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Important disclosures and certifications are contained from page 16 of this report. www.danskeresearch.com
Investment Research
Market movers ahead
There are downside risks to the coming week’s US retail sales data and upside risks to
the preliminary December University of Michigan’s consumer sentiment index.
Furthermore, the Fed’s Labour Market Condition Index for November will be
released on Monday, which will provide important input for the FOMC meeting on
16-17 December.
In the euro area, the result of the ECB’s December TLTRO will be announced. We expect only a small take-up of EUR120bn, which suggests that the expected boost to liquidity will be smaller than expected and hence have a smaller impact.
We expect the TLTROs to be the main contribution in the expansion of the ECB’s
balance sheet towards the level in 2012. Hence, we expect a disappointment to lead to
an announcement of corporate bond purchases in January followed by sovereign bond
purchases in Q2.
In China, most hard economic data for November will be released next week.
In Norway, the rate decision on Thursday will be a close call. Although we do not
expect a rate cut, we expect Norges Bank to signal a 50% likelihood of a cut before
next summer.
Global macro and market themes
Three macro themes are set to shape markets in 2015: a) synchronised global recovery
with low inflation, b) the historic divergence in monetary policy and c) the biggest
global liquidity boost since 2011.
This will underpin outperformance of risk assets, higher US short yields, US bond
yield flattening and more USD strength.
Focus
Read more about the market themes for 2015 here - The Big Picture.
Read more about upcoming ECB events here - ECB’s timeline is tricky – isn’t it?
05 December 2014
Editors
Allan von Mehren +45 4512 8055 [email protected]
Steen Bocian +45 45 12 85 31 [email protected]
Weekly Focus
The ECB prepares for more easing in January 2015
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
Strong US consumer sentiment ECB easing in super slow motion
Source: Macrobond Source: Macrobond
Major indices
05-Dec 3M 12M
10yr EUR swap 0.98 0.85 1.05
EUR/USD 124 122 123
ICE Brent oil 69 103 91
05-Dec 6M 12-24M
S&P500 2072 0-5% 5-8%
2 | 05 December 2014 www.danskeresearch.com
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Market Movers
Global
The most important releases for the US in the coming week are retail sales and the
preliminary December University of Michigan consumer sentiment index.
Our model estimates November retail sales were up 0.10% m/m, which is below
consensus. It was primarily lower gasoline prices and unfavourable weather that
dragged sales lower. On the more positive side, the increased consumer sentiment and
better real income growth are reflected in an increase in car sales, which affects retail
sales positively. The decline in retail sales is in line with the indications from Black
Friday, when retailers reported a decline in sales compared with 2013. Fundamentally,
we have a positive outlook on US private consumption due to the improving labour
market and the falling gasoline price. However, the unusually cold weather is likely to
have influenced the November numbers negatively.
The University of Michigan consumer sentiment index keeps increasing and we
expect the trend from the last couple of months to continue and look for an increase to
89.9 in December. The question is how much more the index can improve but if we
look back to before the crises and further, we are still far from peak levels (see chart
top right).
Furthermore, the Fed’s Labour Market Condition Index (LMCI) for November is
released on Monday, which is an important input to the FOMC meeting on 16-17
December. We are moving into the silence period and Dennis P. Lockhart (non-voter,
neutral) is the only FOMC member scheduled to speak ahead of the meeting.
In the euro area, the result of the ECB’s December TLTRO, which is aimed at
improving the subdued bank-lending channel, will be announced. We expect banks to
take EUR120bn (consensus EUR170bn) at the auction, implying the total take-up will
be around EUR200bn out of EUR400bn eligible for the first two TLTROs, where the
total eligible amount is dependent on the loan stock. The TLTROs are in our view
expected to be the main contributor to the expansion of the ECB’s balance sheet
towards the level seen in 2012. Hence, we expect a disappointment to lead to an
announcement of corporate bond purchases in January followed by sovereign bond
purchases in Q2 (see Flash Comment: ECB preview: ECB’s timeline is tricky – isn’t
it?, 3 December).
We expect euro industrial production to increase marginally (0.1% m/m) in October.
In Germany, passenger car production increased in October and points to higher
German industrial production; hence, we forecast 0.4% m/m. Looking ahead, we
expect some further improvements as IFO expectations showed a small but important
turn in November after a six-month downward trend. The sign of positive momentum
is also reported in other sentiment indicators and we expect this to be confirmed in the
hard data for Q4.
Furthermore, we note that the Eurogroup and Ecofin meetings are scheduled for next
week.
