www.danskeresearch.com

Investment Research

Market movers ahead

Monetary policy meetings at the European Central Bank, Bank of Japan, Bank of

England and Riksbank are the highlights of next week’s calendar.

Also a highlight is the release of the August employment report in the US, which is

likely to determine whether the Federal Reserve will start scaling down asset

purchases in September.

The publication of PMIs in China, the euro area, Norway, Sweden and the UK and

ISM in the US are also likely to attract some attention.

Finally, Danmarks Nationalbank is due to publish updated currency reserve figures.

Global macro and market themes

Over the past week, markets continued to be hit by a double whammy with the

combination of a continued emerging markets crisis and higher oil prices.

Flight to safety has become the name of the game and changed the correlation

between bond yields and equities so that lower equity prices now happen alongside

lower bond yields.

US data generally continue to show strength and the Federal Reserve is still on track

to start scaling down asset purchases in September.

Focus

This week we launched the Big Picture, which presents our view of the global

economy (see The Big Picture: Global growth shifts to a higher gear, 26 August).

We take a close look at the upcoming budget battle in the US Congress (see Research

US: Revisiting the debt ceiling, 29 August).

We examine the likely outcome of the upcoming German elections (see German

elections: New momentum on EU issues, 28 August).

Will job growth be strong enough for

the Fed

Stocks and bonds move together as

risk appetite rules again

Source: Reuters EcoWin Source: Macrobond Financial

30 August 2013

Important disclosures and certifications are contained from page 17 of this report.

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

Weekly Focus

Job growth strong enough to initiate September tapering

Contents

Market movers ahead ........................................... 2 Global macro and market themes ............ 6 Scandi update ............................................................. 10 Latest research from Danske Bank .... 11 Macroeconomic forecast .............................. 12 Financial forecast ................................................... 13 Calendar ........................................................................... 14

Financial views

Source: Danske Bank

Major indices

30-Aug 3M 12M

10yr EUR swap 2.15 2.10 2.40

EUR/USD 132 131 125

ICE Brent oil 115 101 98

30-Aug 6M 12-24M

S&P500 1638 -5 to +5% 5%-10%

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Market movers ahead

Global

There are several interesting releases in the US next week, where the most important

will be the employment report for August. August job growth will be of special

interest, as it could very well determine whether the Fed will initiate a downscaling of

the QE programme at its FOMC meeting in September or whether it will postpone

this. We expect a relatively strong report.

The ISM Manufacturing Index comes out on Tuesday and is likely to fall back a bit

after last month’s surge. We suspect that seasonal adjustment added almost two points

to the index in July and expect the ISM to give back some of the increase. However,

the level should remain high, indicating a continued improvement in the US economy.

We will also get the ISM Non-manufacturing Index, which we expect to remain

unchanged, with weaker activity in housing-related services offset by growth

elsewhere.

The negotiations over the fiscal budget for 2014 begin on Tuesday as Congress

returns after Labour Day on Monday. The deadline for a budget deal is the end of

September, which leaves Congress limited time to find an agreement.

Finally, there are a couple of FOMC speeches next week and the doves of the

committee dominate the scene. With the FOMC meeting coming up on 17-18

September, it will be one of the last chances to hear what FOMC members think

ahead of the likely decision to scale back QE.

Ahead of the ECB meeting next week, a Bloomberg headline stating that the ECB’s

Jörg Asmussen said that next week is a ‘potential policy decision’ has drawn some

interest. We think he was just stating the obvious. Indeed, there is a Governing

Council meeting next week and it could as always make policy decisions. If we look

at the facts, the economy is improving in line with ECB expectations and Q2 GDP

growth even surprised on the upside. Repayment of 3Y LTRO has slowed and excess

liquidity has stabilised. Interest rates have come down slightly and the market is now

pricing the first hike in November 2015. There thus seem to be fewer arguments for a

policy move today than a month ago. In addition, there have not been any signals

from the ECB except the above mention of a potential policy decision. All in all, we

conclude that the policy decision next week will simply be to keep all policy rates

unchanged.

In terms of euro area data, service and manufacturing PMIs for August are due for

release. In Italy and Spain we expect the figures to show further signs of

improvement, as the flash figures for the euro area increased more than suggested by

the development in the German and French figures. Final GDP and underlying

components for the euro area in Q2 will reveal to what extent growth was driven by

domestic or foreign demand. We believe German factory orders and industrial

production decreased in July, after both figures increased strongly in June. Despite a

setback, we expect the trend to continue to be upward on signs of a German recovery.

Additionally, euro area retail sales and French unemployment are released.

Italian and Spanish PMIs to increase

Source: Reuters EcoWin

German factory orders and industrial

production on an upward trend

07 08 09 10 11 12 1373

83

93

103

113

123

133

85

90

95

100

105

110

115

1202010=100

<< German industrial production

German factory orders >>

Source: Reuters EcoWin

Will job growth be strong enough for

the Fed?

Source: Reuters EcoWin

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Weekly Focus

With respect to the UK, the main events next week will be the MPC meeting, with

publication of the decision on Thursday. After the decision from the August meeting

to provide forward guidance linked to a 7% unemployment threshold, we expect no

changes to the current policy at the meeting.

In terms of data releases, we expect the PMI surveys (manufacturing Monday and

service Wednesday) and industrial production for July (published on Friday) to give

new information on how the recovery is materialising. Among Tier 2 data, Funding

for Lending statistics for Q2 13 and the Halifax House Price Index are out on

Monday.

