Investment Research General Market Conditions

13 February 2015

Weekly Focus
Scandinavian central banks are in the spotlight
Market movers ahead

Focus remains on monetary policy across the Scandinavian countries. In Sweden on

Thursday the Riksbank cut the repo rate and introduced a QE programme. In Norway,
we still expect Norges Bank to ease further in March. In Denmark, the appreciation
pressure on the Danish krone is still a major theme.

Contents
Market movers ...................................................... 2
Global macro and market Themes ........... 6

The minutes from the FOMCs January meeting will likely shed light on why the
FOMC chose to refer to International developments in its statement.

The talks on Greece continue at the regular Eurogroup meeting on Monday.

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

In the UK, we expect CPI inflation for January and the unemployment rate for
December to come out at 0.3% and 5.8%, respectively. Minutes from the MPCs
February meeting may also attract some attention.

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

In Japan, we expect the economy to have recovered strongly in Q4.

We expect Swedish CPI and CPIF inflation rates to come out at -0.3% y/y and 0.5%,
respectively.

Global macro and market themes

Scandi Update ........................................................ 9

Latest research from Danske Bank

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

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

Financial views

Strong labour market report clears way for Fed hike as soon as June.

Market pricing of Fed actions is still too complacent we expect the USD and
treasury yields to go higher.

Aggressive easing across Europe we expect it to underpin low bond yields in Europe.

Euro area and Japan appear to be recovering.

Bank of Japan unlikely to join easing party next week, in our view.

Strong private consumption in G3 underscores that deflation has so far not been
destructive.

Major indices
13-Feb

3M

12M

10yr EUR swap

0.69

0.80

1.00

EUR/USD

114

112

112

ICE Brent oil

60

70

84

13-Feb

6M

12-24M

2088

0-5%

5-8%

S&P500

Source: Danske Bank

Focus

Flash Comment: Euro area recovery gains momentum, 13 February.

Swedish repo rate in negative territory

Euro PMIs expected to increase

Editors
Allan von Mehren
+45 4512 8055
alvo@danskebank.dk
Source: Macrobond Financial, Riksbank, Danske Bank

Source: Eurostat, Markit Economics

Important disclosures and certifications are contained from page 15 of this report.

Steen Bocian
+45 45 12 85 31
steen.bocian@danskebank.dk

www.danskeresearch.com

Weekly Focus

Market movers
Global

The main US event in the coming week will be the release of the January FOMC
meeting minutes on Wednesday. There has been a lot of speculation on why the FOMC
chose to include a reference to international developments in its statement (see Flash
Comment: FOMC meeting - more patience, 28 January) and we believe the minutes are
likely to give us some answers. We are also looking forward to Fed Chairman Janet
Yellens semi-annual testimony on 24 February but more on that next week.
We are due lots of housing data this week and, in general, we expect the gradual
improvement in the housing market to continue this year, with a pickup in the pace of
construction activity. The week kicks off with the NAHB for February, which we
expect to stay virtually unchanged. We expect February housing starts to surprise on
the upside, with an increase of 0.6% m/m and building permits to jump 1.0% m/m.

We expect the gradual increase in

housing activity to continue

Source: Macrobond Financial

Finally, the preliminary Markit PMI for February and the regional Philly Fed index
will give us a feel of how the manufacturing sector is coping with the stronger USD.
For January, we expect manufacturing production growth to show a solid increase of
0.4% m/m, thereby extending the upward trend in growth.

In the euro area, talks on Greeces current and future co-operation with the EU continue
at the regular euro group meeting on Monday. Last week, there were no real conclusions
at the extra euro group meeting and the two sides even failed to agree on a way to take
negotiations forward but today Greece started talks with its euro area partners in a bid to
find common ground. This should also reflect that the agreement stalled on wording not
substance, according to a Greek government official. In our view, this also reflects that
the rhetoric will be harsh until it is absolutely necessary to reach an agreement.
In terms of data releases, we expect euro services PMI to increase above 53 for the
first time since August 2014. The increase should reflect that the services sector
benefits from the boost to consumers purchasing power due to the lower oil price.
Added to this, the January flash estimate was revised up by 0.4 points, which could
reflect progress during the month. The manufacturing PMI is also expected to
increase for a third month in a row, supported by the fading headwind from the
weaker euro and a general improvement in business sentiment.
In Germany, there have been positive changes in survey data since late 2014 and
across the board ZEW, IFO and PMIs suggest a pickup in activity for 2015. In the
coming week, we believe this should continue and we expect the ZEW expectation to
increase from 48.4 to 64.0. This is a large increase but, if we look solely looking at
the Sentix expectation, which is good leading indicator, there seems to be upside risk.
We also expect consumer confidence to continue strengthening in February. In January,
consumers reported a marked improvement in expectations on future unemployment
and the overall economic situation. Looking ahead, we see room for further
improvement as consumers purchasing power has increased due to the oil price decline.

Euro PMIs expected to increase

Source: Macrobond Financial

Sentix suggests large jump in ZEW

Source: Macrobond Financial

We are also due to get the first release of the ECB accounts from the 22 January
meeting on Thursday. Based on Mario Draghis comments during the press
conference, it will contain information about whether the decisions were unanimous,
based on majority or consensus. We do not expect names to be mentioned in relation
to this. As the decision was described during the press conference, it should not bring
much new information but it is likely to cast some more light on the QE discussion.

