Important disclosures and certifications are contained from page 16 of this report. www.danskeresearch.com

Investment Research

Market Movers ahead

In the euro area the flash estimate for HICP inflation in November is released, and we

expect it to decline back to this cycle’s low of 0.3% y/y .

German IFO expectations are expected to give a sign of improvement, as we forecast

an increase for the first time since April. ZEW expectations increased for the first

time in 10 months in November, and this is usually a good indication that IFO

expectations will also increase.

Money supply and lending figures for October are also released in the euro area and

we expect recent improvements to continue.

Consumers will be in focus this coming week in the US, with two US consumer

confidence surveys up for release. The outlook on inflation expectations in the

consumer surveys will be the most important item to watch, given the importance of

these expectations for the Fed.

In Japan most of the hard economic data for October will be released next week,

where we see industrial production and retail sales as the most important.

Next week OPEC meets in Vienna for its biannual assessment of its output target.

Global macro and market themes

The biggest stimulus to consumers from an oil price decline since 2008. It strengthens

the recovery case in early 2015 and thus risk asset performance.

Bond yield decline stabilises on rise in risk appetite.

Tentative signs of bottoming in the euro area.

Rise in US core inflation eases downside inflation risks.

Rate cut in China underpins pick-up in growth.

Euro HICP inflation to decline again ZEW expectations lead IFO

expectations

Source: Macrobond Financial, Danske Bank

Markets

Source: Macrobond Financial, Danske Bank

Markets

21 November 2014

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

Weekly Focus

Big drop in oil prices to boost consumption

Contents

Market Movers .................................................... 2

Global Macro and Market Themes .......... 6

Scandi Update.................................................... 10

Latest research from Danske Bank

Markets ................................................................. 11

Macroeconomic forecast ........................... 12

Financial forecast ............................................ 13

Calendar ................................................................ 14

Financial views

Source: Danske Bank

Major indices

21-Nov 3M 12M

10yr EUR swap 0.99 0.85 1.05

EUR/USD 124 122 123

ICE Brent oil 81 103 93

21-Nov 6M 12-24M

S&P500 2053 0-5% 5-8%

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Market Movers

Global

Consumers will be in focus this coming week in the US.

The two major US consumer confidence surveys (Conference Board and University

of Michigan) are released and we expect further improvement. Consumer sentiment is

supported by continued improvement in the labour market, low interest rates and

falling gasoline prices. Further, minutes from the October FOMC meeting showed

some more concern about slowing inflation expectations than could be read out of the

statement. Hence, the gauge on inflation expectations in the consumer surveys will be

important to watch.

Thursday is Thanksgiving and the holiday shopping season kicks off with the so

called Black Friday. Falling gasoline prices have boosted households’ real disposable

income and a cautious approach to spending in previous months means that the

personal savings rate has increased. The backdrop for strong Thanksgiving retail sales

is thus in place.

In the euro area the flash estimate for HICP inflation in November is released and we

expect it to decline back to this cycle’s low of 0.3% y/y in November. In October,

core inflation surprised on the downside as clothing and footwear inflation was very

low in Germany. Although we expect some rebound in this component we should see

another weak German core inflation figure in November and in line with that we

expect euro core inflation to decline to a new historic low of 0.6% y/y. The weak

headline inflation figure should also follow as energy price inflation is expected to

decline below -2% as the oil price has declined during November.

Money supply and lending figures for October are also released and we expect the

latest improvements to continue. Looking further ahead, the upward trend in bank

lending should continue after October, as this was when the ECB’s Asset Quality

Review and Stress test revealed a very limited capital shortfall as banks had raised

capital in anticipation of the assessment, see ECB comprehensive assessment: Capital

shortfall less than expected, 20 October 2014. The higher increase in loans to

households and the slower pace of decline in loans to non-financial corporations

reduces headwind to economic activity in the euro area, and this is one of the reasons

we believe growth will get stronger in 2015. Growth in M3 money supply has

improved since April this year, and we expect the trend to continue as we look for an

increase of 2.8% y/y in October up from 2.5% y/y in September.

German IFO expectations are expected to give a sign of improvement as we forecast

an increase for the first time since April. ZEW expectations increased for the first

time in 10 months in November and although many do not like the financial ZEW

expectations, this is usually a good indication that IFO expectations will also increase.

Our forecast is also based on the fact that the German order-inventory balance in

manufacturing PMI rebounded in November. This suggests the weakness was very

temporary and that companies do not need to work off high inventories. In Germany

the second release of GDP, together with its subcomponents, is also due next week

and we should see positive growth in private consumption, whereas investments are

likely to have been weak.

The ECB’s Constancio participates in a panel discussion called “Monetary Policy:

What can Europe learn from the experience of non-euro countries?”. A number of

Rising consumer confidence

Source: Macrobond Financial

Euro HICP inflation to decline again

Source: Macrobond Financial

Bank lending to continue to improve

Source: Macrobond Financial

ZEW exp. leads IFO exp.

Source: Macrobond Financial

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prominent ECB members have already spoken this week and expressed a dovish

stance, see Flash Comment: ECB members strengthening easing bias, 17 November

2014. The most interesting point was that Draghi said the current purchase

programme could be expanded to include government bonds. However, there does not

yet seem to be a consensus within the ECB’s Executive Board, as Mersch, who is

more hawkish, said he was not sure if Bank of Japan’s QE had worked.

There are no important releases in China next week.

In Japan most of the hard economic data for October will be released next week.

Production plans for October according to our models suggest that industrial

production in October declined 1.2% m/m (consensus: -0.5% m/m) after increasing

2.9% m/m in September. Industrial production is very volatile and, as seen in the

chart, the expected decline in industrial production will still be consistent with a

moderate recovery in Japan. Retail sales for October will also be very important.