In China, the most important event next week will be the release of the

manufacturing PMI published by China’s National Bureau of Statistics (NBS). During

the most recent deceleration in China, the NBS manufacturing PMI has been more

resilient than the HSBC manufacturing PMI and has so far not declined below 50,

improving slightly in July to 50.3, from 50.1 in June. The flash estimate for the HSBC

manufacturing PMI in August improved markedly to 50.2, from 47.5 in July, and this

suggests that the NBS manufacturing PMI could also have improved in August, albeit

less than the HSBC manufacturing PMI. We expect the NBS manufacturing PMI to

improve to 51.0, from 50.3 in July, a little bit ahead of consensus.

In Japan the main focus next week will be the Bank of Japan meeting on 5

September. This said, it should prove to be another relatively uneventful meeting with

no major market impact. With the economy recovering relatively fast and inflation

edging out of deflationary territory, monetary policy is currently on autopilot and we

expect the Bank of Japan to continue to expand the monetary base (now the main

policy instrument) by JPY60-70trn annually. In Japan the release of capital

expenditure for Q2 on Monday should also be watched closely, because it will give us

the first indication of a possible upward revision of Q2 GDP growth, which eased

slightly to 2.6% q/q AR in Q2, from 3.6% q/q AR in Q1. The capital expenditure data

is the most important new information for the first revision of GDP and hence strong

capital expenditure data would indicate an upward revision. In our view, an upward

revision is likely and this would weaken the case for softening or even postponing the

planned increase in the consumption tax in 2014.

Scandi

In Denmark, Friday brings industrial production data for July. Given the positive

signals from both Denmark and the euro area over the summer and the 1.0% fall in

industrial production from May to June, we forecast an increase of 0.5% m/m. On

Wednesday, Statistics Denmark publishes figures for house prices in June. Previous

data from estate agents Home and Boligsiden both showed a fall in June, so we expect

a small fall of around 0.4% m/m. Figures for bankruptcies and repossessions in

August are released the same day. Finally, the week brings data on foreign exchange

reserves. With the EUR/DKK holding well below 7.46 for most of August, we do not

expect the central bank to have had to intervene.

Manufacturing PMIs in China has

started to stabilise

Source: Macrobond

Industrial production expected to

increase

Source: Macrobond

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Weekly Focus

In Sweden, we – cross our hearts and hope to die – believe the Riksbank will not

concoct any new poisonous brew for our financial forecasts this week (or, more

precisely, on Thursday at 09:30 CEST). Instead, if anything, the Riksbank should be

on the hawkish side and why not even take away the small premium for a near-term

cut in their forecast? This would surely get things going (in our direction) as many

analysts/investors still think the Riksbank could actually lower rates near term. Our

impression is that despite a summer spike in interest rates, very few are de facto

positioned for higher rates. In addition to the Riksbank, we will also receive the PMI

surveys from both the manufacturing (Monday, at 08:30 CEST) and services

(Wednesday at 08:30 CEST) sectors. As diligent readers are aware, the manufacturing

PMI is our preferred indicator for the Swedish economy and we would really like to

see a continued ascent from the lukewarm 51.3 in July to well above 52 in August.

The relatively new services PMI is of course interesting but still has to prove itself in

terms of forecasting ability.

One significant reason we expect the Norwegian economy to pick up again is that we

think the worst headwinds from tighter credit policies are over. In particular, growth

in lending to businesses has accelerated since March. We expect the K2 credit

indicator for July to show that this trend is continuing, which should gradually help

push up business investment levels. We expect overall credit growth to be unchanged

at 6.3%, however, as growth in household borrowing is slowing. The week also brings

a couple of industrial indicators. We expect industrial production to fall 1.7% m/m in

July after the strong growth of 3.1% in June but this still points towards another step

forward for industrial activity in Q3. After hovering around 50, indicating unchanged

output, since summer last year, the PMI fell sharply in June and July. This was due

particularly to the order index for the domestic market, lending weight to reports of a

slowdown in oil-related industries. With clear signs of a global upswing and a sharply

weaker krone, the export industry should have better times ahead, so we expect the

PMI to bounce back to 52.0. Further deterioration in the PMI, however, would

suggest that the slowdown in oil-related industries is more serious than we are

assuming.

