the financial markets. Models and/or methods are described in the publication.
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Major risks connected with recommendations or opinions in this report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. All price-related data are based on yesterday's closing prices.
Expected updates
The publication is updated on a daily basis. First date of publication
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