Investment Research Weekly Focus - Danske...

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Investment Research — General Market Conditions

Market movers ahead

In the US, the data calendar is light and we expect focus to remain on Donald Trump’s

policy. One game changer may be confirmation of Steven Mnuchin as Treasury

Secretary.

The main event in the UK next week is the House of Commons vote on the Article 50

bill on Wednesday. The vote is expected to be passed and put the government on course

to trigger Article 50 on 9 March as planned.

In the euro area, we expect to see a decline the Sentix index after it reached very high

levels in January. Likewise, we expect to see a decline in German industrial production

after a solid showing in the autumn.

Chinese FX reserve data are likely to attract some attention, as we saw big movements

in the Chinese currency in January.

We expect next week’s inflation figures from both Norway and Denmark to increase.

In Denmark, this is due to base effects and rising food prices. In Norway, we do not

expect the increase to last, as the effect of the NOK depreciation eases .

Global macro and market themes

Data continues to look robust globally and most markets moved sideways.

The USD continues to weaken, as Trump’s team blames Germany, Japan and China for

currency manipulation.

Uncertainty remains high and a trade war could be brewing.

We expect the USD to strengthen over coming months as more details on Trump’s

fiscal policy plans are revealed.

German production has been trending

upward slowly

EUR/USD lower – then higher

Source: Macrobond Financial Source: Macrobond Financial

Contents

Market movers...............................................................2

Global Macro and Market Themes .............5

Scandi Update.................................................................8

Latest research from Danske Bank

Markets.................................................................................9

Macroeconomic forecast.................................10

Financial forecast ....................................................11

Calendar ...........................................................................12

3 February 2017

Editor

Senior Analyst

Louise Aggerstrøm Hansen +45 45 12 85 31 [email protected]

Weekly Focus

Heading for a trade war?

Financial views

Source: Danske Bank

Follow us on Twitter

@Danske_Research

Major indices

03-Feb 3M 12M

10yr EUR swap 0.82 0.80 1.30

EUR/USD 108 105 112

ICE Brent oil 57 53 59

03-Feb 6M 12-24M

S&P500 2281 5 -10% 10-15%

https://twitter.com/Danske_Research



2 | 3 February 2017 www.danskeresearch.com

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Market movers

Global

In the US next week, the calendar is rather light. In our view, the only interesting release

is preliminary consumer confidence data from the University of Michigan. Consumer

confidence has risen significantly since Donald Trump’s election victory but we think

it will decline slightly from 98.5 to 97.5. However, this is still a high level, supporting

our view that private consumption continues to be the main growth engine in the US.

The Fed’s Patrick T. Harker, James Bullard and Charles Evans (all voting FOMC

members) are all due to speak next week, which is interesting given there were no major

changes to the FOMC statement this week (see also FOMC Review: No major changes

to the FOMC statement, 1 February).

We intend to continue following closely any news on Trump’s policy, especially if we

get any news in ‘Trumponomics’. One game changer could be the confirmation of

Steven Mnuchin as Treasury Secretary.

In the euro area, the first release of interest is Sentix investor confidence. Sentix

trended upwards in H2 16 and reached 18.2 in January 2017, its highest level since

August 2015. The current situation and expectations components have both risen to

historically high levels but we have seen a loss of momentum in both ZEW and ifo

expectations, which could be a drag on Sentix expectations. Therefore, we expect

Sentix to rise marginally to 19.0 in February, possibly dragged down by a declining

expectations component.

We are also due to get German factory orders for December on Monday. Factory orders

have followed a rising tendency since 2013 but have experienced large fluctuations,

with a 5% monthly increase in October and a 2.5% decline in November. We expect a

bounce back in December, with monthly growth of 2%. Our view of another increase

is supported by the manufacturing PMI in November and December, which showed

strength in the new orders indicator.

On Tuesday, German industrial production for December is set to be released. Industrial

production was solid throughout October and November, with 0.5% and 0.4% monthly

increases, respectively. However, factory orders saw a monthly decline in November,

following October’s strong increase, which indicates declining industrial production in

December. Thus, we expect the December figure to show a monthly decline of 0.4%.

In the UK, the main event next week is the House of Commons vote on the Article 50

bill and each of the possible amendments on Wednesday. We expect the House of

Commons to approve the bill and it to pass on to the House of Lords. There is no

programme detailing how much time the House of Lords intends to spend discussing

the bill but the Government hopes the House of Lords will pass the bill by 7 March (for

more on the process of Brexit legislation see Reuters). Prime Minister Theresa May is

expected to trigger Article 50 on 9 March.