Surveys and monetary policy decision

Source: Reuters EcoWin

Businesses borrowing more

Source: Macrobond

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Market movers ahead

Source: Bloomberg and Danske Bank Markets

Global movers Event Period Danske Consensus Previous

Mon 02-Sep - JPY Capital spending y/y 2nd quarter -2.1% -3.9%

8:45 ITL PMI manufacturing Index Aug 51.4 50.4

9:15 ESP PMI manufacturing Index Aug 50.5 49.8

9:50 FRF PMI manufacturing, final Index Aug 49.7 49.7

9:55 DEM PMI manufacturing, final Index Aug 52.0 52.0 52.0

10:00 EUR PMI manufacturing, final Index Aug 51.3 51.3 51.3

10:30 GBP PMI manufacturing Index Aug 55.0 54.6

Tue 03-Sep 16:00 USD ISM manufacturing Index Aug 54.0 54.0 55.4

Wed 04-Sep 9:15 ESP PMI services m/m|y/y Aug 50.7 48.5

9:45 ITL PMI services Index Aug 51.6 48.7

9:50 FRF PMI services, final Index Aug 47.7 47.7

9:55 DEM PMI services, final Index Aug 52.4 52.4 52.4

10:00 EUR PMI services, final Index Aug 51.0 51.0 51.0

11:00 EUR GDP, 2nd release q/q|y/y 2nd quarter 0.3%|… 0.3%|-0.7% 0.3%|-0.7%

Thurs 05-Sep - JPY BoJ 2014 monetary base target JPY trn. 270 270

12:00 DEM Factory orders m/m|y/y Jul -1.1%|… -1.0%|2.9% 3.6%|4.3%

13:00 GBP BoE rate announcement % 0.50 0.50 0.50

13:00 GBP BoE announces asset purchase target GBP bn 375 375 375

13:45 EUR ECB announces refi rate % 0.50% 0.50% 0.50%

13:45 EUR ECB announces deposit rate % 0.00% 0.00% 0.00%

16:00 USD ISM (NAPM) non-manufacturing Index Aug 56.0 55.0 56.0

Fri 06-Sep 10:30 GBP Industrial Production m/m|y/y Jul 0.2%|-1.6% 1.1%|1.2%

12:00 DEM Industrial production m/m|y/y Jul -0.4%|… -0.5%|0.8% 2.4%|2.0%

14:30 USD Nonfarm payroll 1000 Aug 200 180 162

14:30 USD Private payroll 1000 Aug 210 175 161

Scandi movers Event Period Danske Consensus Previous

Mon 02-Sep 8:30 SEK PMI manufacturing Index Aug 51.3

9:00 NOK Manufacturing PMI Index Aug 52.0 47.5

10:00 NOK Credit indicator (C2) y/y Jul 6.3% 6.3%

Tue 03-Sep 16:00 DKK Currency reserves DKK bn Aug 491.9

Wed 04-Sep 8:30 SEK PMI services Index Aug 56.6

9:00 DKK House price index q/q|y/y Jun 0.5%|3.3%

Thurs 05-Sep 9:30 SEK Riksbank, Rate decision % 1.00 1.00 1.00

Fri 06-Sep 9:00 DKK Industrial production m/m Jul -1.0

10:00 NOK Industrial production y/y Jul 0.5%|-5.5%

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Global macro and market themes

Double whammy of EM crisis and conflict in Syria

The past week markets continued to be hit by a double whammy of the continued

Emerging Markets (EM) crisis and higher oil prices on the back of the prospect of US

military intervention in Syria. Coming on top of Fed tapering concerns it is close to a

perfect storm for EM currencies. The marked depreciation of EM currencies continued

early in the week and the oil price shot higher. Towards the end of the week we have seen

some signs of stabilisation, though, on the prospect of a delayed military response.

Although it is positive we see some stabilisation, we believe it is too early to call for a

bottom in EM currencies – see EMEA Weekly, 29 August. There is still significant

uncertainty about the situation in Syria and the negative economic effects on EM. The

countries are faced with a substantial tightening of financial conditions, as money supply

declines sharply due to significant capital outflow. The result is falling stock prices, rising

bond yields and rate hikes from many of the central banks with Brazil being the latest this

week.

In the medium term the weakening of the currencies will be positive for exports and

help repair current account imbalances and underpin growth. Rising growth in the

US and Europe will also be positive for exports and eventually money will likely return to

EM. In the short term, however, focus is on the negative economic effects and the fact

that the countries need to get the inflation pressures coming from the sharp currency

depreciation under control.

How much impact on the developed markets?

The double whammy from EM and Syria is the biggest short-term threat to the global

recovery. So far, however, we believe the positive growth momentum in the developed

world is too strong to be threatened.

The rise in oil prices is so far only moderate in the big scheme of things (see chart). There

is a risk that oil prices could quickly shoot higher if things spiral out of control in Syria

but so far it seems that if there is a response from the US it will be fairly moderate and

only last a couple of days. Standard multipliers suggest that a rise of USD10 per barrel in

the oil price reduces GDP growth in the OECD area by 0.2 percentage points. This is

based on a permanent situation though, and we would judge that even if the oil price rises

USD20 it would only be temporary and the multiplier would be much smaller in this case

– depending on how long a potential conflict would last. Overall the economic effect

from the Syrian crisis is so far likely to be quite moderate.

Stock markets in limbo while bond yields take a breather

Flight to safety has become the name of the game and has changed the correlation

between bond yields and equities so that lower equity prices now happen alongside

lower bond yields. Until recently higher US bond yields were followed by lower equities

on the Fed tapering concerns.

Tentative signs of stabilisation in EM

stocks

Source: Macrobond Financial

Substantial weakening of EM

currencies has stabilised

Source: Macrobond Financial

Oil price rise still moderate in the big

scheme of things

Source: Macrobond Financial

Stocks and bonds move together as

risk appetite rules again

Source: Macrobond Financial

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Weekly Focus

In the short term we believe equity markets are going to be range-bound, as rising

uncertainty is counterweighted by the prospect of recovery in the developed world. In the

medium term we look for further upside in equity markets, as uncertainty will eventually

fade and the global recovery alongside low rates for long will underpin risk assets.

The sell-off in the bond market in US and Germany took a breather over the past week on

safe-haven flows. German bond yields also saw downside from a downside surprise in

inflation and comments from ECB’s Nowotny who backtracked a bit on his comments

from last week where he said rate cuts were off the table. Friday morning he stated that

rates are going to ‘remain at current levels or, if anything, are lowered’.

We expect bond markets to continue to be in consolidation mode trading on a) the

outlook for Fed tapering keeping some upward pressure and b) higher uncertainty, which

is underpinning bonds. The main unknown for markets at the moment might actually be

who will be the next Fed Chairman. If Lawrence Summers becomes the new chairman it

would likely increase risk premia and send bond yields higher. On the other hand,

recently Summers seems to have become the favourite and hence we could also see that if

Yellen ‘wins’ yields would go lower. See also our Research – Yellen vs Summers: Bird

fight, 22 August, for a description of the two main candidates.