Consumer sentiment supported by
lower gasoline prices
Source: Macrobond Financial
Retail sales held down by cold weather
but to rebound in coming months
Source: Macrobond Financial, Danske Bank
Markets
We expect low TLTRO take up
Source: ECB, Bloomberg, Danske Bank Markets
0
50
100
150
200
250
300
350
400
450
500
0
20
40
60
80
100
120
140
160
180
Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16
Danske expectations (lhs) TLTRO acc. take-up (rhs)
EUR EUR bn.
just above 200Bn in
first two operations
82.6
120
75 75
25 25 25 25
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In China, most economic hard data for November is set to be released next week. It is
too early to expect any substantial impact from the People’s Bank of China’s (PBoC)
interest rate cut on 21 November. Hence, in line with recent manufacturing PMIs, we
expect growth in industrial production to have continued to slow to 7.4% y/y in
November, from 7.7% y/y in October. We expect weakness in demand to have shifted
to exports from domestic investment demand, which has so far been the most
important drag on growth in 2014. In the foreign trade data for November, we expect
export growth to have eased further to 10.0% y/y in November, from 11.6% y/y in
October, while import growth stayed subdued at just 4.4% y/y, due partly to lower
import prices. We estimate growth in retail sales remained unchanged at 11.5% y/y in
November, underscoring that private consumption remains resilient despite the recent
weakness in the housing market. Finally, we expect CPI inflation to have eased
further to 1.5% y/y in November, from 1.6% y/y in October, on the back of lower
gasoline prices and a slight decline in food price inflation.
In China, we expect the main policymakers to convene for the Central Economic
Work Conference (CEWC) on 9 December. In connection with the CEWC – that
usually lasts two to three days – the Chinese leadership will decide on the main
macroeconomic targets for 2015, including the targets for GDP growth and inflation.
The targets are not officially announced until the National People’s Congress (NPC)
convenes in March but some of the targets are often leaked to the press in the wake of
the CEWC. We expect the target for GDP growth in 2014 to be cut to 7.0%, from
7.5% in 2014. This will give the government some leeway in monetary policy and
indicate that the PBoC will not need to ease monetary policy aggressively next year.
On the other hand, should the growth target be maintained at 7.5%, it would suggest a
much stronger easing bias next year. In 2014, inflation is poised to undershoot the
3.5% inflation target substantially and the inflation target for 2015 could easily be cut
to 3.0% without being a major constraint on monetary policy next year.
In Japan, the most important event next week is the release of revised GDP data for
Q3. In the first estimate GDP contracted 0.4% q/q in Q3 after contracting -1.6% q/q in
Q2, suggesting that Japan was in a technical recession in the wake of the consumption
tax hike in April. The most important new information in the first revision is the
business capital expenditure survey for Q3 released last week. This survey was much
stronger than expected and indicated that business investments increased in Q3
instead of contracting as reported in the first estimate. Hence, GDP growth for Q3 is
poised to be revised markedly higher in Q3 and we cannot completely rule out the
possibility that GDP did not contract in Q3 and that Japan is not in a technical
recession after all.
Otherwise, focus gradually turns to polls ahead of the Lower House election on 14
December. It will be a big surprise and negative for financial markets if the
government led by the Liberal Democratic Party (LDP) is not able to maintain a solid
majority in the Lower House.
Industrial production continued to
slow in November
Source: Macrobond Financial, Danske Bank
Markets
In Japan, Q3 GDP growth is poised to
be revised higher
Source: Macrobond Financial, Danske Bank
Markets
4 | 05 December 2014 www.danskeresearch.com
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Scandi
In Denmark, the week brings numbers for inflation, which we expect to come out at
-0.4% m/m and 0.3% y/y for November, down from 0.1% m/m and 0.5% y/y in
October. The decrease should be seen in the light of lower petrol prices as oil prices
have fallen. Milk and pork prices also appear to have come down. We still expect
inflation to fall to around 0% y/y in January, although movements in oil prices will
always be a source of uncertainty. The week also brings foreign trade figures for
October. We estimate a current account surplus of DKK14.0bn, down slightly from
DKK15.1bn in September but still high, buoyed by both a strong trade surplus and
strong net income from abroad. We estimate exports of goods excluding vessels and
aircraft climbed 1% after falling in August and September. This can be seen partly as
a normalisation and partly as a result of generally more positive signals from
Denmark's export markets in October. Imports are also likely to rise slightly, giving
an unchanged trade surplus excluding vessels and aircraft of DKK5.7bn. Finally, the
government will publish its quarterly Economic Survey, which we expect to attract
some interest with its updated forecasts for not only economic growth but also the
budget balance.
In Sweden, the week(s) ahead will be filled with political discussions and we expect
the campaigning to commence immediately. In terms of outcomes, first out is
inflation, where our forecasts are spot on those of the Riksbank. In this vein, we also
believe that any (smaller) deviation in either direction should pass largely unnoticed
by the Riksbank and markets, especially if it is related to the dramatic fall in oil and
energy prices. In all honesty, we are actually more interested to see what the labour
force survey could tell us about employment prospects. Anecdotal evidence points to
a renewed focus on cost cutting, especially in the manufacturing sector. In
conjunction with the, it is hoped, temporary loss of momentum in important services
sectors, we are a bit worried that the strong employment growth will start to yield.
In Norway, we expect the rate-setting meeting to be a real thriller. There is extreme
uncertainty, what with oil prices having plummeted from USD95/bl to USD70/bl
since the last monetary policy report. The market’s interest rate expectations have also
fallen like a stone, with almost two cuts now priced in before next summer. In
addition, the krone has depreciated sharply and is now 5% weaker than the central
bank assumed in September. Weighing up the factors that influence the interest rate
path, the weaker krone and lower bank interest rates in isolation will push the path up,
while lower global rates will pull in the other direction. The big question, then, is
what Norges Bank expects GDP and wages to do. Statistics Norway is now predicting
economic growth of just 1.0% next year, with wage growth slowing to 3.1%. If
Norges Bank concurs, the market's interest rate expectations will be realised.