In terms of data releases, the next week is relatively boring. Industrial production and

construction data for December should reveal whether we should expect revisions to

the first estimate of Q4 GDP growth of 0.6% q/q. The NIESR GDP estimate for January

is interesting, as it has been a quite good indicator for actual GDP growth.

Consumer confidence is very high

Source: University of Michigan

Production is trending slowly upwards

Source: German Federal Statistical Office, Danske

Bank Markets

http://danskeresearch.danskebank.com/abo/FlashCommentFOMCReview010217/$file/FlashComment_FOMCReview_010217.pdf

http://danskeresearch.danskebank.com/abo/FlashCommentFOMCReview010217/$file/FlashComment_FOMCReview_010217.pdf

http://reut.rs/2jZNt19


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Next week it is time for trade balance and FX reserves data in China. We do not put

too much weigh on China’s trade figures, as they tend to be very volatile and distorted.

However, FX reserves for January are likely to attract attention, as we have seen big

moves in the Chinese currency. There were clear signs of intervention in the offshore

market, where liquidity was drained to push up money-market rates. It will be

interesting to see how much this has affected currency reserves. Offshore rates have

proven an effective tool in stopping depreciation pressure in the CNY.

Scandi

In Denmark, inflation figures for December are released on Friday. We expect a rate

of 0.1% m/m and 1.0% y/y, pushed up mainly by energy prices and the base effects of

food prices. Recent months have seen sharp increases in German food prices pulling up

Danish food prices too and we expect this effect to continue in January. Note that the

January figures contain a number of new prices that are updated only occasionally,

considerably increasing uncertainty about the overall level of inflation. Wednesday

brings figures for the balance of payments and exports for December. Denmark

continues to run a substantial current account surplus, although it has been pulled down

since the end of 2015 by a decline in the surplus on the balance of services, due largely

to falling freight rates and subdued world trade undermining earnings in the country’s

substantial shipping sector. Freight rates are quoted in US dollars, so the US dollar’s

appreciation over the past six months may give the surplus a bit of a boost. December

industrial production data are due out on Tuesday. Various technicalities have resulted

in some noise in recent months but the general trend has been upward.

In Sweden, the week ahead does not contain any data that normally has an effect on

financial markets. This is too bad, because both the household consumption indicator

and business sector production index have strong explanatory power for GDP

developments. As such, we expect them to post weakish consumption and strongish

production. After next week, we should have a clearer view on the Q4 16 GDP

outcome.

In Norway, core inflation fell surprisingly sharply in December on the back of lower

food prices. The annual rate of 2.5% was the lowest since May 2015 and 0.4pp less than

Norges Bank assumed in the December monetary policy report. We have long argued

that inflation will come down as the effects of the krone’s depreciation ease and

eventually reverse. However, we think the fall in December was due to seasonal

variations in food prices around Christmas and so we estimate a slight rebound in

January. We predict a moderate rise in core inflation to 2.6% y/y, with a slight risk to

the upside if anything. In contrast, we are not seeing any signs of lasting changes in

inflationary pressures, so we believe Norges Bank will be able to live with a bit of

volatility from month to month. Mainland GDP recovered gradually during 2016 but

growth is still modest, as headwinds from the oil shock persist. Based on the

stabilisation in unemployment rates, we are tempted to estimate that mainland growth

was at levels around trend growth in Q4, at around 0.5% q/q. However, the significant

drop in mainland exports implies a major drag on GDP. As a result, we estimate growth

in mainland GDP of 0.1 % q/q in Q4.

Well short of the 2% target

Source: Statistics Denmark

Pointing in different directions

Source: SCB, Riksbank. Danske Bank calculations

NOK-driven dip in inflation

Source: Macrobond Financial, Danske Bank


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Market movers ahead

Source: Bloomberg, Danske Bank Markets

Global movers Event Period Danske Consensus Previous

Fri 10-Feb 16:00 USD University of Michigan Confidence, preliminary Index Feb 97.5 97.8 98.5

Scandi movers

During the week

Mon 06-Feb 8:00 NOK Manufacturing production m/m|y/y Dec -0.1%|-4.2%

8:00 NOK Industrial production m/m|y/y Dec 0.5%|1.3%

Wed 08-Feb 9:30 SEK Household consumption m/m|y/y Dec 0.3%|3.3%

Thurs 09-Feb 8:00 NOK GDP (mainland) q/q 4th quarter 0.1% 0.2%

8:00 NOK GDP (total) q/q 4th quarter -0.5%

Fri 10-Feb 8:00 NOK Core inflation(CPI-ATE) m/m|y/y Jan …|2.6% -0.4%|2.5%

9:00 DKK CPI m/m|y/y Jan 0.1%|1.0% 0.0%|0.5%


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Global Macro and Market Themes

Self-defence or protectionism? Depends on who you ask

The past week provided few surprises. Data continues to look robust globally. The Fed

stands pat as it awaits Trump’s fiscal policy plans. Most markets moved mainly sideways.