Retails sales have recovered substantially in recent months, but auto sales remained

subdued in October suggesting that the improvement in retail sales also lost some

momentum in October. We expect the increase in CPI excl. fresh food to stay

unchanged at 3.0% y/y (consensus 2.9% y/y) in October as a continued decline in

energy prices is offset by a slight increase in core inflation. This suggests that the

Bank of Japan’s targeted inflation measure, which also excludes the impact from the

consumption tax hike in April, also stayed unchanged at 1.0% y/y. In line with

consensus we expect the unemployment rate to have stayed unchanged at 3.6%. For

the labour market the main message is that the improvement appears to have stopped

in the wake of the slowdown in Q2 and Q3, but so far it does not appear to be

persistent enough to push the unemployment rate higher.

Next week OPEC meets in Vienna for its biannual assessment of its output target. The

meeting has been highly anticipated following the sharp decline in oil prices since

beginning of September, which has increased speculation about whether OPEC will

cut its output target from the current 30mb/d in order to stabilize the market. The

latest OPEC oil market report and recent comments from members of the cartel,

however, suggests that OPEC is leaning towards keeping the target unchanged,

mainly because it expects oil demand to pick up next year and thus views the current

weakness as temporary. Furthermore, OPEC can lend some support to the oil market

by lowering production below the current target – OPEC production was around

30.5mb/d in October. The OPEC meeting could move the oil market in either

direction, but the market is probably putting a lower probability on an output target

cut, which should reduce the downside risk to oil prices.

Scandi

In Denmark the week brings preliminary national accounts data for Q3, where the

main focus will be on GDP. We expect growth of 0.0% q/q, which corresponds to just

under 0.4% y/y. The reason we anticipate no change q/q is that there are factors

pulling in both directions. On the negative side, exports and industrial production

were very weak in Q3, falling 1.1% and 1.8% respectively. On the positive side,

preliminary GDP data for the euro area and Germany have surprised on the upside,

with growth of 0.2% and 0.1% respectively in Q3, and when things go well for

Germany and Europe, they generally also go well for Denmark. There is therefore a

chance of the figures showing a fifth successive quarter of positive growth, but there

is definitely also a chance of slightly negative growth. In addition, the week brings

figures for manufacturing confidence. We expect to see an improvement from -16 in

Industrial production has started to

recover in Japan

Source: Macrobond Financial and Danske Bank

Markets

Considerable uncertainty about

Danish GDP in Q3

Source: Statistics Denmark, Danske Bank

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October to -5 in November, which should be seen as both a normalisation and a result

of slightly more positive news flow. The indicator for October must also be seen as

overly pessimistic, as a score of -16 is down at the levels of the crisis years of 2008-

2009, and the economy is in a lot better shape than it was back then. Also coming up

are October figures for gross unemployment (seasonally adjusted), where we expect a

small drop of 350 to a total of 132,700 full-time equivalents, giving an unchanged

jobless rate of 5.0%. The improvement should be seen in the light of our

fundamentally positive view of the labour market at present. Last, but not least, the

Nationalbank will release its figures for foreign portfolio investments and securities

statistics for October.

In Sweden, the week ahead is full of interesting events. We have the NIER’s Business

and Consumer confidence surveys (Wednesday at 09.15), trade balance data (Wed., at

09.30 CET), financial market statistics (including household lending) on Thursday (at

09.30 CET) and retail sales and current account data (both Friday, at 09.30 CET).

However, this data pales in significance compared to the national accounts statistics

being published on Friday (09.30 CET). Our current forecast points to zero growth in

consecutive terms, which translates into 2% y/y. That said, data out during next week

might change this point estimate, and the way things look right now, there might be

some downside to this estimate. We will be sure to keep you posted – especially since

this is one of the few big downside risks we see to the Riksbank in the coming months

and quarters.

In Norway the week’s big release is the results of Norges Bank's latest regional

network survey on Friday. After heading clearly downward since 2012, the

aggregated output index has pointed to accelerating growth in the past two quarters.

Weaker growth in oil-related industries has been offset by stronger growth in retail

and services. We expect this picture to continue in Q4, but with construction in

particular and possibly also exporters being more upbeat, while the situation in oil-

related industries deteriorates further. We therefore expect the aggregated output

index (outlook for the next six months) to hold in the 0.85-1.00 range, which equates

to growth in mainland GDP of 0.4-0.5% in H1 next year. If so, it will mean that there

are still no signs of any major downturn in the Norwegian economy, and uncertainty

about oil investment will be the only thing in the way of unchanged interest rates in

2015. The week also brings retail sales data for October, which we reckon could

surprise on the upside after weak numbers in September due to the weather. High real

wage growth, low unemployment, low real interest rates and rising house and equity

prices all favour spending growth. We also expect registered unemployment, a much

more stable measure than LFS unemployment, to climb only marginally in November.

In fact it seems that the rise in unemployment in recent months is due mainly to fewer

people on job creation schemes rather than redundancies in oil-related industries.

Stable unemployment is a strong indicator of growth being more or less on trend.

GDP to hold still in consecutive terms

Source: Statistics Sweden. Danske Bank

calculations

Growth on the up

Source: Macrobond Financial, Danske Bank

Markets

5 | 21 November 2014 www.danskeresearch.com

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Market movers ahead

Source: Bloomberg, Danske Bank Markets

Global movers Event Period Danske Consensus Previous

Mon 24-Nov 10:00 DEM IFO - business climate Index Nov 104.2 103.0 103.2

10:00 DEM IFO - current assessment Index Nov 108.4 107.7 108.4

10:00 DEM IFO - expectations Index Nov 100.2 98.6 98.3

Tue 25-Nov 0:50 JPY BoJ board minutes

16:00 USD Conference Board consumer confidence Index Nov 96.0 95.3 94.5

Wed 26-Nov 15:55 USD University of Michigan Confidence, final Index Nov 91.3 90.0 89.4

16:00 USD Pending home sales m/m|y/y Oct 0.80%|... 0.30%|1.00%

16:00 USD New Home Sales 1000 (m/m) Oct 470K 467K (0.20%)