However, Statistics Norway's projections assume that the slide in oil prices will hit
private consumption and the housing market via growing consumer pessimism. While
we cannot rule out such effects, we are not entirely convinced and we do not expect
the central bank to be either. Therefore, we expect Norges Bank to leave interest rates
unchanged and believe the interest rate path in the monetary policy report will include
a roughly 50/50 chance of a rate cut before next summer. This is based on the central
bank assuming GDP growth of around 1.75% and wage growth of around 3.25% in
2015.
Inflation expected to fall in November
Source: Statistics Denmark
Are Swedish labour markets losing
the ‘it’-factor?
Source: Statistics Sweden. Macrobond Financial
Market expecting big things
Source: Macrobond Financial, Bloomberg, Danske
Bank Markets
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Market movers ahead
Source: Bloomberg, Danske Bank Markets
Global movers Event Period Danske Consensus Previous
During the week Wed 10 - 15 CNY Aggregate Financing bn CNY Nov 875 890 662.7
Mon 08-Dec - CNY Trade balance USD bn Nov 46.4 44.0 45.4
0:50 JPY GDP, first revision q/q|ann. 3rd quarter -0.10%|… -0.10%|-0.50% -0.40%|-1.60%
8:00 DEM Industrial production m/m|y/y Oct 0.4%|… 0.00%|0.20% 1.40%|-0.10%
Wed 10-Dec 2:30 CNY CPI y/y Nov 1.5% 1.60% 1.60%
Thurs 11-Dec 9:30 CHF Centralbank - press briefing 0 0
11:10 EUR ECB's TLTRO allotment Bn. 120
14:30 USD Retail Sales m/m Nov 0.10% 0.30% 0.30%
Fri 12-Dec 6:30 CNY Industrial production y/y Nov 7.4% 7.50% 7.70%
11:00 EUR Industrial production m/m|y/y Oct 0.1%|… 0.00%|… 0.60%|0.60%
15:55 USD University of Michigan Confidence, preliminary Index Dec 89.8 89.5 88.8
Scandi movers Event Period Danske Consensus Previous
Wed 10-Dec 9:00 DKK CPI m/m|y/y Nov -0.40%|0.30% 0.10%|0.50%
10:00 NOK Consumer prices m/m|y/y Nov 0.10%|2.00%
Thurs 11-Dec 9:30 SEK Unemployment s.a. % Nov 8.0% 8.10%
9:30 SEK Underlying inflation CPIF m/m|y/y Nov -0.10%|0.53% 0.10%|0.60%
11:00 NOK Norges Banks monetary policy meeting Dec
6 | 05 December 2014 www.danskeresearch.com
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Global Macro and Market Themes
Three macro themes to shape markets in 2015
In this week’s Strategy we highlight three macro themes that we expect to shape global
markets in 2015. These are 1) synchronised global recovery with low inflation, 2) historic
divergence in monetary policy and 3) the biggest liquidity boost since 2011. Based on this
we believe investors should position for the following key developments in 2015:
1. Outperformance of risk assets: The combination of synchronised recovery and
another year with lots of liquidity will provide another strong base for risk assets
(stocks, credit and peripheral bonds in the euro area). While some markets are
expensive on a stand-alone basis, we believe they still offer value when viewed
against extremely low bond yields. In an environment of renewed economic
recovery, the hunt for yield is expected to get new tailwind.
2. Rise in US bond yields with short maturities: The markets are still only pricing in
about one hike from the Fed next year, which is in sharp contrast with the Fed’s
own projection of four or five hikes. It is not unusual, though, that the market is
‘mis-priced’ well ahead of the first hike. History suggests, however, that once we
move to within three or four months of the first rate increase, a significant re-pricing
can take place. In 2004, 2-year bond yields, for example, stayed low until March but
then rose by close to 150bp up to the time of the rate hike in June. We are moving
rapidly closer to the window where a re-pricing of Fed expectations is likely to take
place.
3. Flattening of US yield curve: While yields in the short end are expected to go
higher, the medium to long end of the bond spectrum will be better supported by the
global liquidity glut. We thus look for a further significant flattening of the US yield
curve. Again, a comparison with the 2004-2006 hiking cycle is useful. Over this
period US 2-year yields rose by 375bp whereas US 10-year yields rose only 150bp.
And most of the increase in 10-year yields came quite late in the hiking cycle – in
early 2006. We could very well see a repeat of this ‘bond yield conundrum’ given
the significant amount of liquidity that will continue to slush around amid a low
appetite for real investments in the corporate sector. The low yield levels in
Germany and Japan will also work to anchor US longer-term yields.
4. Outperformance of German versus US bonds: In the euro area we expect
negative deposit rates and QE in government bonds to keep German bond yields at
very low levels. While there could be some spill-over to Germany when US yields
go up, at least yield levels out to five years should be well anchored by ECB policy.