The main exception was the USD, which continued to weaken following comments

from Donald Trump and his new head of the National Trade Council Peter Navarro. Both

of them lashed out at China, Germany and Japan, claiming they are using devaluations to

boost exports. Trump mentioned China for the first time since his inauguration when

he said: ‘Every other country lives on devaluation. You look at what China’s doing, you

look at what Japan has done over the years….They play the money market, they play the

devaluation market and we sit there like a bunch of dummies’. Navarro accused Germany

of using a ‘grossly undervalued currency’ to gain a competitive advantage and called the

euro an ‘implicit Deutsche Mark’.

In a market that is very long the USD these comments raised fears that Trump will

aim for a weaker USD. Exactly how he would do that is not very clear. A fiscal expansion

could instead lead to higher rates and push in the direction of a stronger USD. However,

rather than a weaker USD the response from Trump may be an import border tax that

punishes countries he sees a ‘cheating’ in the global game of trade. Peter Navarro has been

very vocal that Germany not only has an undervalued currency but also cheats through its

taxation system because it puts VAT on US imports, whereas German companies can

deduct their VAT when exporting to the US. Having a current account surplus of 8% of

GDP in Germany is seen as reflecting a mercantilist and protectionist policy by the

Trump camp.

Trump and his team very vocal about USD strength

Source: Macrobond Financial

Key points

USD weaker as Trump team

blames Germany, Japan and China

for devaluing currencies

We still look for stronger USD on

1-3M horizon

A trade war could be brewing –

self-defence if you ask Trump,

protectionism if you ask trade

partners

More upside in yields and equities

in the medium term

Germany and Japan big net savers

Source: Danske Bank Markets


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On the issue of an import border tax Peter Navarro said recently in an interview that it’s

early days and that they are looking at several ways to protect US manufacturing.

Heading for a trade war?

While the rest of the world is accusing Trump of protectionism, the view from the US

administration is one of self-defence from other countries’ protectionist and

mercantilist policies. After the release of Navarro’s book ‘Death by China’ in 2012

Navarro said to Bloomberg: ‘There’s a big difference between self-defence against unfair

trade practices and protectionism. The biggest protectionist in the world now is China’

(link to Bloomberg interview, 22 August 2012).

Following Chinese president Xi Jinping’s speech at World Economic Forum in Davos in

which Xi Jinping defended free trade and globalisation, the incoming Secretary of

Commerce Wilbur Ross said that China speaks a lot about free trade but is the most

protectionist of large countries. In the same hearing he said that countries that do not

‘play by the rules’ should ‘get punished – and severely’.

It seems increasingly clear that the Trump team will take action to get what they call

a more fair deal for the US. They will likely talk to their trading partners first to find a

way to level the playing field – as they would see it. But if they do not see a change in

practice from trade partners in Europe and China we should expect Trump to implement

some kind of border tax. This could be flexible and be different for different countries and

goods. Regardless of how it is constructed, it could result in a trade war with retaliation

measures from Europe and/or China.

China is watching Trump with increasing anxiety. In a China Daily Editorial – which

tends to represent the Communist Party view – it said on Thursday: ‘Trump seems to have

proved that his campaign rhetoric was not just empty promises’ and ‘China needs to cast

aside any illusions it may have had that Trump was just mouthing off to attract votes and

instead be prepared for the worst’. China will wait to see what is coming, but it will not sit

back and watch if Trump ends up taxing Chinese goods.

Still positive on the USD in the short term

As we wrote last week, our view on the USD is for it to strengthen over the coming 1-

3 months as we get more details on Trump’s fiscal policy plans. In addition, if Trump’s

response to what he sees as undervalued currencies elsewhere is an import border tax, this

would be USD positive as it would support US exports and hurt imports. Hence the market

may be misinterpreting what Trump’s comments actually mean for the USD, when the USD

moves weaker in response to his remarks. The labour market in the US also seems to be

tightening faster in early 2017 and the market may start to price a higher probability of

three hikes rather than two. Our medium and long-term view remains one of USD

weakness, though. Gravitational forces should pull it weaker as current account flows

strongly favour the euro area and the USD is overvalued on our medium-term valuation

models.