Thurs 27-Nov 9:00 OPC OPEC meeting, Vienna

10:00 EUR Money supply (M3) y/y Oct 2.80% 2.60% 2.50%

14:00 DEM HICP, preliminary m/m|y/y Nov ..|0.50% -0.30%|0.70%

14:00 DEM Consumer prices m/m|y/y Nov ..|0.60% 0.10%|0.60% -0.30%|0.80%

Fri 28-Nov 0:30 JPY CPI - national ex. fresh food y/y Oct 3.0% 2.90% 3.00%

0:50 JPY Industrial production, preliminary m/m|y/y Oct -0.50%|-1.70% 2.90%|0.80%

11:00 EUR CPI - core, preliminary % Nov 0.60% 0.70% 0.70%

11:00 EUR CPI, preliminary y/y Nov 0.30% 0.30% 0.40%

Scandi movers Event Period Danske Consensus Previous

Tue 25-Nov 9:30 SEK PPI m/m|y/y Oct -0.30%|1.70%

Wed 26-Nov 9:00 SEK Consumer confidence Index Nov 100 98.0

9:00 SEK Manufacturing confidence Index Nov 108 107.7

10:00 NOK Unemployment s.a. (LFS) % Sep 3.70% 3.70% 3.70%

Fri 28-Nov 9:30 SEK GDP q/q|y/y 3rd quarter 0.0%|2.2% 0.7%|2.6%

9:30 SEK Retail sales s.a. m/m|y/y Oct 0.5%|3.3% -0.60%|2.80%

10:00 NOK Retail sales, s.a. m/m Oct 0.50% -0.10%

10:00 NOK Unemployment % Nov 2.70%

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Global Macro and Market Themes

Big drop in oil prices to boost consumption

The sharp decline in oil prices over the past months is providing a nice Christmas present

for global consumers. Not least in the US where gasoline prices are now the lowest

since 2010 after posting the sharpest six-month decline since the financial crisis. The

lower energy bill should ensure that the current slowdown in US growth will only be

moderate and temporary. Although we still see a risk of a correction lower in ISM in the

short term, the US stock market will be increasingly willing to look through this as

fundamentals for growth in 2015 are looking more solid now.

The decline in oil prices is also providing a further boost to European consumers.

The period of low euro inflation will be prolonged but as long as this is driven by lower

commodity prices, the low inflation is positive for euro area growth. As in the US, it

provides a boost to real income growth and it is the main reason why private consumption

has actually held up well this year despite the slowdown in the corporate sector, see also

Strategy: Euro area weakness due to Ukraine crisis, 14 November 2014. The low

inflation also makes it more likely that the ECB will find it necessary to add stimuli early

next year to avoid inflation expectations declining further or inflation getting stuck in a

low equilibrium.

Overall, the quite sharp decline in oil prices is a positive supply shock to the developed

economies and strengthens the case for a moderate recovery during H1 15 with rising

growth momentum in both the US and the euro area. A Chinese rate cut today is also

adding to the picture of accommodating central banks. These developments are

providing renewed support for risk assets and strengthen the case for

outperformance of risk assets on a three-six month horizon.

First tentative signs of bottoming in euro cycle

The most criticised business cycle indicator among commentators is the German ZEW

indicator. As it is a survey of financial analysts there is a lot of scepticism about it and the

popular view is that it is just a reflection of the equity market. However, this does not

hold to a closer test. Indeed, we have found it very good at determining shifts in the

business cycle and it has especially been a good leading indicator for the German ifo

expectations index. As an example, over the past 15 years there is only one instance out

of nine when the German ifo survey has bottomed before a turn in the ZEW indicator. On

average, the ZEW indicator turns one-two months ahead of the ifo expectations index.

This week, the German ZEW for November showed the first increase in 10 months and it

was quite a sharp rise from -3.6 to 11.5 (consensus: 0.5). It gives some hope that we will

see a bottom in the ifo and euro area PMI over the coming two-three months. Next

week, ifo data is released and we look for a small increase in the expectations index due

to the relatively strong increase in ZEW. Another sign of stabilisation came from the

order-inventory balance in the Flash euro PMI for November, which also improved after a

plunge in October.

Key points

Biggest stimulus to consumers

from oil prices since 2008

It strengthens recovery case in

early 2015 and thus risk assets

Bond yield decline stabilises on

rise in risk appetite

Tentative signs of bottoming in the

euro area

Rise in US core inflation eases

downside inflation risks

Rate cut in China underpins pick-

up in growth

Euro consumers holding up well as low

inflation gives lift to real incomes

Source: Macrobond

US gasoline prices lowest since 2010

– and still declining

Source: Macrobond

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While still pointing to soft growth, these developments suggest that we are getting

closer to an inflection point in the euro cycle. Rising growth in real M1 growth over the

past months also suggests that the underlying growth momentum is firmer than the

current level of activity. We expect that once the currently too high inventories have been

reduced, we should see a graduate rise in activity levels. As mentioned, this is also

supported by the new boost from lower oil prices adding to stimuli from a weaker euro,

improving credit standards and a pending EU investment plan corresponding to 0.8% of

GDP.

Bond yields stabilising as risk appetite improves

Bond yields in the US and Germany have been quite stable as rising risk appetite is

compensating for low inflation and QE expectations from the ECB. The market is also

still pricing in a very muted hiking path for the Fed and, in our view, one that is much too

soft. The market currently expects the Fed funds rate to be at 0.5% at the end of

2015 in sharp contrast to the Fed’s own projection of 1.375. But history suggests we

need to get closer to an actual hike before a repricing takes place. So, we may have to get

into Q1 15 before US yields in the short end take another turn higher. This should lead to

a bear flattening of the US yield curve. As we have argued before, though, we expect the

rise in US 10-year yields to be quite muted as they are held down by the very low yield

levels in Europe and Japan and the significant liquidity in the global financial system.