We thus look for further outperformance of Germany versus US in maturities from
0-5 years.
Key points
Three macro themes to shape
markets in 2015: a) synchronised
global recovery with low inflation,
b) historic divergence in monetary
policy and c) biggest global
liquidity boost since 2011
This will underpin outperformance
of risk assets, higher US short
yields, US bond yield flattening and
more USD strength
Stock markets to outperform in 2015
versus very low yields on core bonds
Source: Macrobond Financial, G3 is US, Germany
and Japan
US 2-year yields to rise soon as Fed
hike comes closer
Source: Macrobond Financial, G3 is US, Germany
and Japan
7 | 05 December 2014 www.danskeresearch.com
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5. Lower EUR/USD and higher USD/JPY: The strong divergence of monetary
policy will lead to more USD strength. As the Fed hikes and ECB eases further and
Bank of Japan keeps pumping significant amounts of money out, we should see a
further decline in EUR/USD and a higher USD/JPY in the first half of the year.
Over the summer we expect to see a peak in USD strength as Fed hikes will be
priced by then, but for the coming six months, a re-pricing of Fed policy is expected
to underpin more appreciation of the USD.
These are the main trends we believe investors should position for. Below we give a little
more colour on the macro themes behind these financial expectations.
Macro theme #1: Synchronised recovery with low inflation
Following a year of very divergent growth across regions we expect to see a synchronised
recovery among the big regions during H1 2015, see also The Big Picture: Synchronised
recovery in H1 15, 1 December 2014.
In the US, the underlying economic momentum is improving underneath the current
slight moderation. The job market is strong, wealth increases have been significant and
recently a sharp decline in oil prices has been giving a strong boost to consumers. On top
of this, the fiscal drag has eased markedly and profit growth is robust. The main
headwind currently is a stronger USD but this is not enough to stop the US economy. The
US is probably heading for its strongest year since 2005, with growth just above 3%.
In the euro area, we believe the cycle is bottoming and look for gradual
improvement in growth and business surveys over the coming quarters. We see
evidence that the Ukraine crisis has been the main culprit behind this year’s slowdown.
The effects of this shock are expected to gradually fade. At the same time, new tailwinds
will gradually kick in: a sharp weakening of the euro, the big decline in oil prices and
significant easing of both monetary and fiscal policy. The EU investment plan could give
a lift to GDP of approximately 0.3-0.4% over the coming years according to the EU
Commission. Easing lending standards should also start to support credit availability next
year.
The last major engine in the world economy, China, is also expected to see some
improvement. Growth has slowed over the past quarters but the People’s Bank of China
has shown a determination to lift growth by cutting rates and, with inflation clearly below
the target, we believe it can ease enough to get growth back on the 7½% growth path that
the government is targeting.
Finally, Japan is recovering from the sharp slowdown following the VAT hike in
April. Industrial production and retail sales have already recovered and we expect
continued moderate improvement over the coming year.
While growth is picking up, inflation is bound to go lower in coming quarters. The
sharp decline in oil prices will push inflation down in the short term and there is a not
insignificant likelihood that we will see the first negative print in the euro area since the
aftermath of the financial crisis in 2009. While the decline in oil prices is positive for
growth, it will make the ECB’s job harder as the risk of inflation getting stuck far below
their ‘close to 2%’ inflation target is going up.
G3 growth to recover, PMI’s to move
higher in H1
Source: Macrobond Financial
Euro area bottoming
Source: Macrobond Financial
Euro inflation balancing around zero in
coming months
Source: Macrobond Financial
More USD strength expected in 2015
Source: Macrobond Financial
8 | 05 December 2014 www.danskeresearch.com
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Macro theme #2: Historic divergence in monetary policy
2015 will likely be a historic year from a monetary policy point of view. The Fed is
well on track to reach ‘lift-off’ on rates in June while the ECB will need to grab for
more tools to get the desired easing of monetary policy. The usual pattern of the ECB
raising rates around 6-9 months after the Fed is not going to happen this time. Instead the
two central banks will be moving in opposite directions over the coming one or two years.
The Fed is projecting that it will raise rates by 250bp over the next two years, whereas the
ECB in the same period will keep rates unchanged and aim for an increase in the balance
sheet of EUR1trn.
The difference was also highlighted this week with differing central bank communication
across the Atlantic. ECB president Mario Draghi focused on the inflation impact of
the lower oil prices and said that the ECB would evaluate whether further stimulus
measures are needed in early Q1. We look for the ECB to introduce purchases of
corporate bonds in January and sovereign bonds in Q2, Flash Comment: Euro – Draghi
hinted at more easing in January, 4 December 2014.
On the other hand vice chairman of the Fed Bill Dudley (dove, voter) on Tuesday
emphasised the positive effects on growth of the lower oil prices and played down the
risk of sustained lower inflation. He also expressed more confidence that US growth
would finally be able to sustain a stronger performance in contrast to previous years
where hopes of growth breaking out were subsequently dashed. He also repeated that he
agrees with the general expectation of lift-off in mid-2015.