2|

13 February 2015

www.danskeresearch.com

Weekly Focus

In the UK, there are many important releases next week. Minutes from the February
Monetary Policy Committee meeting are scheduled for release on Wednesday. As the
February Inflation Report released this week was overall hawkish compared with the
November report, this suggests that a rate hike in 2015 is still very likely (see Flash
Comment UK: Bank of England inflation report supports the case for rate hike in
2015, 12 February.
The release of CPI inflation in January is also likely to attract attention. In December,
inflation declined to 0.5% y/y and we expect the January reading to decline further, down
to 0.3 %, which will be a new record low. Average weekly fuel prices declined by 16.6%
from December to January, indicating that fuel prices alone will pull down the inflation
rate by approximately 0.2 percentage points. Some of the British gas companies have
announced energy price cuts, which could also pull down inflation somewhat.
There is also news to come from the labour market, as February labour market statistics
are due for release. Although we expect unemployment to continue declining, we expect
the ILO unemployment rate (3M) to stay unchanged at 5.8%. Remember to keep an eye
on the weekly earnings figures, which have been rising in recent months. In our view,
future wage growth will be a key determinant of when the MPC hikes. If wage growth
picks up further in coming months, it could lead to higher core inflation and thereby
increase the likelihood of a hike. The combination of higher wage growth and low
inflation implies that real wage growth is positive, which is supporting growth in the UK.

We expect CPI inflation to decline to

0.3%

Source: ONS

Retail sales for January are also due for release next week.

In China, the important Chinese New Year public holiday starts on 18 February and
most Chinese will be off for a week. Hence, the week ahead will be very quite. The
only notable release scheduled is official house prices for January. Preliminary data
for January released by the real estate agency Soufun showed the first month-onmonth increase since mid-2014. Hence, it appears that the stabilisation in the housing
market evident in late 2014 has continued in early 2015.
In Japan, the main event next week is the Bank of Japan (BoJ) meeting on
Wednesday and the release of Q4 GDP on Thursday. We expect the meeting to be
relatively uncontroversial, in the sense that the BoJ is unlikely to announce any new
easing measures in connection with the meeting. It has already communicated that it
will ignore the short-term downward pressure on inflation from lower oil prices as
long as the economy continues to recover and inflation expectations do not decline
substantially. We expect the Q4 GDP data released on Monday ahead of the BoJ
meeting to show that Japan recovered substantially in Q4 following the technical
recession in Q2 and Q3 in the wake of the consumption tax hike in April. We expect
GDP to expand a solid 1.1% q/q in Q4 after contracting -0.5% q/q in Q3. There
appears to have been strength across the board, with both private consumption and net
exports contributing substantially to GDP growth in Q4.
We expect foreign trade data for January, also due to be released next week, to show
that the strong export performance in Q4 has continued into early 2015. We believe
export growth accelerated further in January to 14.5% y/y, from 12.8% y/y in
December, while import growth eased to -1.6% y/y from 1.9% y/y partly on the back
of lower crude oil prices. Consequently, Japans trade balance deficit is currently also
declining. Finally, the flash estimate for the Markit/JMMA manufacturing PMI for
February is also set to be released next week. Our model based on the Economic
Watchers business survey suggests a slight improvement to 52.7 in February, from
52.2 in January.

3|

13 February 2015

Tentative signs of stabilisation in

house prices in China

Source: Macrobond Financial, Danske Bank

Markets

Strong recovery in Japan in Q4

Source: Macrobond Financial, Danske Bank

Markets

www.danskeresearch.com

Weekly Focus

Scandi

In Denmark, the coming week will see a further focus on the upward pressure on the
krone against the euro and so we will continue to keep a close eye on messages from
the Nationalbank, which has said that it will use all necessary means to defend the
fixed-rate policy. The week ahead also brings the latest results for consumer
confidence. We expect the indicator to fall from 9.0 in January to 7.0 in February,
which should be seen as a normalisation following the jump in January. This is still a
high level, though, thanks partly to low petrol prices and low inflation boosting
consumers purchasing power. Statistics Denmark is also due to release retail sales
figures for January during the week.
In Sweden, the week ahead will be about one thing and one thing only the January
consumer price index (Tuesday at 09:30 CET). In our view, this particular number has
the ability to make even the most seasoned trader break into tears. The reason is that
Statistics Sweden applies a reweighting of the products that constitute the CPI basket
every January. Normally, this implies lower inflation (on average the effect is -0.1pp
to -0.2pp) and has sometimes subtracted as much as 0.5pp from inflation but at times
it has even contributed to inflation. In our forecast, we have assumed a -0.1pp effect
and as the Riksbank has a headline number only a couple of hundredths above ours,
we can only assume that it makes more or less the same estimate. Another, related,
issue is how different weighting will hit forecasts, i.e. even if headline inflation were
to hit our forecast, large shifts in the weights could push the forecast inflation path in
either direction. Thus, it seems as though the suspense continues for yet another
week....
In Norway, data is set to be thin on the ground, with the only release of note trade
balance data for January. Stronger global growth and a weaker krone boosted
mainland exports towards the end of 2014 and higher export growth helped counter
the negative impact on the economy of lower activity in oil-related industries. The
January figures for mainland exports will, therefore, give us an idea of whether this
has continued to be the case this year.

Consumer confidence still high

Source: Statistics Denmark

If not next week, then when? In the

future

Source: Macrobond Financial

Strong export growth

Source: Macrobond Financial

4|

13 February 2015

www.danskeresearch.com

Weekly Focus

Market movers ahead

Global movers

Event

Mon

16-Feb

Tue

17-Feb

Wed

Thurs
Fri

18-Feb

19-Feb
20-Feb

0:50

JPY

GDP, preliminary

Period

Danske

Consensus

Previous

q/q|ann.