US inflation data eases downside risks to inflation outlook

US core inflation surprised a bit on the upside this week rising to 1.8% y/y in October

from 1.7% y/y. The upward surprise was due to service prices where the housing

component keeps pushing higher and transport prices partly reversed a decline in previous

months. This puts core inflation still below the Fed’s target of 2% (note the Fed uses the

core PCE deflator which is currently at 1.5% y/y). At the same time, it may ease some of

the downside risks to inflation that some Fed members have expressed concern

about as seen in the FOMC minutes, see Flash Comment: Key points from the minutes of

the October FOMC meeting, 19 November 2014.

US business surveys were very mixed this week. On the one hand, Markit PMI

manufacturing for November weakened further in line with what we have also seen in

business sales recently and a little at odds with the very high level of ISM. However, the

Philadelphia Fed survey rose to the highest level since 1993. The latter tends to be very

volatile, though, and has sent false signals before; therefore, we would take it with a grain

of salt given the softer trend in demand recently. It does suggest, though, that any

slowdown in the US is likely to be moderate.

The ECB is unanimous – but about what?

There have been many ECB speeches this week leaving an unclear picture of how strong

the support Mario Draghi has for broad-based QE should it prove necessary. Draghi

himself continues to strike quite a dovish tone. Today, for example, he said at a

conference in Frankfurt that ‘we will do what we must to raise inflation and inflation

expectations as fast as possible, as our price stability mandate requires’. Earlier this week,

his comments that an expansion of the purchase programme could include government

bonds strengthened market expectations of a broader QE programme next year.

US core inflation bounced in October

Source: Macrobond

Our medium-term model for euro PMI

points to improvement

Source: Macrobond

Euro PMI points to weak finish to

2014

Source: Macrobond

First sign of bottoming in euro area?

Watch ifo next week

Source: Macrobond

8 | 21 November 2014 www.danskeresearch.com

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However, other ECB members are showing scepticism about the effectiveness of

aggressive easing. Mersch said that he was not sure if the Bank of Japan’s QE has

worked and that unconventional monetary policy measures can have unintended side

effects in the medium and long term if they are used too aggressively. The Dutch central

bank chief Knot said on Wednesday he was ‘rather sceptical’ about putting liquidity into

the market to create financial bubbles that do not have an impact in the real economy.

Hence, the German camp, with Bundesbank head Weidman and ECB board member

Lautenshlaeger, is not alone in its reluctance towards an aggressive QE programme.

Therefore, when the ECB statement mentions unanimity on further unconventional

measures if necessary, this may not be the large scale programme the market is hoping

for. So, while we do expect further measures to be taken early next year, the scale might

be smaller than the market hopes. Nevertheless, even an increase in the balance sheet of

close to EUR1trn as the ECB aims for will provide decent stimulus. Another option for

Draghi is to vote down the minority of opposition and go for the big bazooka. In that

case, it would be a positive surprise for the markets.

China also closer to a cyclical bottom

While Chinese PMI was a bit weaker than expected, falling from 50.4 to 50.0, it is still

holding up pretty well. The details in the PMI report were also slightly positive with the

new orders index rising to 51.4 from 51.2. This suggests that although the Chinese

economy has slowed it is not dramatic and other data points to a tentative bottoming

(investment and industrial production). The main culprit behind the weaker PMI was

export orders – a sign that the weakness in the euro area is weighing on Chinese sales to

the European continent. Taking a step back, Chinese growth continues to grow closely in

line with the government’s growth target of 7.5% and leading indicators such as money

growth suggest that this pace is likely to continue into next year.

The Chinese authorities have been pretty successful at steering growth around their target

adding stimulus if growth slows too much and taking the foot off the gas when growth

runs higher than the target. The rate cut today of 25bp on the deposit rate and 40bp on the

lending rate will provide more support and underpin a bottom in growth.

Chinese house prices continued to decline in October but the pace is slowing. On a

seasonally-adjusted basis, house prices declined 0.7% m/m in October after declining

1.0% and 1.1% in September and August, respectively. This is likely to be a sign that the

minor easing measures targeting the housing markets have started to work and we expect

to see the declines in house prices moderating further in coming months. Since the peak

in May 2014 prices are down 4.2%. While negative on the margin, this is far from a

catastrophe for the Chinese economy. Household leverage is generally low and on the

positive side, cheaper houses raises the opportunity for more Chinese to afford a home,

helping to get rid of any excess supply in the market. New home sales improved in

October and are normally the best leading indicator for the overall housing market.

Bond yields stabilising recently – rising

risk appetite muting decline

Source: Macrobond

Spanish and Italian bonds supported

by QE talk from Draghi

Source: Macrobond

Chinese PMI new orders holding up

Source: Macrobond

9 | 21 November 2014 www.danskeresearch.com

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Global market views

Source: Danske Bank Markets

Asset class Main factors

Equities Positive on 3M horizon, moderately positive on 12M horizon Strong US outlook, moderate Chinese growth, a sharp drop in the oil price and

the continued easing bias at ECB, BoJ and PBoC is supportive of equities. In addition equities are still attractive versus bonds

Bond market Downward pressure on yields short term, medium-term moderate rise Moderation in US growth, ECB QE expectations building, inflation to stay low US-Euro spread: Wider 2-5y, stable longer maturities Policy divergence drives short-end spread wider, longer-end spread stable as close to historical highs Peripheral spreads to continue gradual tightening Volatility to remain higher into year-end. Neg. policy rate and improving fundamentals support search for yield. Credit spread to remain stable, but with bouts of volatility Added liquidity from ECB, stable fundamentals and search for yield

FX EUR/USD - lower short and medium term Lower on 0-6 months on diverging growth and monetary policy USD/JPY - higher USD/JPY to break sharply higher on BoJ easing and pension reforms EUR/SEK - lower Lower following Riksbank on Swedish growth outperformance, valuation EUR/NOK – consolidation and then lower EUR/NOK to fall on stabilizing oil prices, growth outperformance

Commodities Oil prices - weakness for rest of the year, recovery in 2015 OPEC overproduction and global growth concerns to weigh near term. Limited risk of supply disruptions Metal prices sideways before trending up in 2015 Chinese growth concerns a near-term negative factor, supply side risks. Gold prices to correct lower still Trending down as first Fed hike draws closer. Geopolitical concerns a supportive factor. Agricultural risks remain on the upside Near term stabilisation, extreme weather is key upside risk.