More upside in bond yields and equities in medium term

In the bond market we still look for yields to move higher on a six-month horizon. A

stronger US job market, a further rise in inflation and more details on US fiscal plans,

should work in favour of higher yields. The sharp rise in euro area inflation from 1.1% in

The Trump camp sees weak US

manufacturing as a reflection of failed

US trade policies


Manufacturing share much lower than

other high-tech nations


EUR/USD lower – then higher


German yields catching up with US


https://www.bloomberg.com/news/articles/2012-08-22/q-and-a-peter-navarro-on-americas-death-by-china


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Weekly Focus

December to 1.8% in January week may also give some fuel to a tapering discussion in the

euro area – even if it was driven by food and energy. Interestingly yields were lower this

week despite good economic news, which may reflect that the market is already positioned

for higher yields. Nevertheless eventually, we believe fundamentals will win and push bond

yields higher. Some patience may be needed, though.

Similarly, stock markets are in a wait-and-see mode. The failure to show further increases

despite strong data (US ISM rose further this week) may also reflect that the market is

overweight equities. We may be in a waiting mode a bit longer but ultimately we expect

Trump’s tax plans and deregulation to give a boost to US equity markets.

The big unknown is of course if and when we could see a trade war involving the US

and China – and possibly other nations. Judging from comments from the incoming

Treasury Secretary Steven Mnuchin the US will use the annual US-China Strategic and

Economic Dialogue (SED) to get a new deal with China. This normally takes place in June

or July. House Speaker and Republican Paul Ryan told Fox News that the focus will be on

overhauling health care ahead of fiscal budget planning during spring. The Trump

administration will probably have its hands full with these things and wait for the SED to

talk to China. Hence it may take some time before we are wiser in this area, but it should

be watched carefully.

Global market views


Asset class Main factors

Equities

Overweight stocks short and medium term Global recovery and Trump's fiscal boost support equities.

Underweight DM , overweight EM

Overweight US, Japan, Nordics and Russia/Eastern Europe; underweight Europe and LatAm; neutral on

China

Bond market

Higher yields, further steepening 2Y10Y curve

US-euro spread: slightly wider in 2017

Peripheral spreads: tightening, but clear risk factors to watch

Credit spreads: neutral

FX

EUR/USD – lower over coming months on momentum, relative rates USD set to remain supported by Trump and the Fed in the near term. EUR/USD to head higher beyond 3M .

EUR/GBP – risk skewed on the upside in run-up to when the UK is likely to trigger Article 50 Longer term, we expect EUR/GBP to settle in the 0.83-0.88 range. Short-term risk skewed to the upside on 'hard' Brexit risks.

USD/JPY – short-term risks skewed to upside on higher US rates USD/JPY set to remain supported near term by relative monetary policy and risk appetite.

EUR/SEK – range near term after recent decline, gradually lower medium term Gradually lower on relative fundamentals and valuation in 2017 but near-term potential limited.

EUR/NOK – gradually lower, but technicals are near-term support factors Cross set to move lower on valuation and growth, real rate differentials normalising.

Commodities

Oil price – OPEC hesitant about extending deal through H2, crude stocks remain high Support from positive growth and inflation sentiment; near-term focus implementation of OPEC deal, US crude stocks.

M etal prices – focus turns to Trump's plans on infrastructure and defence spending Underlying support from consolidation in mining industry; recovery in global manufacturing and US fiscal spending.

Gold price – hawkish Fed weighing on gold price Rising yields and USD pushing gold price down.

Agriculturals – abundant supply keeping a lid on prices Attention has turned to La Niña weather risks over the winter, consolidation seen in some parts of the market.

M ore expansive fiscal policy in the US and the Fed outlook add to the steepening trend in Europe. Higher inflation prints in Q1, tapering

fears later in 2017 and a global recovery also point to a steeper curve. However, the ECB's QE mitigates some of the effects.

The US FI market is now more or less priced according to our view for 2017 and after the recent spike in US yields the upside potential for

the next three months should be limited. As we move further into 2017 we could in fact see a tightening of the USD-EUR spread in the 10Y

segment as the strong USD caps the upside for longer US yields and as an end to ECB QE is coming closer.

Economic recovery and QE should mean further tightening, but politics, banking recapitalisation plans and a potential new move higher in

eurozone yields remain clear risk factors. Periphery spreads often widen when core yields move higher.