EUR/USD has declined over the past days, as the short-end yield spread between the

US and the euro area widened and the stabilisation of the EM crisis decreased the

expected need for EM central banks to sell USD. While short-end US yields went

higher on the rise in risk appetite German, yields declined on the abovementioned factors.

Being in the high end of the range, EUR/USD and the yield spread corrected lower and

hence the recent ranges continue to hold very well. In the short term we see more

downside for EUR/USD but otherwise expect the range to hold on a three-month horizon

with a slight downward bias as Fed tapering begins.

Mixed US data but Fed still on track for September tapering

US data generally continue to show strength, although a few negative surprises

caught some attention over the past week. To start with the good news: initial jobless

claims showed another strong reading falling to 331k down from 337k last week. It is

thus still hovering around the lowest levels since 2007 and the recent leg down in August

suggests that growth momentum has picked up recently in line with what is seen in ISM

for both manufacturing and the service sector. Consumer confidence also bounced

slightly in August reversing last months’ decline and the labour market component (jobs

plentiful minus jobs hard to get) was at the strongest level since 2008.

Housing data was a little mixed sending somewhat different signals. New home sales

were very soft falling 13.5% in July, raising concern that the rise in bond yields are

starting to hurt housing. On the other hand, pending home sales, which is a good leading

indicator for existing home sales, fell much less and is generally still pretty close to the

high level it reached after rising strongly in the spring months.

The jury is still out in terms of how much the rise in bond yields will affect the

housing market and we need more months of data to evaluate the effects. Our estimate is

that it will dampen the growth in housing but that it will still grow decently given the

EUR/USD lower as US yields rise,

while German yields fall

Source: Macrobond Financial

German yields down on lower inflation

and more dovish Nowotny

Source: Macrobond Financial

Mixed signals from US home sales

data

Source: Macrobond Financial

08 09 10 11 12 13

75

80

85

90

95

100

105

110

115

250

300

350

400

450

500

550

600

650'000

Index

<< New home sales

Pending home sales >>

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Weekly Focus

improved sentiment, stronger income growth and pent-up demand after many years of

very low activity.

Maybe the biggest negative surprise out of the US this week was the durable goods

orders. Core durable goods orders (ex defence and transport) fell 3.3% m/m and

shipments were also soft showing little sign of a pick-up. Given the rise in ISM

manufacturing new orders lately and the very high level of the Philadelphia Fed future

capex survey, this was very surprising. The series is very volatile so we want to see more

months of data to evaluate the trend. However, unless we see a clear pick-up in August

we may have to revise down our forecast for investment growth in coming quarters.

Despite the recent turmoil in markets we still believe the Fed is on track to start

tapering of asset purchases in September. Labour market data are quite decent and the

negative impact of the EM crisis and higher oil prices is not deemed big enough for Fed

to be too worried about the growth outlook. If we are right that the August employment

report will again show decent job growth, we would likely have to see a significant

deterioration in the EM crisis and/or big rise in oil prices for Fed to postpone tapering.

Another event looming in the US is the negotiations on raising the debt ceiling once

again. US politicians have to reach an agreement before 1 October to avoid a government

shutdown – see Research US – revisiting the debt ceiling, 29 August.

... while euro area continues to surprise to the upside

The euro area economy continues to surprise to the upside taking the economic

surprise index to very high levels (see chart). This week German Ifo business

confidence rose further and euro area consumer confidence rose for the ninth month in a

row reaching the highest level since summer 2011. Despite improving confidence, there is

no sign of a pick-up in credit growth. Data for July showed a further decline in annual

credit growth and monthly loan flows also disappointed. It highlights that private sector

deleveraging and very tight credit conditions continue to be a headwind for growth.

Euro area inflation keeps surprising to the downside. Euro area inflation fell in

August to 1.3% from 1.6% highlighting the absence of any inflation pressure whatsoever.

This gives ECB plenty of flexibility to support growth further if it wants to by lowering

the refi rate further. However, the recent signals suggest that ECB is sidelined for now.

The fact that repayments of the 3-year LTRO has come down significantly also puts less

upward pressure on short rates, which could also have been an argument for ECB to cut

the refi rate.

The UK also continues to show strong growth signals. Consumer confidence rose

further in August and figures from Nationwide show that house prices are rising at a 7%

run rate at the moment.

The German election is coming closer and is getting more attention. Opinion polls

show a very tight race but we believe the most likely scenario is that Angela Merkel is

able to form a government again. Regardless of the result we believe getting past the

German elections will remove a hindrance for moving further on important EU issues –

see German elections: New momentum on EU issues, 28 August.

US job data robust

Source: Macrobond Financial

Euro area and UK continue to surprise

to the upside

Source: Macrobond Financial

Euro area inflation declines again

Source: Macrobond Financial

10 11 12 13

-50.0

-45.0

-40.0

-35.0

-30.0

-25.0

-20.0

325

350

375

400

425

450

475

500'000 persons

Balance

Jobs plentiful minus hard to get >>

<< US jobless claims, 4-week avg

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Global market views – three to six months’ horizon

Source: Danske Bank Markets

Asset class Main factors

Equities

Range bound short term, higher on six-month horizon Short term uncertainty keep stocks range bound. Medium-term recovery gives more upside. Earnings revisions to gradually be positive driver. Fixed income to equities rotation has still some way to go .

Bond market Core bond yields move gradually higher, but short-term pause Global recovery, Fed tapering has been priced. US to underperform Germany in the short end US economic outlook strong, Fed tapering, ECB on hold for very long. Long end is priced for this. Peripheral spreads to tighten gradually Ample liquidity, search for yield, improving fundamentals. Credit spread to tighten gradually Ample liquidity, search for yield, strong corporate fundamentals.