4th quarter

1.1%|

0.90%|3.70%

-0.50%|-1.90%

17:30

EUR Eurogroup meeting on Greece

10:30

GBP CPI

m/m|y/y

Jan

-0.9%|0.3%

-0.80%|0.40%

0.00%|0.50%

11:00

DEM ZEW exspectations

Index

Feb

64.0

55.5

48.4

16:00

USD NAHB Housing Market Index

Index

Feb

56.9

58.0

57.0

18:15

CHF

SNB President Jordan Speaks in Brussels

JPY

BoJ target for exspansion of monetary base

80

80

80

JPY

BoJ monetary policy announcement

10:30

GBP Minutes from MPC meeting

14:30

USD Housing starts

20:00

USD minutes from Jan. 27-28 FOMC Meeting

23:00

USD Fed's Powell (voter, neutral) speaks

EUR ECB publishes minutes (accounts)

Feb
1000 (m/m)

Jan

1096K (0.60%)

1073K

1089K (4.40%)

8:45

FRF

m/m|y/y

Jan

|-0.3%

|-0.3%

0.10%|0.10%

10:00

EUR PMI composite, preliminary

Index

Feb

53.0

53.0

52.6

10:00

EUR PMI manufacturing, preliminary

Index

Feb

51.5

51.4

51.0

10:00

EUR PMI services, preliminary

Index

Feb

53.3

53.0

52.7

10:30

GBP Retail Sales

m/m|y/y

Jan

-0.20%|6.10%

0.40%|4.30%

15:45

USD Markit manufacturing PMI, preliminary

Index

Feb

53.6

53.9

Scandi movers

HICP, preliminary

trn. Yen

Event

Tue

17-Feb

9:30

SEK

Underlying inflation CPIF

Fri

20-Feb

9:00

SEK

Economic Tendency Survey

Period

Danske

m/m|y/y

Jan

-1.08%|0.53%

Index

Feb

Consensus

105.6

Source: Bloomberg, Danske Bank Markets

5|

13 February 2015

Previous
0.20%|0.50%

www.danskeresearch.com

Weekly Focus

Global macro and market themes

Fed hike in June back on the agenda
In the US a rate hike as soon as June is back on the agenda.
First, the labour market for January was strong across the board, see US: very strong
employment report, 6 February 2015. Overall, the combination of better wage growth and
continued solid growth in employment should give the Fed more confidence that the
labour market is still improving.
Second, the communication from Fed members has turned more hawkish. Three
voting members of Feds FOMC have been speaking since the release of the strong labour
market report. San Francisco Fed president John Williams in an interview in Financial
Times said that the time for the Fed to start raising interest rates is moving closer and
closer and that there is an increasing risk that the Fed could be behind the curve, see
Financial Times. Williams also said that a decision on whether to hike interest rates
would be in play in June. Williamss comments are notable because he is usually
regarded as slightly dovish. Richmond Fed president Jeffrey Lacker in a speech said he
favoured a rate hike in June, which is less surprising as he is regarded a moderate hawk.
However, Jerome Powell, a member of the Feds governing board, in a speech said that
he believed it was too early to remove the phrase that the Fed can afford to be patient.
This would effectively rule out an interest rate hike in June, as according to Janet Yellen
patient should be interpreted as meaning that interest rates will not be raised at the next
two meetings.

Key points
Strong labour market report

clears way for Fed hike as soon as

June
Market pricing of Fed is still too

complacent - USD and treasury

yields to go higher
Aggressive easing across Europe

expected to underpin low bond

yields
Euro area and Japan appear to be

recovering
Bank of Japan unlikely to join

easing party next week

Strong private consumption in G3

underscores that deflation has not

been destructive so far

Fed hike possible as soon as June

In light of the strong labour market report and more hawkish communication from Fed
members we stick to our call that Fed will deliver the first rate hike in June this year
but we expect the pace of subsequent hikes to be slow initially. We also acknowledge
risks are still skewed towards a later hike (July or September) as low inflation gives Fed
room to be patient. In the wake of the strong labour market report money market futures
are now also pricing an earlier rate hike. A 25bp rate hike in September is now priced
with 90% probability, whereas a 25bp rate hike in June is priced with a 25% probability.
The market pricing of the first rate hike in our view is still complacent and markets
will probably continue to gradually price an earlier Fed hike in the coming months.
Hence, the USD and treasury bond yields should continue to move higher in the coming
months. In our view the 2-5 year segment on the US yield curve is probably the most
sensitive to pricing of an earlier Fed hike. In Europe we expect low bond yields to
continue to be underpinned by the aggressive monetary easing across Europe.

6|

13 February 2015

Strong labour market in the US

Source: Macrobond Financial

www.danskeresearch.com

Weekly Focus

Private consumers fuel recovery in G3

Data released in the past week suggest that global growth is firming and supports
our view that global growth will pick up in H1 15. OECDs leading indicators for
December improved further for G3, driven primarily by strong improvements in the euro
area and Japan, see Euro area is recovering, 11 February 2015. However, according to
OECDs leading indicators emerging markets remain fragile: There are tentative signs of
stabilisation in India and China but Russia appears to be contracting sharply and Brazil
remains subdued.
In G3 the improvements have to a large degree been driven by private consumers.
Consumer confidence in the US has surged recently and in the past two months consumer
confidence has also started to recover in the euro area and Japan. Lower gasoline prices
are an important explanation. Another one is improving labour markets. Even in the euro
area the unemployment rate appears to have peaked but it remains high. Private
consumption has been relatively strong in the G3 countries. This suggests that so far
deflation has not been of the destructive kind and the boost to real purchasing power
from particularly the lower crude oil price has more than offset any concerns about
declining consumer prices.