Stock markets treading water



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Weekly Focus

Scandi Update

Denmark – Nationalbank did not intervene in January

January was a quiet month for the krone without any intervention in the currency market

by the central bank. Otherwise, the week's confidence data for January showed December's

budding optimism has continued into the New Year, with rises in both the services and

construction indicators. Although there was a slight dip in manufacturing confidence, it

remains at healthy levels relative to the past 2.5 years. Unemployment edged up from 4.2%

in November to 4.3% in December but this was due to an increase in the labour force rather

than a decrease in employment. The rise in the jobless rate was driven particularly by

immigrants previously on integration benefit being declared available to work and so

classified as unemployed. Since September, this effect in isolation has pushed up gross

unemployment by 5,100 FTEs. Finally, housing prices fell 0.9% in November. This is a

relatively big drop, but it has to be borne in mind that prices normally fall in November, so

the true picture is probably that prices were flat and have been since the summer.

Sweden – diverging data

Indeed, Swedish data has by and large been very strong over the past few weeks. That said,

the strength is confined mainly to survey data such as PMI and BCI, with the past week’s

data proving to be no exception. Real data such as industrial production, retail sales etc. has

not proved as buoyant. In particular, retail sales data has proved to be a disappointment.

With the above in mind, we can make a first – uncertain – estimate for Q4 16 GDP growth,

due to be released on 28 February. According to our preliminary – uncertain – calculations,

GDP growth could come in as low as 1% y/y. This would be nothing less than shockingly

low. We will monitor these developments closely over the next few weeks.

Norway – manufacturing downturn coming to an end

Two indicators during the week suggest that the oil-driven downturn in Norwegian

manufacturing may be coming to an end. Statistics Norway's confidence indicator for Q4

climbed to -0.4, its highest since Q3 14. Although the underlying data reveals there is a still

negative outlook in some oil-related industries, the main indices suggest that manufacturing

activity as a whole is bottoming out after falling for more than two years. The PMI for

January, meanwhile, points to continued moderate improvement in the first part of 2017.

What is particularly encouraging is that the employment index climbed above 50, signalling

increased employment in manufacturing for the first time in 25 months.

No currency intervention in January

Source: Danmarks Nationalbank

Surprisingly weak activity during Q4?


calculations.

Manufacturing outlook improving


Markets


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Latest research from Danske Bank Markets

3/2 CNB Review: CNB revises inflation forecast up significantly

The CNB has revised its inflation forecast up significantly, raising the risk of an exit from

the EUR/CZK floor as early as Q2 17

2/2 Bank of England Review: BoE maintains neutral bias despite increasing inflation

As widely expected, the Bank of England (BoE) made no policy changes at its February

meeting.

1/2 CBR rate decision preview: no cut on looming FX purchases

We expect the Central Bank of Russia (CBR) to hold the key rate unchanged on 3 February,

while the main focus will be on the statement’s tone in light of planned FX purchases by

the Ministry of Finance (Minfin).

1/2 FOMC review: No major changes to the FOMC statement

As expected, the Fed maintained the target range unchanged at 0.50%-0.75% and made no

major changes to the FOMC statement.

31/1 Euro area inflation surprises on the upside - will core inflation follow the upward

trend?

Euro area inflation increased to 1.8% y/y in January, which is the highest rate since

February 2013 and above consensus at 1.5% y/y.

http://danskeresearch.danskebank.com/link/Strategy030217/$file/Strategy_030217.pdf

http://danskeresearch.danskebank.com/link/BoEReview020217/$file/BoE_Review_020217.pdf

http://danskeresearch.danskebank.com/link/FlashCommentRussiaCBRpreview020217/$file/FlashComment_Russia_CBR_preview_020217.pdf

http://danskeresearch.danskebank.com/link/FlashCommentFOMCReview010217/$file/FlashComment_FOMCReview_010217.pdf

http://danskeresearch.danskebank.com/link/EURInflation310117/$file/EUR_Inflation_310117.pdf

http://danskeresearch.danskebank.com/link/EURInflation310117/$file/EUR_Inflation_310117.pdf


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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 2016 1.0 1.8 1.3 3.9 -0.4 0.1 1.3 0.3 4.2 -1.7 38.0 7.42017 1.5 1.6 1.0 3.2 0.2 2.2 3.4 1.3 4.1 -1.3 37.2 7.32018 1.8 2.0 0.5 3.7 0.1 2.7 3.4 1.5 3.9 -0.7 36.2 7.3

Sweden 2016 3.3 2.1 3.5 6.5 0.2 3.1 4.3 1.0 7.0 -0.6 42.0 4.62017 1.7 1.5 2.0 1.9 -0.1 3.5 3.4 1.3 7.2 -0.7 41.8 4.52018 1.9 2.0 1.3 2.1 0.1 4.1 4.4 1.4 7.1 -0.5 40.7 4.5