FX EUR/USD - range trading for now. Lower next year. Fed exit moves closer, but no strong downtrend before Fed rate hikes are in sight. USD/JPY - further upside BoJ to continue monetary easing and Fed exit. Market sentiment. EUR/SEK - medium and short-term lower Strong fundamentals and no rate cut from the Riksbank. EUR/NOK - gradual move lower, but short-term jitters Strong fundamentals but risk of rate cut from Norges Bank and positioning an issue.

Commodities Oil prices - short term upside risk, lower in 2014 Syria creates short-term risks, significant supply shock from US shale and OPEC over-production to weigh in 2014 Metal prices - downside risk on EM worries Copper to stay volatile, aluminium to head lower as energy costs come under pressure Gold prices to correct lower still Part of the bubble now eliminated but more declines in store on Fed tapering. Agricultural risks remain on the upside Stabilisation in the near term but extreme weather events remain a key challenge.

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Scandi update

Denmark – budget proposals spring no surprises

The government’s budget proposals, unveiled during the week, contained no big surprises

and translate into a largely neutral fiscal effect. There was talk during the spring about

whether fiscal policy should be more relaxed but the government plans to stick to its

previous line, with a stringent focus on compliance with EU budgetary requirements.

During the week, the government also revised down its growth forecast for 2013, from

0.5% to 0.2%, due mainly to weaker growth in H1 than expected. As even annual growth

of 0.2% would require a significant improvement from H1 to H2, the government clearly

shares our optimistic view of the Danish economy and it is still assuming growth of 1.6%

in 2014. The week’s figures for registered unemployment showed a decrease of 1,500

people in July, to a seasonally adjusted total of 151,500, or 5.7% of the labour force.

Unfortunately, though, we have to be careful about concluding that the smaller number of

jobless reflects a stronger labour market, as the number of employed was largely

unchanged from Q1 to Q2 once the teacher dispute is taken into account. Finally, the

central bank's securities statistics revealed that foreign investors made net purchases of

mortgage bonds, government bonds and treasury bills in July and now own almost a fifth

of all DKK-denominated bonds.

Sweden – looking forward to growth

The past week serves as a reminder of the weak recent history of the Swedish economy.

Not only do the weak retail sales numbers produce a weak starting point for H2 (albeit

much due to the very warm weather in July) but revised current account data constitutes a

large risk of downward revisions to Q1 GDP numbers. However, sometimes history is

nothing to go by and if we instead turn our eyes to the forward-looking survey data

published over the past week, we are in for an economic Indian summer. Both the Export

Managers Index and the National Institute for Economic Research’s (NIER) Business and

Consumer Confidence Surveys shot up dramatically and point to considerably stronger

growth ahead. This suits our current forecasts very well, with a continued slow drift up in

interest rates and a gradually stronger SEK.

Norway – no signs of a sharp slowdown

Data from Norway during the week were something of a mixed bag. Retail sales fell 1.3%

in July, so private consumption made a slow start to Q3 but this was probably just down

to abnormally good weather for much of the month. In any case, household income is still

growing around the 5% mark, so the weak spending growth is due to higher saving. Far

more importantly, however, NAV and LFS data indicated that the labour market has more

or less stabilised. While there was an increase in gross unemployment of 600 people in

August, which was slightly worse than expected, LFS unemployment fell to 3.3%. It is

important to note here that the fall in LFS unemployment was due entirely to higher

employment growth. This puts a question mark on whether GDP growth really was as

weak as reported in the national accounts for Q2. Taken together, these figures mean a

smaller chance of a significant downward adjustment of Norges Bank’s growth forecast

for the Norwegian economy when the new monetary policy report is published on 19

September, so higher inflation and a weaker krone will pull towards unchanged interest

rates and an upward revision of the interest rate path.

Unemployment declined in July

Source: Macrobond

Surveys paint a more upbeat picture

Sources: Danske calculations, Macrobond

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Latest research from Danske Bank

30/8 Flash Comment - Denmark: Danish economy starts growing again

The Danish economy surprised on the upside in Q2 13, growing 0.5% q/q.

30/ 8/13 Research Finnish economy: Focus on structural reforms

Finnish government announced on 29 August a budget for 2014. The budget was

unsurprising as the agreement was heavily based on the agreement the six-party coalition

made in March. Mild austerity continues as planned.

29/ 8/13 German elections: New momentum on EU issues

The most likely outcome of the federal election on 22 September is that Angela Merkel

(CDU) will continue as Chancellor.

29/ 8/13 Research US: Revisiting the debt ceiling

Once again we are heading for a budget battle in the US Congress.

26/ 8/13 Monitor: Chinese credit crunch

While there were signs of stabilisation in July and August, monetary conditions still

appear to have tightened compared to H1 13 but it does not look like a severe credit

crunch.

26/ 8/13 The Big Picture: Global growth shifts to a higher gear

We launch our new publication The Big Picture which will replace Global Scenarios. It

presents our view of the global economy and outlook for US, euro area, Japan and China.