Euro area and Japan appear to be

recovering

Source: Macrobond Financial

Consumer confidence improves in G3

Recovery in euro area and Japan

In the euro area GDP in Q4 expanded slightly more than expected by 0.3% q/q after
increasing 0.2% q/q in the previous quarter. The details in the national accounts data
have not yet been published, nor have the main growth drivers. However, retail sales in
the euro area were strong in Q4, suggesting that growth in private consumption also
improved. Germany returned as the most important growth engine with GDP growth
accelerating markedly to 0.7% q/q in Q4 from just 0.1% q/q in the previous quarter.
In the US retail sales data for January were slightly disappointing with core retail
sales only increasing 0.1% m/m after declining 0.3% m/m in the previous month. Hence,
on the surface it looks like retail sales lost a bit of momentum in early 2015. There could
be a slight downside risk to our forecast of 2.9% q/q annualised GDP growth in Q1.
Nonetheless, private consumption in our view is still on track to increase 3.5% q/q
annualised in Q1 after increasing a solid 4.3% q/q annualised in the previous quarter.
Hence, the private consumer remains the main growth engine in the US.
In Japan the first estimate for GDP growth in Q4 is expected to show that GDP
expanded solidly by 4.4% q/q annualised after the technical recession in Q2 and Q3.
Growth in private consumption is expected to accelerate to 2.9% q/q annualised in Q4
from 1.6% q/q annualised in the previous quarter and hence appears to have recovered
after the consumption tax hike in April. The implication in our view is that Bank of Japan
is unlikely to join the current easing party in Europe in connection with next weeks
monetary meeting.

Source: Macrobond Financial

Retail sales suggest solid private

consumption in the euro area

Source: Macrobond Financial, Danske Bank

Markets

Strong recovery in Japan in Q4

Source: Macrobond Financial, Danske Bank

Markets

7|

13 February 2015

www.danskeresearch.com

Weekly Focus

Global market views

Asset class

Main factors

Equities
P o sitive o n 3m ho rizo n, mo derately po sitive o n 12m ho rizo n

Stro ng US o utlo o k, mo derate Chinese gro wth, a sharp dro p in the o il price and
QE fro m ECB and B o J and stimulus fro m P B o C is suppo rtive o f equities. In additio n equities are still
attractive versus bo nds

Bond market
M edium term mo derate rise

Strenthening G3 gro wth and Fed hikes getting clo ser. ECB QE suppo rting EGB markets.

US-Euro spread: Wider 2-5y, stable lo nger maturities

P o licy divergence drives sho rt-end spread wider, lo nger-end spread stable

P eripheral spreads to co ntinue gradual tightening

Neg. po licy rate, QE expectatio ns and impro ving fundamentals suppo rt search fo r yield.

Credit spread to remain stable, but with bo uts o f vo latility

A dded liquidity fro m ECB , stable fundamentals and search fo r yield

FX
EUR/USD - Lo wer sho rt- and medium-term

Lo wer o n 0-6 mo nths o n diverging gro wth and mo netary po licy

USD/JP Y - Higher

Relative mo netary po licy, Fed hikes and o utflo ws will remain suppo rted by pensio n refo rm

EUR/SEK - Near-term risk tilted to the upside

Near-term risk tilted to the upside, lo wer medium term o n valuatio n and relative mo netary po licy

EUR/NOK - To edge higher sho rt-term o n o il, lo wer during 2015

Oil prices lo wer sho rt term, higher medium term

Commodities
Oil prices - clo se to the bo tto m, reco very during the year

Higher glo bal gro wth, supply co nso lidatio n to suppo rt reco very this year. Limited risk o f supply disruptio ns

M etal prices sideways befo re trending up during the year

Chinese gro wth co ncerns a near-term negative facto r, supply side risks.

Go ld prices to co rrect lo wer still

Trending do wn as first Fed hike draws clo ser. Geo po litical co ncerns a suppo rtive facto r.

A gricultural risks remain o n the upside

Trending up again, extreme weather is key upside risk.

Source: Danske Bank Markets

8|

13 February 2015

www.danskeresearch.com

Weekly Focus

Scandi update
Denmark deflation a reality in January
With the krone still coming under upward pressure, the Nationalbank was in the limelight
again during the week. Although the market anticipated a further rate cut on Thursday,
the bank decided to leave things alone rather than make its policy rates clearly the worlds
absolute lowest. This inaction could mean the bank will increasingly intervene instead to
weaken the currency by flooding the market with kroner rather than make further rate
cuts. This said, we cannot rule out further cuts, especially if the appreciation pressure
intensifies.
Statistics Denmark released inflation figures for January during the week showing that
consumer prices fell 0.1% y/y. This is the first time since 1954 that prices have fallen,
giving us in principle not inflation but deflation. There are three reasons for the fall.
First, and most important, the protracted crisis in Europe is making it difficult for
businesses to put up prices and for workers to demand higher wages, resulting in low
inflation. Second, the sharp slide in oil prices has brought much cheaper petrol and oil for
consumers in recent months. Third, the security-of-supply tax on heating was rolled back
at the start of the year, tipping inflation below zero. Deflation is often portrayed as the
big, bad wolf and evokes memories of the Great Depression of the 1930s, but cheaper
petrol is by no means a reason to be unhappy. The danger comes if negative expectations
become entrenched, leading to a prolonged decline in wages, house prices and so on, as
then households debts could grow in real terms even if they make repayments. But this is
not the situation we are seeing now, and the current flirtation with deflation is in all
probability only a very temporary phenomenon. We expect to see a return to positive
territory in February.