Norway 2016 0.8 1.5 2.3 -0.3 0.2 -1.5 1.0 3.6 3.0 - - -2017 1.8 2.0 2.0 1.0 0.0 1.3 1.9 2.2 3.0 - - -2018 2.2 2.2 2.3 2.5 0.0 1.3 2.3 2.1 3.0 - - -

Macro forecast, Euroland

Euroland 2016 1.7 1.7 1.9 3.0 - 2.3 3.0 0.2 10.1 -1.8 91.6 3.72017 1.5 1.1 1.2 2.7 - 3.0 3.1 1.6 9.5 -1.5 90.6 3.52018 1.5 1.1 1.1 3.6 - 3.6 4.0 1.2 9.1 -1.5 89.6 3.3

Germany 2016 1.8 1.7 4.2 2.1 - 2.3 3.0 0.4 4.3 0.6 68.1 9.02017 1.9 1.4 2.2 2.0 - 3.3 3.1 1.8 4.1 0.4 65.7 8.72018 1.9 1.4 1.8 4.0 - 4.0 4.8 1.5 4.1 0.3 63.1 8.5

France 2016 1.1 1.7 1.5 2.8 - 0.8 3.5 0.3 10.1 -3.3 96.4 -2.12017 1.0 0.8 1.2 2.1 - 2.8 3.6 1.2 10.0 -2.9 96.8 -2.32018 1.2 1.0 1.1 3.0 - 3.0 3.5 1.3 9.8 -3.1 97.4 -2.6

Italy 2016 0.9 1.4 0.6 2.0 - 1.3 1.7 -0.1 11.6 -2.4 133.0 2.82017 1.0 0.7 0.6 2.1 - 3.3 3.3 1.2 11.5 -2.4 133.1 2.52018 1.3 0.8 0.7 3.6 - 3.5 3.5 1.2 11.4 -2.5 133.1 2.1

Spain 2016 3.2 3.0 1.3 3.6 - 4.0 3.0 -0.3 19.7 -4.6 99.5 1.72017 2.3 2.1 1.4 2.9 - 2.6 2.1 1.8 18.3 -3.8 99.9 1.52018 2.3 2.0 1.3 4.7 - 3.6 4.6 1.1 17.1 -3.2 100.0 1.5

Finland 2016 1.6 2.2 0.2 3.0 - 0.8 1.5 0.4 8.8 -2.5 65.0 -0.72017 1.3 0.8 0.0 3.5 - 3.0 2.5 1.3 8.3 -2.4 66.5 -0.72018 1.3 1.0 0.2 2.5 - 3.5 3.0 1.5 8.0 -2.2 67.0 -0.7

Macro forecast, Global

USA 2016 1.6 2.6 0.8 0.4 -0.4 0.7 0.7 1.3 4.9 -2.6 105 -2.72017 2.2 2.2 0.6 2.8 0.1 3.2 2.3 2.4 4.7 -2.9 105 -2.92018 2.8 2.0 2.9 6.1 0.0 3.0 3.0 2.5 4.4 -2.8 103 -3.3

China 2016 6.7 - - - - - - 2.0 4.1 -3.0 46.3 2.42017 6.6 - - - - - - 2.0 4.3 -3.3 49.9 2.12018 6.3 - - - - - - 2.0 4.3 -3.0 53.3 1.5

UK 2016 2.0 2.8 0.8 0.9 0.5 1.0 2.7 0.7 4.9 -3.6 88.7 -5.02017 1.2 1.7 0.2 0.3 0.3 1.7 2.4 2.3 5.0 -2.9 89.2 -4.92018 1.0 1.0 0.4 0.7 0.0 2.8 2.0 2.6 5.3 -2.2 88.7 -3.3

Current

acc.4

GDP 1

Private

cons.1

Public

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Fixed

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Ex-

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Im-

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Infla-

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Year

Year GDP 1

Private

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Public

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Im-

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Infla-

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Unem-

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Public

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Current

acc.4

Public

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Current

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Im-

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Public

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Public

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Ex-

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Infla-

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Unem-

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Year GDP 1

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Weekly Focus

Financial forecast


Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 03-Feb - 691.3

+3m - 708.1

+6m - 688.9+12m - 664.3

EUR 03-Feb 107.6 743.8

+3m 105.0 743.5

+6m 108.0 744.0+12m 112.0 744.0

JPY 03-Feb 113.1 6.11

+3m 118.0 6.00

+6m 118.0 5.84+12m 118.0 5.63

GBP 03-Feb 125.2 865.4

+3m 119.3 844.9

+6m 125.6 865.1+12m 130.2 865.1

CHF 03-Feb 99.4 695.9

+3m 101.9 694.9

+6m 101.9 676.4+12m 100.9 658.4

DKK 03-Feb 691.3 -

+3m 708.1 -

+6m 688.9 -+12m 664.3 -

SEK 03-Feb 875.3 79.0

+3m 895.2 79.1

+6m 861.1 80.0+12m 821.4 80.9

NOK 03-Feb 824.9 83.8

+3m 847.6 83.5

+6m 814.8 84.5+12m 776.8 85.5

Equity Markets

Regional

Price trend12 mth

Regional recommen-dations

USA (USD) Growth boost: fisc. expansion, tax cuts, infl./growth-impulse 10-15% Overweight