12 | 30 August 2013 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 2012 -0.4 0.5 0.7 -0.1 -0.4 0.2 1.0 2.4 6.1 -4.0 45.6 5.62013 0.1 0.4 0.8 1.7 0.3 -0.8 1.9 0.8 5.9 -1.9 45.0 4.62014 1.5 1.2 0.5 1.8 -0.2 3.5 2.4 1.7 5.9 -1.1 43.4 5.1

Sweden 2012 0.7 1.5 0.7 3.2 -1.1 0.8 0.0 0.9 8.0 -0.6 37.7 6.72013 1.7 2.7 1.0 -2.7 0.2 -0.8 -2.2 0.1 8.6 -1.1 37.7 7.82014 2.0 2.1 0.8 3.3 0.2 3.9 4.6 1.5 8.4 -0.9 37.8 8.3

Norway 2012 3.4 3.0 1.8 8.0 0.0 1.8 2.4 0.8 3.2 - - -2013 2.7 3.0 2.7 6.5 -0.5 -3.1 1.8 1.7 3.3 - - -2014 3.0 3.5 2.2 4.7 -0.1 1.1 3.9 1.8 3.3 - - -

Macro forecast, Euroland

Euroland 2012 -0.6 -1.3 -0.4 -4.3 -0.5 2.7 -0.8 2.5 11.4 -3.7 90.6 1.32013 -0.4 -0.4 -0.4 -4.0 -0.1 0.1 -1.8 1.4 12.1 -2.9 93.4 1.92014 1.3 0.7 -0.4 0.8 0.1 4.2 2.8 1.2 12.1 -2.8 93.8 1.8

Germany 2012 0.9 0.7 1.0 -4.4 0.0 3.8 1.8 2.0 5.5 0.1 82.4 6.32013 0.7 0.9 0.9 -0.1 0.1 1.2 1.4 1.7 5.2 -0.2 81.1 6.02014 2.5 1.7 1.1 5.4 0.0 5.1 4.8 1.8 4.9 0.0 79.0 5.6

France 2012 0.0 -0.4 1.4 -1.2 1.9 2.5 -0.9 2.1 10.2 -4.7 90.8 -1.92013 0.2 0.4 1.5 -2.5 0.1 1.8 1.4 1.0 11.2 -4.0 94.2 -1.62014 1.3 1.1 0.3 0.6 0.1 6.3 4.7 1.4 11.5 -4.2 96.4 -1.8

Italy 2012 -2.4 -4.3 -2.9 -8.0 -0.6 2.2 -7.8 3.0 10.6 -2.4 124.2 -0.72013 -1.7 -2.0 -0.3 -6.1 0.0 0.0 -2.1 1.3 12.0 -3.2 130.9 0.62014 0.4 0.5 -0.4 1.0 0.0 3.6 4.1 1.2 12.3 -2.6 132.0 0.8

Spain 2012 -1.4 -2.2 -3.7 -8.7 0.5 3.1 -5.0 1.9 24.9 -10.6 88.4 -1.92013 -1.5 -2.7 -3.8 -7.0 0.0 3.1 -3.2 1.8 27.2 -6.5 96.0 1.02014 0.3 -0.1 -2.1 -2.0 0.0 6.2 3.5 0.9 27.6 -6.9 102.0 2.5

Finland 2012 -0.2 1.6 0.8 -2.9 - -1.4 -3.7 2.8 7.7 -1.9 53.0 -1.92013 -0.4 0.3 0.5 -4.0 - -1.0 -2.0 1.4 8.4 -2.0 57.0 -1.52014 1.5 0.8 0.2 2.5 - 3.0 2.0 1.7 8.3 -1.5 58.5 -1.2

Macro forecast, Global

USA 2012 2.8 2.2 -1.0 8.3 0.2 3.5 2.2 2.1 8.1 -7.0 98.0 -2.72013 1.6 1.9 -2.2 4.6 0.0 3.4 2.2 1.5 7.5 -4.0 99.0 -2.52014 2.9 2.5 -0.6 7.9 0.0 9.1 7.6 1.4 6.8 -3.4 98.0 -2.4

Japan 2012 2.0 2.3 2.4 2.0 0.0 -0.1 5.5 -0.1 4.4 -9.3 238.0 1.02013 1.6 1.8 1.6 -0.6 -0.2 2.2 1.9 0.3 4.2 -9.0 246.0 1.22014 1.3 0.6 1.1 1.0 0.2 6.6 3.4 2.5 4.0 -6.2 247.0 1.8

China 2012 7.8 - - - - - - 2.7 4.3 -1.5 22.8 2.32013 7.4 - - - - - - 2.6 4.3 -1.5 21.3 1.92014 7.7 - - - - - - 3.2 4.1 -1.8 20.0 2.5

UK 2012 0.0 0.8 2.7 -0.4 -0.3 -0.1 2.3 2.8 8.0 -5.2 90.5 -3.52013 1.1 1.4 0.9 -3.6 0.0 1.0 -1.0 2.8 7.8 -6.5 94.9 -2.52014 2.0 1.5 -0.7 5.1 0.0 4.9 3.4 2.5 7.5 -6.0 98.6 -2.5

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

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Financial forecast

Source: Danske Bank Markets

Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 30-Aug - 563.6

+3m - 569

+6m - 583+12m - 597

EUR 30-Aug 132.4 745.9

+3m 131 746.0

+6m 128 746.0+12m 125 746.0

JPY 30-Aug 98.0 5.75

+3m 99 5.78

+6m 103 5.65+12m 110 5.41

GBP 30-Aug 155.2 874.8

+3m 155 888

+6m 156 910+12m 149 888

CHF 30-Aug 93.0 605.8

+3m 96 592

+6m 97 602+12m 99 602

DKK 30-Aug 563.6 -

+3m 569 -

+6m 583 -+12m 597 -

SEK 30-Aug 659.0 85.5

+3m 641 88.8

+6m 648 89.9+12m 656 91.0

NOK 30-Aug 609.9 92.4

+3m 588 96.9

+6m 598 97.5+12m 608 98.2

Equity Markets

Regional

Price trend12 mth.