Nationalbank leaves rates alone

Source: Danmarks Nationalbank

Deflation in January

Source: Statistics Denmark

Sweden a primer on the Riksbank

The main policy rate, the repo rate, was lowered into negative territory (to -0.1%) when
the Riksbank executive board convened past Wednesday. It is a first in Sweden, and as
far as we know it is the first negative main policy rate (no, deposit rates dont really
count) for any inflation targeter. However, in addition to lowering rates, the Riksbank will
also make a first shot (sort of) on QE, buying nominal government bonds for a total of
SEK10bn.
Despite all the fuss that the Riksbanks decision created, it really wont make much of a
difference. Instead, the main effect will probably stem from the promise of more to
come and, hopefully, from the weakening krona. We expect the Riksbank to be forced to
act again, possibly as soon as the beginning of March (11 March, when wage and
inflation expectations are being published), which would constitute an intra-meeting
policy action since the next official meeting date is 28 April. However, as early as next
week we will receive information that could prove decisive for further Riksbank measures
(more on that in the Market mover section), when January inflation numbers are
published.

9|

13 February 2015

Riksbankers are a negative lot

Source: Macrobond Financial, Riksbank, Danske

Bank Markets

www.danskeresearch.com

Weekly Focus

Norway Still no need to panic

The GDP figures for Q4 revealed that the slide in oil prices has now begun to affect the
Norwegian economy. Oil investment is falling and taking mainland business investment
with it. On the other hand, mainland exports are rising relatively rapidly on the back of
stronger global growth and a weaker krone. The rate cuts also seem to have stimulated
consumption, while housing investment has surprisingly dropped off somewhat. We also
note that public-sector consumption and investment are continuing to grow, which goes to
show how the spending of oil revenue is completely shielded from earnings in the short
term. We expect this trend to continue through the year, with lower activity in oil-related
industries offset to some extent by low interest rates, a weaker krone and expansionary
fiscal policy. Unless oil prices fall significantly further, there is therefore little risk of a
serious downturn in the Norwegian economy.

10 |

13 February 2015

A new normal?

Source: Macrobond Financial

www.danskeresearch.com

Weekly Focus

Latest research from Danske Bank Markets

13 Febraury Flash Comment: Euro area recovery gains momentum
The euro area economy expanded 0.3% q/q in Q4 up from 0.2% q/q in Q3. This was a bit
below our expectation (0.4%) but above consensus expectations (0.2%).

12 February Flash Comment - UK: Bank of England inflation report supports the case
for rate hike in 2015
The Bank of Englands inflation report released today was relatively mixed, with a quite
dovish short-term focus on inflation but also a more confident view on the medium-term
outlook for the UK economy.

12 February Flash Comment: Minsk 2.0 - not a game changer for the Russian rouble
The 16-hour Minsk talks have ended, adopting new measures. The headline-driven RUB
market returns to pre-talks mode. We keep our view on the RUB unchanged, as we do not
expect any major support from macro figures in 2015.

11 February Global Business Cycle: Euro area is recovering

Leading indicators continue to pick up in the G3, driven primarily by improvements in
the euro area and Japan.

10 February Periphery business cycle monitor

In the euro periphery, the Greek political uncertainty is in focus. The spillover to other
periphery countries has so far been relatively limited.