10 | 21 November 2014 www.danskeresearch.com

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Scandi Update

Denmark – Consumer confidence down but still high

Statistics Denmark’s consumer confidence indicator fell from 8.2 in October to 6.3 in

November but it is worth stressing that this is still a very high level, with a clear majority

of consumers looking positively on both their personal finances and the economy as a

whole. Consumer confidence has continued to climb after an initial surge in June 2013

and this has been reflected in increased spending – but not to the degree that the sky-high

confidence scores would indicate. Private consumption is currently around three-quarters

of a point higher than in spring 2013, which is a far from impressive growth rate over a

period of more than a year. We expect spending to continue to rise but we are not

anticipating any major upsurge. The improvement should be seen in the light of rising

real wages, low interest rates and improvements in the housing market. Job creation is

also strong at the moment, as confirmed by the Q3 LFS published during the week, which

revealed that 26,000 new jobs were created during the quarter. Although some of this was

a rise in part-time employment, an increase in employment of this magnitude will always

be welcome news.

Sweden – Labour market giving the government a heads up

The past week saw only the labour force survey and an appearance by the Riksbank

before a parliament committee. The starting declarations from Governor Ingves and

Deputy Governor Jansson were anything but exciting and the politicians set to question

Ingves and Jansson did a… – less than perfect job of dissecting the Riksbank’s decisions

over the past years. Since the past couple of months have demonstrated a pronounced

improvement, the labour force survey had the potential of changing the current dismal

mood among Swedish forecasters. Alas, the outcome did what we indicated in Weekly

Focus a week ago, the sideways trend in the unemployment rate was restored. Worse still,

the strong employment trend actually weakened somewhat and we suspect it has

something to do with the new government initiatives being announced. We will await

further evidence before passing a judgment – but it doesn’t look all too good to be honest.

Norway – Growth still normal

Adjusted for power production, mainland GDP grew 0.5% q/q in Q3, which is more or

less what we predicted and confirms that growth in the Norwegian economy is still

around trend. As expected, there was more or less zero growth in private consumption

and a big drop in investment after a strong H1. Most encouraging was an increase in

business investment of 1.8% q/q, and mainland exports also came out a bit stronger than

expected. So there are no signs of decline in the Norwegian economy despite a clear

slowdown in oil-related industries, thanks to strong growth in other sectors. We have

therefore revised up our forecast for mainland GDP this year from 2.4% to 2.5%. By way

of comparison, Norges Bank was projecting 2.25% in its September monetary policy

report.

Consumer confidence still high

Source: Statistics Denmark

Sideways

Source: Statistics Sweden

No signs of decline

Source: Macrobond

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Latest research from Danske Bank Markets

21/11 Flash Comment: China cuts interest rates - positive for risky assets particularly

emerging markets and commodities

The Peoples Bank of China (PBoC) today cut its leading interest rates. The one-year

benchmark deposit rate was cut by 25bp to 2.75% and the one-year benchmark lending

rate was cut by 40bp to 5.6%.

20/11 Flash Comment - Euro PMIs declined again in November

The euro flash PMIs continued lower in November, still showing a declining trend in

euro-area activity. The composite PMI new orders declined to 49.9 and went below 50 for

the first time since June 2013.

20/11 Flash Comment: China - HSBC manufacturing PMI declines slightly as exports

lose momentum

In China the flash estimate for HSBC/Markit manufacturing PMI in November declined a

bit more than expected to 50.2 from a final reading of 50.4 in October. This is the lowest

level for the HSBC/Markit manufacturing PMI since May.

19/11 Flash Comment: Key points from the minutes of the October FOMC meeting

The minutes of the 29-30 October FOMC meeting were on balance slightly more dovish

than the statement.

19/11Flash Comment: Bank of Japan board probably still divided despite 8-1 vote

As expected, Bank of Japan (BoJ) was on hold in connection with its meeting this

morning, meaning that the target for the annual expansion of the monetary base remains

JPY80trn.

18/11 Yield Forecast Update - BoJ and the ECB to boost liquidity in 2015

Monthly yield forecast update

18/11 Flash Comment: Consumption tax hike postponed to 2017, Lower House election

in mid-December

Prime Minister Shinzo Abe today announced that the planned hike in the consumption tax

to 10% from 8% for October 2015 will be postponed by 18 months to April 2017.

17/11 Flash Comment: ECB members strengthening easing bias

A number of prominent ECB members have spoken today and some of the comments

were interesting in terms of what to expect of the ECB going forward.

17/11 Flash Comment: Japan in recession in Q3, consumption tax hike will most likely be

postponed

Japan's GDP unexpectedly contracted 0.4% q/q (consensus: 0.5% q/q - DBM 0.3% q/q) in

Q3 after contracting 1.9% q/q in Q2 (revised lower from -1.8% q/q).