Regional recommen-dations

USA Corporate earnings surprise 5%-10% Neutral

Emerging markets (USD) Uncertainty has hit Asia 5%-10% Underweight

Europe (ex. Nordics) (EUR) Recovering economy, attractive valuation 10%-15% OverweightNordics Strong cyclical profile 5%-10% Neutral

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014

NYMEX WTI 94 94 89 89 89 89 89 89 92 89

ICE Brent 113 103 101 100 99 98 97 96 104 98

Copper 7,958 7,200 6,800 6,775 6,760 6,745 6,735 6,725 7,183 6,741

Zinc 2,054 1,875 1,850 1,835 1,825 1,815 1,805 1,795 1,904 1,810

Nickel 17,376 15,080 14,500 14,200 14,000 13,800 13,600 13,400 15,289 13,700

Aluminium 2,041 1,875 1,800 1,770 1,745 1,720 1,700 1,680 1,871 1,711

Gold 1,631 1,425 1,150 1,000 975 950 925 900 1,302 938

Matif Mill Wheat 245 225 222 229 232 234 236 238 230 235

CBOT Wheat 737 700 690 695 700 705 710 715 706 708

CBOT Corn 715 660 650 655 660 665 670 675 670 668CBOT Soybeans 1,449 1,465 1,450 1,460 1,470 1,480 1,490 1,500 1,456 1,485

0.50

Average

Key int.rate

0.25

0.25

0.250.25

1.50

0.00

0.50

0.50

0.100.10

0.50

10-yr swap yield

1.22

0.20

0.300.40

3m interest rate

1.85

0.50

0.10

0.50

0.00

0.20

0.45

0.50

0.550.70

0.000.00

0.50

0.50

1.50

1.00

0.10

0.28

1.50

1.00

1.001.00

1.50

1.50

0.26

0.23

0.15

0.52

0.02

0.30

0.350.40

0.25

0.30

0.05

0.20

0.20

0.20

0.050.05

0.40

0.30

0.55

1.30

1.25

1.71

765

1.82

1.82

2.10

2.20

1.70

2.35

1.85

0.80

0.901.00

0.30

0.300.45

1.67

1.60

0.700.95

0.85

1.001.15

0.25

0.350.45

131

128125

129

132138

0.92

132.4

-

-

--

129.7

746

746746

872.3

807.2

760

840

830820

770

85.3

123.1

745.9

84.0

82.084.0

126

124124

0.56

0.61

0.26

0.82

0.19

0.84

0.60

0.700.80

0.50

2.14

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Medium -5 to +5%

Price trend3 mth.