Emerging markets (local ccy) Hurt by stronger USD and increased protectionism -5-+5% Underweight

Japan (JPY) Valuation and currency support 10-15% Overweight

Euro area (EUR) Weaker growth and EPS momentum than USA 0-5% Underweight

UK (GBP) Currency support, stronger infl. exp. o ff-set Brexit negativity 5-10% NeutralNordics (local ccy) Currency support on earnings, continued domestis demand 5-10% Neutral

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018

NYMEX WTI 51 53 57 59 60 60 61 61 55 61

ICE Brent 53 55 57 59 60 60 61 61 56 61

Copper 5,850 5,900 5,950 6,000 6,025 6,050 6,075 6,100 5,925 6,063

Zinc 2,700 2,400 2,200 2,200 2,225 2,250 2,275 2,300 2,375 2,263

Nickel 10,500 11,000 11,400 11,500 11,600 11,700 11,800 11,900 11,100 11,750

Aluminium 1,770 1,760 1,770 1,780 1,790 1,800 1,810 1,820 1,770 1,805

Gold 1,150 1,100 1,140 1,160 1,170 1,180 1,190 1,200 1,138 1,185

Matif Mill Wheat (€/t) 170 164 168 170 170 169 168 168 168 169

Rapeseed (€/t) 430 440 440 430 425 425 425 425 435 425

CBOT Wheat (USd/bushel) 435 465 500 510 520 530 540 550 478 535CBOT Soybeans (USd/bushel) 1,050 1,100 1,100 1,100 1,125 1,125 1,150 1,150 1,088 1,138