12 | 21 November 2014 www.danskeresearch.com

Weekly Fo

cus

Weekly Focus

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 2013 -0.5 0.0 -0.5 0.9 -0.2 0.8 1.5 0.8 5.8 -0.7 45.0 7.12014 0.7 0.4 0.8 1.5 0.1 0.8 1.7 0.5 5.1 -0.4 43.2 6.52015 1.3 1.5 0.8 1.9 -0.2 2.0 2.2 0.8 4.9 -2.9 43.0 6.0

Sweden 2013 1.5 2.1 1.6 -0.1 0.0 -0.5 -0.8 0.0 8.0 -1.2 38.7 3.72014 2.2 2.7 1.3 4.9 0.0 2.1 4.5 -0.1 8.0 -2.0 39.2 2.92015 2.6 1.7 1.6 7.3 0.0 3.0 4.0 1.0 7.7 -1.2 38.8 2.6

Norway 2013 2.0 2.1 1.8 8.4 -0.2 -3.3 2.9 2.1 3.5 - - -2014 2.5 2.1 2.1 0.2 0.0 1.2 1.5 2.2 3.4 - - -2015 2.2 2.1 2.1 -1.0 -0.1 1.0 3.5 2.0 3.5 - - -

Macro forecast, Euroland

Euroland 2013 -0.4 -0.6 0.2 -2.3 -0.1 2.1 1.2 1.4 12.0 -3.0 92.6 2.62014 1.0 0.9 1.1 0.3 0.1 3.5 3.5 0.5 11.6 -2.5 96.2 2.92015 1.5 1.5 0.9 1.5 0.0 3.5 3.4 0.6 11.4 -2.2 95.6 2.9

Germany 2013 0.2 0.9 0.7 -0.6 0.2 1.7 3.2 1.6 5.3 0.0 78.4 7.42014 1.3 0.9 0.8 1.9 -0.1 3.6 4.0 0.9 5.1 0.0 76.0 7.32015 1.6 1.2 0.6 1.1 0.0 4.8 4.5 1.3 5.1 -0.1 73.6 7.0

France 2013 0.4 0.3 2.0 -0.8 0.2 2.4 1.9 1.0 10.3 -4.3 93.5 -1.92014 0.3 0.1 1.6 -2.1 -0.1 2.7 2.6 0.7 10.3 -3.9 95.6 -1.82015 1.0 0.8 0.2 1.3 0.0 3.7 2.7 0.9 10.2 -3.4 96.6 -2.0

Italy 2013 -1.9 -2.7 -0.7 -5.4 -0.6 0.9 -2.6 1.3 12.2 -3.0 132.6 0.92014 -0.2 0.2 -0.1 -2.8 0.3 2.4 1.6 0.2 12.6 -2.6 135.2 1.52015 1.0 0.8 0.2 0.1 0.0 4.4 2.9 0.9 12.1 -2.2 133.9 1.5

Spain 2013 -1.2 -2.1 -2.3 -5.1 0.0 4.9 0.4 1.5 26.1 -7.1 93.9 0.82014 1.2 1.6 1.9 1.0 0.0 3.8 5.0 0.0 25.2 -5.6 100.2 1.42015 2.0 1.6 -0.1 3.8 0.0 4.8 4.2 0.7 24.0 -6.1 103.3 1.5

Finland 2013 -1.2 -0.7 1.5 -4.9 - -1.7 -2.5 1.5 8.2 -2.0 55.8 -1.42014 -0.4 -0.2 0.3 -3.5 - 0.5 -0.5 1.0 8.6 -2.0 59.0 -1.22015 0.8 0.0 0.0 1.0 - 3.0 1.5 1.0 8.6 -1.8 61.0 -1.0

Macro forecast, Global

USA 2013 1.9 2.0 -0.6 4.5 -0.4 2.7 1.4 1.1 7.4 -4.1 72.0 -2.32014 2.2 3.0 0.0 3.7 -0.3 3.8 4.2 1.5 6.3 -2.9 74.0 -2.22015 3.4 3.5 1.0 7.3 0.0 7.8 8.6 1.9 5.9 -2.6 73.0 -2.9

Japan 2013 1.5 2.0 2.0 2.4 -0.3 1.6 3.4 0.2 4.0 -8.4 243.0 0.72014 1.0 -0.2 0.7 4.7 -0.4 7.8 7.2 2.7 3.6 -7.2 244.0 1.22015 1.3 -1.5 0.8 0.7 0.4 6.3 2.7 2.1 3.4 -6.4 245.0 1.3

China 2013 7.7 - - - - - - 2.6 4.3 -1.9 22.8 2.02014 7.4 - - - - - - 2.3 4.3 -2.2 21.3 2.22015 7.2 - - - - - - 2.9 4.2 -2.0 30.0 2.6

UK 2013 1.7 2.2 0.7 -0.8 0.3 0.5 0.2 2.6 7.6 -4.5 89.7 -3.32014 3.1 2.5 0.6 8.9 -0.2 0.5 -0.5 1.7 6.5 -3.5 94.9 -2.72015 2.7 2.4 -0.5 8.7 0.0 4.7 4.4 1.8 6.0 -1.9 96.6 -2.2

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Current

acc.4

Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Infla-

tion1

Unem-

ploym.3

Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3

Public

budget4

Current

acc.4

Public

debt4

Unem-

ploym.3

Public

budget4

Public

debt4

Year

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Current

acc.4

GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Ex-

ports1

Im-

ports1

Infla-

tion1

13 | 21 November 2014 www.danskeresearch.com

Weekly Fo

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Weekly Focus

Financial forecast

Source: Danske Bank Markets

Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 21-Nov - 598.5

+3m - 610.0

+6m - 619.9+12m - 604.8

EUR 21-Nov 124.4 744.2

+3m 122.0 744.3

+6m 120.0 743.9+12m 123.0 743.9

JPY 21-Nov 117.9 5.08

+3m 120.0 5.10

+6m 122.0 5.10+12m 124.0 4.86

GBP 21-Nov 156.6 937.2

+3m 156.0 966.6

+6m 158.0 978.8+12m 156.0 941.6

CHF 21-Nov 96.7 619.0

+3m 99.2 615.1

+6m 101.7 609.8+12m 100.8 599.9

DKK 21-Nov 598.5 -

+3m 610.0 -

+6m 619.9 -+12m 604.8 -

SEK 21-Nov 742.2 80.6

+3m 745.9 81.8

+6m 750.0 82.7+12m 723.6 83.6

NOK 21-Nov 677.0 88.4

+3m 688.5 88.6

+6m 687.5 90.2+12m 650.4 93.0

Equity Markets

Regional

Price trend12 mth.