Medium

Medium

496

30-Aug

-5 to +5%

-5 to +5%

108

14,075

7,153

1,935

1,396

188

115

1,835

20142013

2.90

2.95

3.103.30

2.10

2.302.40

0.95

0.951.05

2.67

2.80

2.903.10

1.59

1.60

1.601.75

3.45

2.502.60

2.30

2.89

2.80

2.41

Medium -5 to +5%

1,418

642

2.15

2.802.90

3.47

3.20

3.30

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Calendar

Source: Danske Bank Markets

Key Data and Events in Week 36

Period Danske Bank Consensus Previous

- CNY NBS Manufacturing PMI (released Sunday) Index Aug 51.0 50.6 50.3

- JPY Capital spending y/y 2nd quarter -2.1% -3.9%

- GBP Funding for Lending Scheme usage and lending data publication 2nd quarter

8:30 SEK PMI manufacturing Index Aug 51.3

8:45 ITL PMI manufacturing Index Aug 51.4 50.4

9:00 NOK Manufacturing PMI Index Aug 52.0 47.5

9:15 ESP PMI manufacturing Index Aug 50.5 49.8

9:30 CHF PMI manufacturing Index Aug 55.2 57.4

9:50 FRF PMI manufacturing, final Index Aug 49.7 49.7

9:55 DEM PMI manufacturing, final Index Aug 52.0 52.0 52.0

10:00 EUR PMI manufacturing, final Index Aug 51.3 51.3 51.3

10:00 NOK Credit indicator (C2) y/y Jul 6.3% 6.3%

10:30 GBP PMI manufacturing Index Aug 55.0 54.6

10:30 EUR ECB's Coeure speaks in Berlin

Tuesday, September 3, 2013 Period Danske Bank Consensus Previous

1:50 JPY Monetary base y/y Aug 38.0%

3:30 JPY Labour cash earnings y/y Jul 0.6%

3:30 AUD Retail sales % Jul 0.4% 0.0%

6:30 AUD Reserve Bank of Australia (cash rate target decision) % 2.5% 2.5% 2.5%

7:45 CHF GDP q/q|y/y 2nd quarter 0.3%|1.7% 0.6%|1.2%

10:30 GBP PMI construction Index Aug 57.0

11:00 EUR PPI m/m|y/y Jul 0.1%|0.1% 0.0%|0.3%

14:58 USD Markit manufacturing PMI Index Aug

16:00 USD Construction spending m/m Jul 0.3% -0.6%

16:00 USD ISM manufacturing Index Aug 54.0 54.0 55.4

16:00 USD ISM prices paid Index Aug 51.6 49.0

16:00 DKK Currency reserves DKK bn Aug 491.9

Monday, September 2, 2013

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Calendar - continued

Source: Danske Bank Markets

Wednesday, September 4, 2013 Period Danske Bank Consensus Previous

- EUR ECB's Asmussen speaks in Frankfurt

3:30 AUD GDP q/q|y/y 2nd quarter 0.6%|2.5% 0.6%|2.5%

3:45 CNY HSBC/Markit services PMI Index Aug 51.3

8:30 SEK PMI services Index Aug 56.6

9:00 DKK House price index q/q|y/y Jun 0.5%|3.3%

9:15 ESP PMI services m/m|y/y Aug 50.7 48.5

9:45 ITL PMI services Index Aug 51.6 48.7

9:50 FRF PMI services, final Index Aug 47.7 47.7

9:55 DEM PMI services, final Index Aug 52.4 52.4 52.4

10:00 EUR PMI services, final Index Aug 51.0 51.0 51.0

10:00 EUR PMI composite, final Index Aug 51.7 51.7 51.7

10:30 GBP PMI services Index Aug 59.7 60.2

11:00 EUR GDP, 2nd release q/q|y/y 2nd quarter 0.3%|… 0.3%|-0.7% 0.3%|-0.7%

11:00 EUR Retail sales m/m|y/y Jul -0.3%|… 0.4%|-0.3% -0.5%|-0.9%

11:00 EUR ECB announces allotment in 7-day (USD)

11:00 EUR Household consumption, preliminary q/q 2nd quarter 0.2% 0.0%

11:00 EUR Gross fixed capital investments q/q 2nd quarter -0.2% -1.9%

11:00 EUR Government expenditure, preliminary q/q 2nd quarter -0.1% -0.2%

13:00 USD MBA Mortgage Applications

14:30 USD Trade balance USD bn Jul -38.7 -34.2

16:00 CAD Bank of Canada rate decision % 1.00% 1.00% 1.00%

18:30 USD Fed's Williams (non-voter, dove) speaks

20:00 USD Fed's Beige Book

23:00 USD Total Vehicle Sales m Aug 15.80 15.73

Thursday, September 5, 2013 Period Danske Bank Consensus Previous

- JPY BoJ monetary policy announcement %

- JPY BoJ 2014 monetary base target JPY trn. 270 270

- OTH G20 summit

2:00 USD Fed's Kocherlakota (non-voter, dove) speaks

3:30 AUD Trade balance AUD m. Jul 100 602

7:30 FRF Unemployment % 2nd quarter

9:00 DKK Bankruptcies (s.a.) Number Aug 383

9:00 DKK Forced sales (s.a.) Number Aug 386

9:30 SEK Riksbank, Rate decision % 1.00 1.00 1.00

9:30 SEK Service production m/m|y/y Jul -0.4%|-0.2%

12:00 DEM Factory orders m/m|y/y Jul -1.1%|… -1.0%|2.9% 3.6%|4.3%

13:00 GBP BoE rate announcement % 0.50 0.50 0.50

13:00 GBP BoE announces asset purchase target GBP bn 375 375 375

13:45 EUR ECB announces refi rate % 0.50% 0.50% 0.50%

13:45 EUR ECB announces deposit rate % 0.00% 0.00% 0.00%

14:15 USD ADP employment 1000 Aug 180 200

14:30 USD Initial jobless claims 1000 330 331

14:30 USD Unit labour cost, final q/q 2nd quarter 1.0% 1.4%

14:30 EUR ECB press conference

15:00 USD Fed's Kocherlakota (non-voter, dove) speaks

16:00 USD Factory Orders m/m Jun -3.5% 1.5%

16:00 USD ISM (NAPM) non-manufacturing Index Aug 56.0 55.0 56.0

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Calendar - continued

Source: Danske Bank Markets

Friday, September 6, 2013 Period Danske Bank Consensus Previous

- OTH G20 summit

7:00 JPY BoJ monthly economic report Sep

7:00 JPY Leading economic index Index Jul 107.9 107.2

8:00 DEM Trade balance EUR bn Jul 16.6 16.9

8:00 DEM Current account EUR bn Jul 13.0 17.3

8:45 FRF Consumer confidence Index Aug 82

9:00 DKK Industrial production m/m Jul -1.0

9:15 CHF CPI m/m|y/y Aug 0.0%|0.0% -0.4%|0.0%

9:15 CHF Industrial production y/y 2nd quarter 3.0%

9:30 SEK Budget balance SEK bn Aug -8.9

10:00 NOK Industrial production y/y Jul 0.5%|-5.5%

10:00 NOK Manufacturing Production m/m Jul -1.7% 3.1%

10:30 GBP Industrial Production m/m|y/y Jul 0.2%|-1.6% 1.1%|1.2%

10:30 GBP Manufacturing production m/m|y/y Jul 0.3%|-0.7% 1.9%|2.0%

10:30 GBP Trade balance GBP bn Jul -1700 -1548

12:00 DEM Industrial production m/m|y/y Jul -0.4%|… -0.5%|0.8% 2.4%|2.0%

14:00 USD Fed's Evans (voter, dove) speaks

14:30 USD Nonfarm payroll 1000 Aug 200 180 162

14:30 USD Private payroll 1000 Aug 210 175 161

14:30 USD Manufacturing payroll 1000 Aug 5 6

14:30 USD Unemployment rate % Aug 7.4% 7.4% 7.4%

14:30 USD Average hourly earnings, non-farm m/m Aug 0.2% -0.1%

14:30 USD Average Weekly Hours Hours Aug 34.5 34.4

14:30 CAD Net change in employment 1000 Aug 30.0 -39.4

19:30 USD Fed's George (voter, hawk) speaks

During the week Period Danske Bank Consensus Previous

Mon 02 - 06 GBP Halifax house prices m/m|3Ms/YoY Aug 0.9%|4.6%

Mon 02 - 08 DEM German election campaigns

Sat 07 EUR EU's Van Rompuy speaks in Italy

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

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

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Disclosure This research report has been prepared by Danske Reseach, a division of Danske Bank A/S ("Danske Bank"). The

authors of the research report are Allan von Mehren, Chief Analyst and Steen Bocian, Chief Economist.

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