The difference between the Fed and ECB makes sense from an economic point of
view: In the US the output gap is about to close over the next one to two years whereas
the euro area still has a very high output gap, probably around 4-5%. Inflation is on track
to reach the Fed’s 2% goal over the next 1-1½ years, whereas euro area inflation may go
into negative territory in the coming months.
Japan is really a special case, experimenting with a much more aggressive style of
economic policy. It is the only country where the output gap is pretty much closed and
inflation around 1% is between the level of the US and the euro area. Yet Bank of Japan
is the central bank adding the most stimulus, with net asset purchases corresponding to
16% of GDP.
Macro theme #3: The biggest liquidity boost since 2011
With massive asset purchases from Bank of Japan and new measures from the ECB
during 2015, this will be another year of massive liquidity boost to the financial system.
In fact it is likely to be the biggest increase since 2011, although it depends on how fast
the ECB moves to reach its soft target of increasing the balance sheet by EUR1trn. But if
the ECB manages to increase the balance sheet in 2015 by a little over half of that, we
could get a global liquidity boost of USD1.5trn, since the Bank of Japan is scheduled to
increase the balance sheet by what corresponds to USD700bn.
This time it’s different
Source: Macrobond Financial
Solid outlook for US growth – 2015 to
be strongest year since 2005
Source: Macrobond Financial
Global liquidity to get big boost in 2015
Source: Macrobond Financial
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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 o il 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 M oderation 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 vo latility 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 BoJ easing, Fed hikes and pension reforms
EUR/SEK - Higher short-term, lower medium-term Higher near-term on weaker Swedish growth
EUR/NOK - To edge higher short-term on o il, lower in 2015 Oil prices and Norges Bank decision in December
Commodities
Oil prices - weakness rest of the year, recovery in 2015 Oil glut and global growth concerns to weigh near-term. Limited risk of supply disruptions
M etal 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 stabilization, extreme weather is key upside risk.
10 | 05 December 2014 www.danskeresearch.com
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Scandi Update
Denmark – Nationalbank intervenes again
The currency reserves data for November were eagerly anticipated after the EUR/DKK
traded below the central parity rate during the month, at times dipping below 7.440, its
lowest level for two years. The figures revealed that the Nationalbank intervened for a
third successive month, with net purchases of DKK 3.8bn.The normal pattern is for the
central bank to change interest rates once cumulative interventions reach DKK 10-20bn.
Interventions over the past three months have totalled DKK 6.9bn, but with the krone still
strong we expect the bank to cut interest rates in Q1 next year. The week also brought
housing market data for September, completing the picture for Q3, with house prices
dropping 0.7% q/q and apartment prices climbing 0.9% q/q. Although house prices fell
slightly, this does not give us cause for concern because it is probably at least partly
seasonal. We are still positive about the housing market, which is being boosted by both
low interest rates and rising employment. Finally we heard from manufacturers, with
industrial production climbing 2.8% m/m in October and so making a good start to Q4
after a difficult Q3.
Sweden – United we stand, divided we fall
Aesop’s lemma above has been used for all sorts of political motifs throughout history
(for some reason often leaving out the latter part) and given the very turbulent political
situation it is a fitting frame for the options going forward. The extra election being held
on 22 March will, with a very high degree of certainty, produce the same parliamentary
situation – id est, with the far-right Sweden Democrats (SD) controlling the balance of
power. Hence, to bypass SD, the centre-right Alliance and the leftist Red-Green coalition
will need to find a common ground. The initial statements after the decision to hold an
extra election do not, however, open up for such possibilities. We will just have to see, it
seems. For those who want to keep track, Sentio and United Minds are the most reputable
forecasters. Being economists, we also like this approach (we expect it to be updated
shortly). Elsewhere, data during the week has been second-rate at best and has no major
bearing on our forecasts.
Norway – Strong data, weaker outlook?
As expected, the week's data did not reveal any signs of a significant slowdown in the
Norwegian economy. The PMI climbed unexpectedly to 51.3 in November, which points
to slow but accelerating growth in manufacturing despite the impact of lower oil
investment on oil-related industries. Housing prices climbed for a 12th successive month
and are now up 6.8% y/y. Falling stock-to-sales and time-to-sell also point to a tighter
housing market. In addition, the oil investment survey suggested that the drop in oil
investment next year will not be worse than feared despite oil prices tumbling to USD
70/bbl. On the other hand, Statistics Norway published a surprisingly weak growth
forecast for the Norwegian economy next year of just 1.0%. This low estimate is not,
however, a result of expectations of a sharp fall in oil investment or significant knock-on
effects from this. Instead, Statistics Norway expects Norwegian households to be more
cautious following the drop in oil prices, leading to lower growth in spending and housing
investment via weaker housing demand. Although this is a possibility, we would wager
that both spending and the property market will hold up and that growth will turn out
closer to 2% than 1%.
Nationalbank reacts to strong krone
Source: Statistics Denmark
Is consumer confidence signalling
weaker spending?
Source: Macrobond
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Latest research from Danske Bank Markets
4/12 Flash Comment: Euro - Draghi hinted at more easing in January
Draghi had a dovish stance during the ECB's press conference, but from a market
perspective sweet talk was not enough.