Regional recommen-dations

USA (USD) Strong growth & earnings, expensive 5-8% Neutral

Emerging markets (local curr) Commodity-related equities are pressured 0-5% Underweight

Japan Monetary easing, attractive pricing 10-15% Overweight

Europe (ex. Nordics) Stagnating economy, cheap valuation 5-10% OverweightNordics Cyclical profile, expensive 5-10% Overweight

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

NYMEX WTI 99 103 97 86 87 89 91 93 96 90

ICE Brent 108 110 103 89 91 93 95 97 102 94

Copper 6,996 6,768 6,973 6,675 6,825 6,975 7,125 7,275 6,853 7,050

Zinc 2,024 2,080 2,314 2,300 2,350 2,400 2,450 2,500 2,180 2,425

Nickel 14,723 18,529 18,631 18,000 18,250 18,500 18,750 19,000 17,471 18,625

Aluminium 1,754 1,839 2,007 1,925 1,975 2,025 2,075 2,125 1,881 2,050

Gold 1,292 1,291 1,281 1,250 1,240 1,230 1,220 1,210 1,278 1,225

Matif Mill Wheat (€/t) 201 200 171 160 166 169 171 172 183 169

Rapeseed (€/t) 383 372 324 325 337 344 348 351 351 345

CBOT Wheat (USd/bushel) 618 651 528 505 515 525 530 535 575 526

CBOT Corn (USd/bushel) 453 478 359 340 350 360 365 370 408 361CBOT Soybeans (USd/bushel) 1,358 1,470 1,146 940 960 980 990 1,000 1,228 983

340

Average

Key int.rate

0.25

0.25

0.251.00

1.50

0.00

0.05

0.05

0.100.10

0.50

10-yr swap yield

0.27

0.20

0.200.20

3m interest rate

1.75

0.05

0.10

0.50

0.00

0.20

0.03

0.55

0.571.02

0.000.00

0.05

0.50

0.25

0.00

0.10

0.31

0.05

0.75

0.050.05

0.20

0.20

0.20

0.25

0.25

1.50

0.00

0.000.00

1.50

1.50

1.70

1.75

0.23

0.08

0.10

0.56

0.00

0.30

0.601.30

0.03

0.03

0.20

0.15

0.20

1.75

1.75

0.25

1.95

0.25

1.591.67

0.35

0.350.35

0.05

0.050.05

0.32

0.25

1.401.90

1.10

1.201.60

0.20

0.200.25

124.4

-

-

--

146.6

744.3

743.9743.9

923.0

841.8

800.0

910.0

825.0

900.0890.0

840.0

120.2

744.2

77.0

79.0

121.0

122.0124.0

122.0

120.0123.0

146.0

146.0153.0

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Price trend3 mth.

2.55

2.46

2.75

0.73

0.21

0.15

0.98

0.01

0.48

0.15

0.150.15

0.95

79.4

3.05

76.0

372

21-Nov

77

16,539

6,746

2,304

1,194

175

81

2,057

20152014

0.85

0.801.05

0.75

0.800.85

2.13

2.25

0.62

Medium 0-5%

1,021

542

0.99

1.301.45

2.32

2.15

2.20

2.402.65

0.70

0.95

1.051.25

2.60

1.101.35

1.15

1.43

1.30

1.31

Medium

Medium

Medium 0-8%

Medium 0-5%

0-5%

0-5%

14 | 21 November 2014 www.danskeresearch.com

Weekly Focus

Calendar

Source: Danske Bank Markets

Key Data and Events in Week 48

During the week Period Danske Bank Consensus Previous

Sat 22 EUR ECB's Constancio speaks in Florence

Mon 24 GBP Nationwide House Prices m/m|y/y Nov 0.50%|9.00%

Thu 27 - 01 DEM Retail sales m/m|y/y Oct 2.00%| .. 1.30%| .. -2.80%|2.30%

Monday, November 24, 2014 Period Danske Bank Consensus Previous

- GBP Nationwide House Prices m/m|y/y Nov 0.50%|9.00%

10:00 DEM IFO - business climate Index Nov 104.2 103.0 103.2

10:00 DEM IFO - current assessment Index Nov 108.4 107.7 108.4

10:00 DEM IFO - expectations Index Nov 100.2 98.6 98.3

15:30 EUR ECB Announces Covered-Bond Purchases

15:45 USD Markit Service PMI, preliminary 57.1

15:45 USD Markit composite PMI, prelimenary 57.2

Tuesday, November 25, 2014 Period Danske Bank Consensus Previous

0:50 JPY BoJ board minutes

2:00 JPY BoJ Kuroda speaks

6:30 NOK Consumer confidence Net. bal. 4th quarter 21.2

8:00 DEM GDP, final and components q/q|y/y 3rd quarter 0.10%|.. 0.10%|1.20% 0.10%|1.20%

8:00 DEM Fixed investments q/q|y/y 3rd quarter -1.70%| ..

8:00 DEM Private consumption q/q|y/y 3rd quarter 0.20%| ..