11 |

13 February 2015

www.danskeresearch.com

Weekly Focus

Macroeconomic forecast
Macro forecast, Scandinavia
Year

GDP 1

Private
cons.1

Public
cons.1

Fixed
inv.1

Stock
build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public
budget4

Public
debt4

Current
acc.4

Denmark

2014
2015
2016

0.9
1.6
2.0

0.4
1.9
2.0

0.9
0.9
0.6

2.2
2.2
4.0

0.3
-0.1
0.1

2.8
2.3
4.2

3.8
2.9
4.6

0.6
0.6
1.5

5.1
4.9
4.7

2.3
-2.4
-2.4

44.5
42.5
43.0

6.8
6.4
5.9

Sweden

2014
2015
2016

1.8
2.0
1.9

2.3
1.6
1.8

1.5
1.5
0.8

4.6
3.4
2.1

0.3
0.1
0.0

2.2
3.2
5.0

4.9
3.7
4.5

-0.2
0.3
1.2

7.9
7.6
7.3

-1.9
-1.6
-1.0

40.2
42.0
42.3

5.1
5.0
4.8

Norway

2014
2015
2016

2.6
1.8
2.3

1.8
2.0
2.2

3.3
2.5
2.2

1.2
-5.5
1.3

0.4
-0.1
0.0

0.4
0.8
0.9

2.6
3.8
3.3

2.1
2.8
2.0

3.5
3.7
3.7

Macro forecast, Euroland

Year

GDP 1

Private
cons.1

Public
cons.1

Fixed
inv.1

Stock
build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public
budget4

Public
debt4

Current
acc.4

Euroland

2014
2015
2016

0.9
1.5
2.0

0.9
1.6
1.1

0.9
0.9
0.7

0.6
1.3
5.4

-0.1
0.0
0.0

3.7
4.5
4.2

3.6
4.3
4.1

0.4
-0.3
1.4

11.6
11.5
10.9

-2.6
-2.3
-1.9

92.7
92.8
91.5

2.5
2.6
2.5

Germany

2014
2015
2016

1.6
2.0
2.6

1.3
2.2
1.6

1.1
1.1
0.8

2.9
2.4
6.8

-0.1
0.0
0.0

4.1
5.5
4.9

3.7
5.6
5.3

0.8
0.2
2.1

5.1
5.0
4.7

0.2
0.0
0.2

74.5
72.4
69.6

7.1
7.1
6.7

France

2014
2015
2016

0.3
0.6
0.9

0.4
0.8
0.6

2.0
1.1
0.4

-1.7
-0.8
3.1

-0.1
0.0
0.0

2.5
4.4
3.4

3.2
4.0
4.0

0.6
0.1
1.3

10.4
10.4
10.2

-4.4
-4.5
-4.7

95.5
98.1
99.8

-1.9
-1.9
-2.2

Italy

2014
2015
2016

-0.4
0.5
1.2

0.3
0.6
0.5

-0.2
0.3
0.4

-2.6
-1.4
3.4

0.3
0.0
0.0

1.9
3.5
4.3

0.4
2.3
3.8

0.2
0.1
1.0

12.6
12.6
12.4

-3.0
-2.7
-2.2

132.2
133.8
132.7

1.5
1.5
1.8

Spain

2014
2015
2016

1.3
2.3
2.6

2.3
2.4
1.9

0.8
0.3
0.4

2.5
4.8
6.8

-0.1
0.0
0.0

4.6
6.0
4.5

7.7
7.0
4.9

-0.2
-0.8
1.3

24.7
23.2
21.7

-5.6
-4.5
-3.7

98.1
101.2
100.6

0.5
0.7
0.9

Finland

2014
2015
2016

-0.2
0.5
1.3

-0.2
-0.2
0.5

0.2
0.0
0.0

-4.5
0.0
3.0

1.5
3.0
4.0

-0.5
1.5
3.0

1.0
0.9
1.2

8.6
9.0
8.8

-2.2
-2.2
-1.5

59.5
61.5
62.5

-1.5
-1.0
-0.5

Macro forecast, Global

Year

GDP 1

Private
cons.1

Public
cons.1

Fixed
inv.1

Stock
build.2

Exports1

Imports1

Inflation1

Unemploym.3

Public
budget4

Public
debt4

Current
acc.4

USA

2014
2015
2016

2.4
3.1
2.7

2.5
3.8
2.9

-0.2
1.1
0.9

5.2
4.2
5.3

0.1
-0.1
0.0

3.1
3.6
3.7

3.9
4.8
5.0

1.6
0.0
2.4

6.2
5.2
4.6

-4.1
-2.9
-2.6

101.0
104.0
103.0

-2.3
-2.5
-2.6

Japan

2014
2015
2016

0.4
1.2
1.6

-0.9
1.0
1.4

0.3
1.1
1.2

4.2
0.7
0.8

0.2
0.3
0.4

7.9
7.2
7.6

7.0
3.5
7.0

2.6
1.4
1.7

3.6
3.5
3.3

-8.1
-6.7
-6.3

245.0
245.0
246.0

0.3
1.0
1.1

China

2014
2015
2016

7.4
7.2
6.8

2.0
2.2
2.7

4.3
4.2
4.2

-1.1
-0.8
-0.8

40.7
41.8
42.8

1.8
2.4
2.3

UK

2014
2015
2016

2.6
2.8
2.8

2.3
2.5
2.3

1.1
0.7
-1.0

7.8
6.1
7.5

-0.2
0.0
0.0

-1.6
2.4
4.7

-0.8
3.9
4.7

1.5
1.5
2.0

6.2
5.5
5.5

-3.5
-1.9
-0.2

80.0
81.1
.

-4.7
-3.5
-2.9

1. % y/y
2. % contribution to GDP growth
3. % of labour force. 4) % of GDP
Source: OECD, Danske Bank

12 |

13 February 2015

www.danskeresearch.com

Weekly Focus

Financial forecasts
Bond and money markets
USD

13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m
13-Feb
+3m
+6m
+12m

EUR

JPY

GBP

CHF

DKK

SEK

NOK

Key int.
rate
0.25
0.25
0.50
1.00
0.05
0.05
0.05
0.05
0.10
0.10
0.10
0.10
0.50
0.50
0.50
1.00
-0.75
-0.85
-0.85
-0.85
0.05
0.05
0.05
0.05
0.00
-0.10
-0.10
-0.10
1.25
1.00
1.00
1.00

3m interest rate

2-yr swap yield

10-yr swap yield

Currency
vs EUR

0.26
0.46
0.74
1.32
0.05
-0.02
-0.02
-0.02
0.10
0.15
0.20
0.20
0.57
0.55
0.75
1.10
-0.93
-0.82
-0.84
-0.78
-0.54
-0.10
-0.10
-0.10
0.01
0.25
0.25
0.30
1.38
1.20
1.20
1.20

0.90
1.10
1.40
2.00
0.13
0.15
0.15
0.15
0.17
0.20
0.20
0.25
0.94
1.10
1.40
1.75
-0.79
-0.76
-0.74
-0.69
-0.10
0.00
0.00
0.00
-0.01
0.25
0.25
0.25
1.11
1.00
1.00
1.10

2.12
2.35
2.65
3.15
0.69
0.80
0.85
1.00
0.60
0.75
0.80
0.85
1.79
1.85
2.00
2.40
0.12
0.04
0.08
0.16
0.72
0.85
0.90
1.00
0.94
0.95
1.00
1.10
1.78
1.70
1.90
2.25