3/12 Flash Comment - Higher euro retail sales in October, we look for further
improvements
Euro area retail sales increased 0.4% m/m in October after declining 1.2% m/m in
September. In yearly terms they were up 1.4% in October and have increased at around
that level since April.
3/12 Flash Comment - Sweden: Government crisis
The right-wing party Sweden Democrats announced that it will support the former
alliance government’s alternative budget bill, which effectively means that the present
government’s budget bill will be rejected.
3/12 Monitor - US Labour Market: improvement to continue
We expect nonfarm payrolls to gain 240,000 in November, which is a little above
consensus of 228,000. We expect the unemployment rate to be flat at 5.8% (same as
consensus).
1/12 Flash Comment US: ISM manufacturing remains too high
The US ISM manufacturing index surprised once again in November.
1/12 Flash Comment China: NBS manufacturing PMI declines more than expected in
November
China's official manufacturing PMI in November declined to 50.3 (consensus: 50.5,
DBM: 50.6) from 50.8 in October.
1/12 The Big Picture: Synchronous global recovery in H1 15
The Big Picture presents our view of the global economy and outlook for US, euro area,
Japan and China.
12 | 05 December 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 1.9 2.7 1.3 4.9 0.0 2.1 4.5 -0.1 8.0 -2.0 39.2 2.92015 1.7 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 -2.4 0.0 2.1 1.2 1.4 12.0 -3.0 92.6 2.42014 0.9 0.9 0.9 0.7 -0.1 3.4 3.5 0.5 11.6 -2.6 94.0 2.52015 1.5 1.5 0.9 1.5 0.0 4.3 4.2 0.5 11.5 -2.4 94.2 2.6
Germany 2013 0.2 0.9 0.7 -0.4 0.2 1.7 3.2 1.6 5.2 0.0 78.4 6.92014 1.5 1.2 1.1 2.8 -0.1 4.1 3.7 0.8 5.1 0.2 76.0 7.12015 1.9 1.9 1.1 2.1 0.0 5.5 5.4 0.7 5.1 0.0 73.6 7.1
France 2013 0.4 0.3 2.0 -0.8 0.2 2.4 1.9 1.0 10.3 -4.3 93.5 -2.02014 0.4 0.3 2.0 -1.7 -0.1 2.1 2.9 0.6 10.4 -3.9 95.8 -1.92015 0.6 0.8 0.8 -0.8 0.0 3.4 3.2 0.5 10.4 -3.4 96.6 -1.9
Italy 2013 -1.9 -2.7 -0.7 -5.4 -0.6 0.9 -2.6 1.3 12.2 -3.0 132.6 1.02014 -0.4 0.3 -0.2 -2.6 0.3 2.0 0.4 0.2 12.7 -3.0 135.2 1.52015 0.5 0.6 0.2 -1.4 0.0 3.7 2.3 0.3 12.6 -2.7 134.0 1.5
Spain 2013 -1.3 -2.3 -2.9 -3.9 0.2 4.3 -0.5 1.5 26.1 -7.1 93.9 1.52014 1.3 2.3 0.8 2.5 -0.1 4.6 7.7 -0.1 24.8 -5.6 98.1 0.52015 2.3 2.4 0.3 4.8 0.0 6.0 7.0 0.2 23.5 -4.6 101.2 0.7
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 2.2 2.4 -2.0 4.7 0.0 3.0 1.1 1.1 7.4 -4.1 101.0 -2.32014 2.3 2.3 0.0 5.2 0.0 3.2 3.7 1.4 6.2 -2.9 104.0 -2.52015 3.0 3.0 1.3 6.3 0.0 4.7 5.8 1.2 5.5 -2.6 103.0 -2.6
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 0.4 -0.9 0.3 4.2 0.2 7.9 7.0 2.6 3.6 -8.1 245.0 0.32015 1.2 1.0 1.1 0.7 0.3 7.2 3.5 1.4 3.5 -6.7 245.0 1.0
China 2013 7.7 - - - - - - 2.6 4.3 -1.9 39.7 2.02014 7.4 - - - - - - 2.0 4.3 -1.1 40.7 1.82015 7.2 - - - - - - 2.2 4.2 -0.8 41.8 2.4
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 | 05 December 2014 www.danskeresearch.com
Weekly Fo
cus
Weekly Focus
Financial forecast
Source: Danske Bank Markets
Bond and money markets
Currencyvs USD
Currencyvs DKK
USD 05-Dec - 601.1
+3m - 610.0
+6m - 619.9+12m - 604.8
EUR 05-Dec 123.8 744.1
+3m 122.0 744.3
+6m 120.0 743.9+12m 123.0 743.9
JPY 05-Dec 120.1 5.00
+3m 120.0 5.10
+6m 122.0 5.10+12m 124.0 4.86
GBP 05-Dec 156.6 941.2
+3m 156.0 966.6
+6m 158.0 978.8+12m 156.0 941.6
CHF 05-Dec 97.1 618.8
+3m 99.2 615.1
+6m 101.7 609.8+12m 100.8 599.9
DKK 05-Dec 601.1 -
+3m 610.0 -
+6m 619.9 -+12m 604.8 -