8:45 FRF Business confidence Index Nov 91.0

9:30 SEK PPI m/m|y/y Oct -0.30%|1.70%

11:00 EUR EC OECD Economic Outlook

14:30 USD GDP, first revision q/q ann. 3rd quarter 3.20% 3.50%

14:30 USD GDP Price Deflator, first revision q/q 3rd quarter 1.30% 1.30%

14:30 USD PCE core q/q 3rd quarter 1.40%

14:30 USD Personal Consumption q/q 3rd quarter 1.80%

14:30 CAD Retail sales m/m Sep 0.50% -0.30%

15:00 USD S&P Case Shiller House prices Index Sep 173.7

16:00 USD Conference Board consumer confidence Index Nov 96.0 95.3 94.5

Wednesday, November 26, 2014 Period Danske Bank Consensus Previous

6:00 JPY Small business confidence Index Nov 47.4

8:45 FRF Consumer confidence Index Nov 85.0

9:00 SEK Consumer confidence Index Nov 100 98.0

9:00 SEK Manufacturing confidence Index Nov 108 107.7

9:00 SEK Economic Tendency Survey Index Nov 104.3

9:30 SEK Trade balance SEK bn Oct 0.5 1.4

10:00 NOK Unemployment s.a. (LFS) % Sep 3.70% 3.70% 3.70%

10:30 GBP GDP, preliminary q/q|y/y 3rd quarter 0.70%|3.00%

13:00 USD MBA Mortgage Applications %

14:30 USD Durable Goods Orders m/m Oct -0.50% -1.10%

14:30 USD Initial jobless claims 1000

14:30 USD Personal income m/m Oct 0.50% 0.40% 0.20%

14:30 USD Personal spending m/m Oct 0.30% 0.30% -0.20%

14:30 USD PCE core m/m|y/y Oct 0.20%|.. 0.10%|1.50% 0.10%|1.50%

14:30 USD PCE deflator m/m|y/y Oct -0.10%|1.40% 0.00%|1.40% 0.10%|1.40%

15:45 USD Chicago PMI Index Nov 63.0 66.2

15:55 USD University of Michigan Confidence, final Index Nov 91.3 90.0 89.4

16:00 USD Pending home sales m/m|y/y Oct 0.80%|... 0.30%|1.00%

16:00 USD New Home Sales 1000 (m/m) Oct 470K 467K (0.20%)

22:45 NZD Trade balance NZD M Oct -749M -1350M

15 | 21 November 2014 www.danskeresearch.com

Weekly Focus

Calendar - continued

Source: Danske Bank Markets

Thursday, November 27, 2014 Period Danske Bank Consensus Previous

- USD US financial markets closed

9:00 DKK Gross unemployment s.a. K (%) Oct 132.7 (5.0%) 133 (5.0%)

9:00 ESP GDP, final q/q|y/y 3rd quarter 0.50%| .. 0.50%|1.60%

9:00 ESP HICP, preliminary m/m|y/y Nov ...|-0.20% ...|-0.20%

9:00 DKK Confidence indicator, industry Index Nov -5 -16

9:00 OPC OPEC meeting, Vienna

9:55 DEM Unemployment % Nov 6.70% 6.70% 6.70%

10:00 EUR Loans to NFC's (adj. For sales and sec.) y/y Oct -1.6%

10:00 ITL Business confidence Index Nov 96.0

10:00 EUR Money supply (M3) y/y Oct 2.80% 2.60% 2.50%

10:00 EUR Loans to Households (adj. For sales and sec.) y/y Oct 0.70%

11:00 EUR Consumer confidence, final Net bal. Nov

11:00 EUR Service confidence Net bal. Nov 4.4

11:00 EUR Business climate indicator Net bal. Nov 0.1

11:00 EUR Industrial confidence Net bal. Nov -5.1

11:00 EUR Economic confidence Index Nov 100.7

13:00 DEM GfK consumer confidence Net. Bal. Dec 8.6 8.5

14:00 DEM Consumer prices m/m|y/y Nov ..|0.60% 0.10%|0.60% -0.30%|0.80%

14:00 DEM HICP, preliminary m/m|y/y Nov ..|0.50% -0.30%|0.70%

Friday, November 28, 2014 Period Danske Bank Consensus Previous

- USD US finansial markets close early

0:30 JPY Unemployment rate % Oct 3.60% 3.60% 3.60%

0:30 JPY CPI - national y/y Oct 3.00% 3.20%

0:30 JPY CPI - national ex. fresh food y/y Oct 3.0% 2.90% 3.00%

0:30 JPY CPI - national ex. fresh food and energy y/y Oct 2.30% 2.20% 2.30%

0:30 JPY CPI- Tokyo y/y Nov 2.30% 2.50%

0:30 JPY CPI - Tokyo ex fresh food y/y Nov 2.50% 2.50%

0:30 JPY Household spending y/y Oct -5.00% -5.60%

0:30 JPY Job-to-applicant ratio Oct 1.09 1.09 1.09

0:50 JPY Industrial production, preliminary m/m|y/y Oct -0.50%|-1.70% 2.90%|0.80%

0:50 JPY Retail trade m/m|y/y Oct ...|1.50% 2.80%|2.30%

0:50 JPY Large retailers' sales y/y Oct 0.10% 0.50%

1:05 GBP Gfk Consumer confidence Index Nov -2.0

6:00 JPY Housing starts y/y Oct -14.90% -14.30%

8:45 FRF Household consumption m/m|y/y Oct 0.80%| .. -0.80%|0.20%

9:00 DKK GDP, preliminary q/q|y/y 3rd quarter 0.00%|0.40% 0.20%|0.30%

9:00 DKK CB's securities statistics Oct

9:00 DKK Foriegn portfolio investments Oct

9:30 SEK GDP q/q|y/y 3rd quarter 0.0%|2.2% 0.7%|2.6%

9:30 SEK Retail sales s.a. m/m|y/y Oct 0.5%|3.3% -0.60%|2.80%

10:00 NOK Unemployment % Nov 2.70%

10:00 NOK Retail sales, s.a. m/m Oct 0.50% -0.10%

10:00 NOK Norges Bank Daily FX Purchases M Dec -250 -250

10:00 NOK Wage index manufacturing q/q 3rd quarter 0.10%

11:00 ITL HICP, preliminary m/m|y/y Nov 0.10%| .. 0.30%|0.20%

11:00 EUR Unemployment % Oct 11.50% 11.50% 11.50%

11:00 EUR CPI - core, preliminary % Nov 0.60% 0.70% 0.70%

11:00 EUR CPI, preliminary y/y Nov 0.30% 0.30% 0.40%

12:00 EUR ECB announces 3-year LTRO repayment

14:30 CAD GDP m/m|y/y Sep -0.10%|2.20%

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

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

16 | 21 November 2014 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

Economist.

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