114.3
112.0
110.0
112.0
135.9
136.0
136.0
141.0
74.3
76.0
75.0
77.0
106.0
97.0
100.0
105.0
744.4
744.4
744.4
744.4
963.9
930.0
920.0
900.0
867.5
850.0
825.0
815.0

Currency
vs USD
114.3
112.0
110.0
112.0
118.9
121.0
124.0
126.0
153.9
148.0
147.0
148.0
92.8
86.6
90.9
93.8
651.3
664.6
676.7
664.6
843.3
830.4
836.4
803.6
759.0
758.9
750.0
727.7

Currency
vs DKK
651.3
664.6
676.7
664.6
744.4
744.4
744.4
744.4
5.48
5.47
5.47
5.28
1002.2
979.5
992.5
966.8
702.0
767.4
744.4
709.0
77.2
80.0
80.9
82.7
85.8
87.6
90.2
91.3

Risk profile
3 mth.

Price trend
3 mth.

Price trend
12 mth.

Regional recommendations

Medium
Medium
Medium
Medium
Medium

0-5%
0-5%
0-8%
0-5%
0-5%

5-8%
0-5%
5-10%
10-15%
5-10%

Neutral
Underweight
Overweight
Overweight
Overweight

Equity Markets
Regional
USA (USD)
Emerging markets (local curr)
Japan
Europe (ex. Nordics)
Nordics

Strong earnings growth, expensive valuation

Commodity-related equities are pressured
Reflation, earnings growth, fair valuation
Reflation, multiple expansion, attractive valuation
Earnings growth, fair valuation

Commodities
2015
NYMEX WTI
ICE Brent
Copper
Zinc
Nickel
Aluminium
Gold
Matif Mill Wheat (/t)
Rapeseed (/t)
CBOT Wheat (USd/bushel)
CBOT Corn (USd/bushel)
CBOT Soybeans (USd/bushel)

13-Feb
52
60
5,740
2,146
14,705
1,842
1,227
185
357
524
386
992

Q1
54
58
6,800
2,325
17,500
2,025
1,190
177
347
565
385
1,050

Q2
58
62
6,925
2,350
18,000
2,075
1,180
180
354
575
395
1,070

2016

Q3
Q4
Q1
Q2
66
74
78
80
70
78
82
84
7,050
7,175
7,300 7,375
2,375
2,400
2,425 2,450
18,500 19,000 19,250 19,500
2,125
2,175
2,225 2,250
1,170
1,160
1,150 1,150
182
183
185
186
357
361
364
367
580
585
590
595
400
405
410
415
1,080
1,090
1,100 1,110

Q3
82
86
7,375
2,450
19,500
2,250
1,150
188
371
600
420
1,120

Average
Q4
82
86
7,375
2,450
19,500
2,250
1,150
190
374
605
425
1,130

2015
63
67
6,988
2,363
18,250
2,100
1,175
181
355
576
396
1,073

Source: Danske Bank Markets

13 |

13 February 2015

www.danskeresearch.com

2016
81
85
7,356
2,444
19,438
2,244
1,150
187
369
598
418
1,115

Weekly Focus

Calendar
Key Data and Events in Week 8
During the week
Sat 14 - 18

CNY FDI

Sun 15

NOK Consumer confidence

Sun 15

NZD Retail sales

Period
y/y

Jan

Net. bal.

1st quarter

q/q

4th quarter

Monday, February 16, 2015

Danske Bank

Consensus

Previous
10.30%
15.4

1.30%

1.50%

Period

Danske Bank

Consensus

Previous

q/q|ann.

4th quarter

1.1%|

0.90%|3.70%

-0.50%|-1.90%

y/y

4th quarter

USD US markets closed for president's day

0:50

JPY

GDP, preliminary

0:50

JPY

GDP deflator, preliminary

1:01

GBP Rightmove House Prices

m/m|y/y

Feb

1.40%|8.20%

5:30

JPY

m/m|y/y

Dec

1.00%|0.30%

9:00

CHF SNB - Sight Deposits

Industrial production, final

10:00

NOK Trade balance

NOK bn

Jan

11:00

EUR Trade balance

EUR bn

Dec

15:00

EUR Eurogroup meeting in Brussels

17:30

EUR Eurogroup meeting on Greece

Tuesday, February 17, 2015

Period

2.00%

1.90%

30.1

Danske Bank

19

20

Consensus

Previous

2:30

CNY Property prices

9:00

EUR ECOFIN meeting

y/y

9:30

SEK CPI

m/m|y/y

Jan

-1.2%|-0.3%

0.2%|-0.3%

9:30

SEK Underlying inflation CPIF

m/m|y/y

Jan

-1.08%|0.53%

0.20%|0.50%

10:30

GBP CPI

m/m|y/y

Jan

-0.9%|0.3%

10:30

GBP CPI core

y/y

Jan

1.4%

10:30

GBP PPI - input

m/m|y/y

Jan

10:30

GBP PPI - output

m/m|y/y

Jan

-0.30%|-1.40%

-0.30%|-0.80%

11:00

DEM ZEW current situation

Index

Feb

30.0

27.0

22.4

11:00

DEM ZEW exspectations

Index

Feb

64.0

55.5

48.4

14:30

USD Empire Manufacturing PMI

Index

Feb

9.0

10.0

16:00

USD NAHB Housing Market Index

Index

Feb

56.9

58.0

57.0

18:15

CHF SNB President Jordan Speaks in Brussels

18:45

USD Fed's Plosser (non-voter, hawkish) speaks

22:00

USD TICS international capital flow, Net inflow

Danske Bank

Consensus

Previous

80

80

80

1.7

1.7

USD bn

Wednesday, February 18, 2015

-

JPY

BoJ target for exspansion of monetary base

JPY

BoJ monetary policy announcement

trn. Yen

GBP Average Earnings

10:30

GBP Minutes from MPC meeting

3Ms/YoY

10:30

GBP ILO Unemployment rate

13:00

USD MBA Mortgage Applications

14:30

USD Housing starts

14:30

USD Building permits

14:30

0.00%|0.50%
1.30%

-2.20%|-11.90% -2.40%|-10.70%

Dec
Period

10:30

-0.80%|0.40%

-6.3

Dec
Feb
Dec

5.80%

5.70%

5.80%

1000 (m/m)