SEK 05-Dec 749.2 80.2
+3m 762.3 80.0
+6m 766.7 80.9+12m 731.7 82.7
NOK 05-Dec 706.2 85.1
+3m 713.1 85.5
+6m 708.3 87.5+12m 666.7 90.7
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 83 87 91 93 96 89
ICE Brent 108 110 103 84 87 91 95 97 101 93
Copper 6,996 6,768 6,973 6,675 6,800 6,925 7,050 7,175 6,853 6,988
Zinc 2,024 2,080 2,314 2,300 2,325 2,350 2,375 2,400 2,180 2,363
Nickel 14,723 18,529 18,631 17,000 17,500 18,000 18,500 19,000 17,221 18,250
Aluminium 1,754 1,839 2,007 1,975 2,025 2,075 2,125 2,175 1,894 2,100
Gold 1,292 1,291 1,281 1,200 1,190 1,180 1,170 1,160 1,266 1,175
Matif Mill Wheat (€/t) 201 200 171 165 177 180 182 183 185 181
Rapeseed (€/t) 383 372 324 330 347 354 357 361 352 355
CBOT Wheat (USd/bushel) 618 651 528 520 565 575 580 585 579 576
CBOT Corn (USd/bushel) 453 478 359 355 385 395 400 405 411 396CBOT Soybeans (USd/bushel) 1,358 1,470 1,146 985 1,050 1,070 1,080 1,090 1,240 1,073
337
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
0.28
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
0.11
0.55
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
1.481.62
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
123.8
-
-
--
148.7
744.3
743.9743.9
927.4
874.2
820.0
930.0
850.0
920.0900.0
870.0
120.3
744.1
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
2.38
2.75
0.76
0.21
0.15
0.97
0.01
0.48
0.15
0.150.15
0.95
79.1
3.05
76.0
374
05-Dec
66
17,120
6,470
2,238
1,205
186
69
1,995
20152014
0.85
0.801.05
0.75
0.800.85
2.08
2.25
0.59
Medium 0-5%
1,009
600
0.98
1.301.45
2.20
2.15
2.20
2.402.65
0.66
0.95
1.051.25
2.60
1.101.35
1.15
1.39
1.30
1.29
Medium
Medium
Medium 0-8%
Medium 0-5%
0-5%
0-5%
14 | 05 December 2014 www.danskeresearch.com
Weekly Fo
cus
Weekly Focus
Calendar
Source: Danske Bank Markets
Key Data and Events in Week 50
During the week Period Danske Bank Consensus Previous
Wed 10 - 15 CNY Aggregate Financing bn CNY Nov 875 890 662.7
Wed 10 - 15 CNY New Yuan loans CNY bn. Nov 730 660 548.3
Wed 10 - 15 CNY Money supply M2 y/y Nov 12.50% 12.60%
Monday, December 8, 2014 Period Danske Bank Consensus Previous
- CNY Trade balance USD bn Nov 46.4 44.0 45.4
- CNY Import y/y Nov 4.4% 3.90% 4.60%
- CNY Export y/y Nov 10.0% 8.10% 11.60%
0:50 JPY GDP, first revision q/q|ann. 3rd quarter -0.10%|… -0.10%|-0.50% -0.40%|-1.60%
0:50 JPY GDP deflator, final y/y 3rd quarter 2.10% 2.10%
0:50 JPY Bank lending y/y Nov 2.40%
6:00 JPY Eco Watchers Survey Outlook (Current) Index Nov 47.0 46.6|44.0
8:00 DEM Industrial production m/m|y/y Oct 0.4%|… 0.00%|0.20% 1.40%|-0.10%
9:15 CHF Retail sales y/y Oct 0.30%
9:15 CHF CPI m/m|y/y Nov 0.00%|0.00% 0.00%|0.00%
10:30 EUR Sentix Investor Confidence Index Dec -7.0 -10.0 -11.9
15:00 EUR Eurogroup meeting in Brussels
16:00 USD Fed's LMCI m/m Nov 4.00%
18:30 USD Fed's Lockhart (non-voter, neutral) speaks
Tuesday, December 9, 2014 Period Danske Bank Consensus Previous
0:50 JPY Money supply M2 y/y Nov 3.20% 3.20%
1:30 AUD NAB Business Conditions Index Nov 13.0
7:45 CHF Unemployment % Nov 3.20% 3.20%
8:00 DEM Trade balance EUR bn Oct 19.0 21.9
8:00 DEM Labour costs q/q|y/y 3rd quarter 0.70%|1.70%
9:00 ESP House price index q/q|y/y 3rd quarter 1.70%|0.80%
9:00 EUR ECOFIN
9:00 DKK Trade balance ex ships and aircrafts (s.a.) DKK bn Oct 5.7 5.7
9:00 DKK Current account DKK bn Oct 14.0 15.1
10:30 GBP Industrial production m/m|y/y Oct 0.30%|1.90% 0.60%|1.50%
10:30 GBP Manufacturing production m/m|y/y Oct 0.20%|3.30% 0.40%|2.90%