Average

1.03

-0.33

0.00

0.36

413

-0.60

-0.73

-

--

-0.20

-0.20

-0.20

1.12

1.251.52

-0.35

-0.35

-

-

Key int.rate

0.75

0.75

1.001.25

0.50

-0.75

0.00

0.00

-0.10-0.10

0.25

0.50

-0.50

0.25

-0.50-0.50

0.00

0.25

-

-0.60

10-yr swap yield

-0.55

0.05

0.050.05

3m interest rate

1.00

0.00

-0.10

0.25

-0.75

0.05

-0.35

0.40

0.400.40

0.50

0.50

1.00

-0.75-0.75

-0.50

-0.10

-0.23

1.752.15

0.65

0.700.60

-

-

1.30

-0.30

-

1.25

0.10

0.100.20

-

--

-0.28

-0.40

1.40

-0.35

1.271.00

1.00

-0.60

107.6

-

-

--

121.7

743.5

744.0744.0

941.7

887.5

870.0

940.0

880.0

930.0920.0

890.0

106.9

743.8

88.0

86.0

107.0

110.0113.0

105.0

108.0112.0

123.9

127.4132.2

Currencyvs EUR

2-yr swap yield

Risk profile3 mth

Price trend3 mth

2.40

2.40

2.50

1.51

-0.15

0.05

0.67

-0.65

0.04

-0.10

-0.100.00

1.45

85.9

2.90

86.0

1,214

170

57

1,829

2017

03-Feb

54

10,395

5,886

2,851

2018

Medium

Medium

Medium 5 -10%

Medium 5 -10%

-5 -0%

0 -5%

Medium 3-8%Medium 3 -8%

0.80

0.901.30

-

--

1.44

1.40

0.29

1,040433

0.82

1.201.60

2.03

1.90

2.00

1.501.75

0.21

-

--

2.40

1.151.55

1.10

1.23

1.20

1.09


Weekly Fo

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Weekly Focus

Calendar


Key Data and Events in Week 6

During the week Period Danske Bank Consensus Previous

Monday, February 6, 2017 Period Danske Bank Consensus Previous

1:00 JPY Labor cash earnings y/y Dec 0.4% 0.5%

8:00 NOK Manufacturing production m/m|y/y Dec -0.1%|-4.2%

8:00 NOK Industrial production m/m|y/y Dec 0.5%|1.3%

8:00 DEM Factory orders m/m|y/y Dec 2.0%|… 0.5%|4.1% -2.5%|3.0%

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

9:00 DKK Bankruptcies (s.a.) Number Jan

10:30 EUR Sentix Investor Confidence Index Feb 19.0 16.5 18.2

22:30 USD Fed's Harker (voter, hawkish) speaks

Tuesday, February 7, 2017 Period Danske Bank Consensus Previous

- CNY Foreign exchange reserves USD bn Jan 3000 3010.5

2:45 CNY Caixin PMI service Index Jan 53.4

4:30 AUD Reserve Bank of Australia rate decision % 1.5% 1.5% 1.5%

6:00 JPY Leading economic index, preliminary Index Dec 105.5 102.8

8:00 DEM Industrial production m/m|y/y Dec -0.4%|… 0.4%|2.5% 0.4%|2.2%

9:00 DKK Industrial production m/m Dec 6.6%

9:00 CHF SNB balance sheet, intervention CHF bn Jan 645.3

9:30 SEK Budget balance SEK bn Jan -75.2

14:30 USD Trade balance USD bn Dec -45.0 -45.2

17:35 EUR ECB's Weidmann speaks in Mainz

21:00 USD Consumer credit USD bn Dec 20.0 24.5

Wednesday, February 8, 2017 Period Danske Bank Consensus Previous

- GBP House of Commons to hold final vote on Article 50 bill

- PLN Polish central bank rate decision % 1.5% 1.5% 1.5%

9:00 DKK Trade balance ex ships DKK bn Dec 5.7

9:00 DKK Exports m/m Dec

9:00 DKK Current account (nsa|sa) DKK bn Dec ...|16.7

9:30 SEK Household consumption m/m|y/y Dec 0.3%|3.3%

16:30 USD DOE U.S. crude oil inventories K 6466

21:00 NZD Reserve Bank of New Zealand (cash rate decision) % 1.8% 1.8% 1.8%

Thursday, February 9, 2017 Period Danske Bank Consensus Previous

1:01 GBP RICS house price balance Index Jan 0.2 0.2

7:45 CHF Unemployment % Jan 3.3%

8:00 NOK GDP (mainland) q/q 4th quarter 0.1% 0.2%

8:00 NOK GDP (total) q/q 4th quarter -0.5%

8:00 DEM Trade balance EUR bn Dec 19.7 22.7

9:30 SEK Average house prices SEK m Jan 2.887

14:30 USD Initial jobless claims 1000 246

15:10 USD Fed's Bullard (non-voter, dove) speaks

19:10 USD Fed's Evans (voter, dovish) speaks


Weekly Fo

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Weekly Focus

Calendar — continued


Friday, February 10, 2017 Period Danske Bank Consensus Previous

- ITL Moody's may publish Italy's debt rating

- EUR Moody's may publish France's debt rating

- EUR Moody's may publish Italy's debt rating

- CNY Trade balance USD bn Jan 58.9 40.7

- FRF Moody's may publish France's debt rating

- CNY Money supply M2 y/y Jan 11.3% 11.3%

- CNY Aggregate financing CNY bn Jan 3085 1626

1:30 AUD RBA Statement of Monetary Policy

8:00 NOK Core inflation(CPI-ATE) m/m|y/y Jan …|2.6% -0.4%|2.5%

8:00 NOK CPI m/m|y/y Jan -0.5%|3.5%

8:00 NOK PPI m/m|y/y Jan 5.1%|7.2%

8:45 FRF Industrial production m/m|y/y Dec 2.2%|1.8%

9:00 DKK CPI m/m|y/y Jan 0.1%|1.0% 0.0%|0.5%

10:30 GBP Construction output m/m|y/y Dec 1.0%|-0.4% -0.2%|1.5%

10:30 GBP Industrial production m/m|y/y Dec -0.2%|2-9% 2.1%|2.0%

10:30 GBP Manufacturing production m/m|y/y Dec 0.2%|1.6% 1.3%|1.2%

10:30 GBP Trade balance GBP mio. Dec -3500 -4167

11:00 EUR ECB's Weidmann speaks in Hamburg

14:30 USD Import prices m/m|y/y Jan 0.4%|3.5% 0.4%|1.8%

14:30 CAD Net change in full time employment 1000 Jan 81.3

16:00 USD University of Michigan Confidence, preliminary Index Feb 97.5 97.8 98.5

16:00 GBP NIESR GDP estimate q/q Jan 0.5%

20:00 USD Budget statement USD bn Jan 33.0 -27.5

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

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


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Weekly Focus

Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’).

The author of the research report is Louise Aggerstrøm Hansen, Senior Analyst.

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Weekly Focus

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