Jan

1096K (0.60%)

1073K

1089K (4.40%)

1000 (m/m)

Jan

1068K (0.95%)

1070K

1058K (0.60%)

USD PPI

m/m|y/y

Jan

-0.40%|0.40%

-0.30%|1.10%

14:30

USD PPI core

m/m|y/y

Jan

0.10%|2.00%

0.30%|2.10%

15:15

USD Capacity utilization

Jan

79.90%

79.70%

15:15

USD Industrial production

m/m

Jan

0.40%

-0.10%

20:00

USD minutes from Jan. 27-28 FOMC Meeting

23:00

USD Fed's Powell (voter, neutral) speaks

0.40%

Source: Danske Bank Markets

14 |

13 February 2015

www.danskeresearch.com

Weekly Focus

continued

Thursday, February 19, 2015

-

Period

Danske Bank

Consensus

Previous
12.80

EUR ECB publishes minutes (accounts)

0:50

JPY

Export

y/y (%)

Jan

14.5

13.50

0:50

JPY

Import

y/y (%)

Jan

-1.6

-4.80

1.90

0:50

JPY

Trade balance, s.a.

JPY bn

Jan

-599.1

-712.1

5:30

JPY

All industry activity index

m/m

Dec

-0.20%

0.10%

6:00

JPY

Leading economic index, final

Index

Dec

8:00

CHF Trade balance

CHF bn

Jan

8:45

FRF

m/m|y/y

Jan

|-0.3%

9:00

7.0

HICP, preliminary

105.2
1.52

DKK Consumer confidence

Net. bal.

Feb

10:00

EUR Current account

EUR bn

Dec

14:30

USD Initial jobless claims

16:00

EUR Consumer confidence, preliminary

16:00

DKK Press release from Danish CB if any changes to policy rates (no press release if no changes)

0.10%|0.10%
9.0
18.1

1000
Net bal.

Friday, February 20, 2015

-

|-0.3%

Feb

-7.5

-8.0

-8.5
Previous

Period

Danske Bank

Consensus

52.7

52.5

EUR Moody's may publish Spain's debt rating

2:35

JPY

9:00

DKK Retail Sales

Index

Feb

m/m|y/y

Jan

9:00

FRF

9:00

FRF

PMI manufacturing, preliminary

Index

Feb

49.5

49.6

PMI Services, preliminary

Index

Feb

49.8

49.9

9:00

SEK Economic Tendency Survey

Index

Feb

9:00

SEK Consumer confidence

Index

Feb

98.6

9:00

SEK Manufacturing confidence

Index

Feb

107.3

9:30

DEM PMI manufacturing, preliminary

Index

Feb

51.8

51.4

50.9

9:30

DEM PMI service, preliminary

Index

Feb

54.6

54.3

54.0

10:00

EUR PMI composite, preliminary

Index

Feb

53.0

53.0

52.6

10:00

EUR PMI manufacturing, preliminary

Index

Feb

51.5

51.4

51.0

10:00

EUR PMI services, preliminary

Index

Feb

53.3

53.0

52.7

10:30

GBP Retail Sales

m/m|y/y

Jan

-0.20%|6.10%

0.40%|4.30%

11:00
14:30

ITL

Markit/JMMA manufacturing PMI, preliminary

HICP, final

CAD Retail sales

52.2
-0.50%|2.30%
49.2
49.4
105.6

m/m|y/y

Jan

m/m

Dec

-0.40%

0.40%

Feb

53.6

53.9

15:45
USD Markit manufacturing PMI, preliminary
Index
The editors do not guarantee the accurateness of figures, hours or dates stated above

...|-0.40%

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

Source: Danske Bank Markets

15 |

13 February 2015

www.danskeresearch.com

Weekly Focus

Disclosures
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.
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in this
research report accurately reflect the research analysts personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority
(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation
Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske
Banks research policies. Employees within Danske Banks Research Departments have been instructed that any
request that might impair the objectivity and independence of research shall be referred to Research Management
and the Compliance Department. Danske Banks Research Departments are organised independently from and do
not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors on request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis
of relevant assumptions, are stated throughout the text.

General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) (Relevant Financial
Instruments).
The research report has been prepared independently and solely on the basis of publicly available information that
Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not
untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates
and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation
any loss of profits, arising from reliance on this research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgement as of the date hereof. These opinions are subject to change and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in this research report.
This research report is not intended for retail customers in the United Kingdom or the United States.

16 |

13 February 2015

www.danskeresearch.com

Weekly Focus

This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Banks prior
written consent.

Disclaimer related to distribution in the United States

This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer
and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S.
Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to U.S. institutional investors as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this
research report in connection with distribution in the United States solely to U.S. institutional investors.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence
of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are
not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements
of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial
Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in nonU.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and
auditing standards of the U.S. Securities and Exchange Commission.

17 |

13 February 2015

www.danskeresearch.com