13:30 USD NFIB small business optimism Index Nov 96.3 96.1
Wednesday, December 10, 2014 Period Danske Bank Consensus Previous
0:30 AUD Westpac Consumer Confidence Index (% m/m) Dec 96.6|0.019
0:50 JPY PPI m/m|y/y Nov -0.30%|2.70% -0.80%|2.90%
0:50 JPY BSI Large all industry q/q 4th quarter 1110.00%
2:30 CNY CPI y/y Nov 1.5% 1.60% 1.60%
2:30 CNY PPI y/y Nov -2.40% -2.20%
6:00 JPY Consumer confidence Index Nov 39.5 38.9
8:45 FRF Industrial production m/m|y/y Oct 0.5%|… 0.00%|-0.30% 0.00%|-0.30%
9:00 DKK CPI m/m|y/y Nov -0.40%|0.30% 0.10%|0.50%
10:00 NOK Consumer prices m/m|y/y Nov 0.10%|2.00%
10:00 NOK Core inflation(CPI-ATE) m/m|y/y Nov 0.1%|2.4% 0.20%|2.50%
10:00 NOK Producer prices m/m|y/y Nov -0.20%|-3.40%
10:30 GBP Trade balance GBP bn Oct -2350 -2838
13:00 USD MBA Mortgage Applications %
20:00 USD Budget statement USD bn Nov -79.5
21:00 NZD Bank of New Zealand (cash rate decision) % 3.50% 3.50% 3.50%
15 | 05 December 2014 www.danskeresearch.com
Weekly Fo
cus
Weekly Focus
Calendar - continued
Source: Danske Bank Markets
Thursday, December 11, 2014 Period Danske Bank Consensus Previous
0:50 JPY Machine orders m/m|y/y Oct -1.90%|-0.30% 2.90%|7.30%
0:50 JPY Tertiary industry index m/m Oct -0.20% 1.00%
1:01 GBP RICS House Price Balance Index Nov 0.2 0.2
1:30 AUD Employment change 1000 Nov 15.0K 24.1K
8:00 DEM HICP, final m/m|y/y Nov 0.00%|0.50% 0.00%|0.50% 0.00%|0.50%
8:45 FRF HICP m/m|y/y Nov 0.00%|0.50% 0.00%|0.50%
9:30 CHF Centralbank - press briefing 0 0
9:30 CHF SNB 3-month Libor target rate % 0.00% 0.00% 0.00%
9:30 SEK CPI m/m|y/y Nov -0.19%|-0.25% 0.10%|-0.10%
9:30 SEK Unemployment % Nov 7.5% 7.50%
9:30 SEK Unemployment s.a. % Nov 8.0% 8.10%
9:30 SEK Underlying inflation CPIF m/m|y/y Nov -0.10%|0.53% 0.10%|0.60%
10:00 EUR ECB monthly report
10:00 ITL Industrial production m/m|y/y Oct -0.90%|-2.90%
10:30 DKK The Government publish Economic Survey Dec
11:00 NOK Norges Banks monetary policy meeting Dec
11:00 NOK Norges Banks deposit % Dec 1.5 1.5 1.5
11:10 EUR ECB's TLTRO allotment Bn. 120
12:00 IRL GDP q/q|y/y 3rd quarter 0.3%|4.6% 1.50%|7.70%
14:30 USD Retail Sales m/m Nov 0.10% 0.30% 0.30%
14:30 USD Retail sales less autos m/m Nov -0.50% 0.10% 0.30%
14:30 USD Retail sales less autos and gas m/m Nov 0.50% 0.60%
14:30 USD Retail Sales Control Group m/m Nov 0.40% 0.50%
14:30 USD Import prices m/m|y/y Nov -1.80%|-2.30% -1.30%|-1.80%
14:30 USD Initial jobless claims 1000
Friday, December 12, 2014 Period Danske Bank Consensus Previous
- FRF Fitch may publish France's debt rating
5:30 JPY Industrial production, final m/m|y/y Oct 0.20%|-1.00%
6:30 CNY Fixed assets investments y/y Nov 15.7% 15.80% 15.90%
6:30 CNY Industrial production y/y Nov 7.4% 7.50% 7.70%
6:30 CNY Retail sales value y/y Nov 11.5% 11.50% 11.50%
8:00 SEK PES Unemployment % Nov 4.20%
9:00 ESP HICP m/m|y/y Nov 0.10%|-0.50%
10:00 ITL HICP, final m/m|y/y Nov ...|0.20%
11:00 EUR Industrial production m/m|y/y Oct 0.1%|… 0.00%|… 0.60%|0.60%
12:00 EUR ECB announces 3-year LTRO repayment
14:30 USD PPI m/m|y/y Nov -0.10%|1.40% 0.20%|1.50%
14:30 USD PPI core m/m|y/y Nov 0.10%|1.70% 0.40%|1.80%
15:55 USD University of Michigan Confidence, preliminary Index Dec 89.8 89.5 88.8
The editors do not guarantee the accurateness of figures, hours or dates stated above
For further information, call (+45 ) 45 12 85 22.
16 | 05 December 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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