1. society
2. work
3. unemployment

Investment Research
9 January 2015
Weekly Focus
Deflation grabs the headlines again
Market movers ahead

The risk of deflation will again be in focus in the coming week, as inflation figures
are scheduled for release in the US, Sweden and Denmark.
Contents

US inflation in December 2014 looks set to hit a five-year low at 0.8% y/y.
Market movers ..................................................... 2

Headline inflation in Sweden is already negative and we look for price growth in
December of -0.6% y/y, which is below the Riksbank’s forecast and supportive of
further monetary policy easing in the coming months.
Global Macro and Market Themes .......... 5

Denmark also skirted with deflation in December – we expect inflation of 0.2 % y/y

European eyes will be looking slightly further ahead to the week after next, when an
ECB meeting and a general election in Greece are on the schedule.
Scandi Update....................................................... 9
Latest research from Danske Bank
Markets .................................................................11
Macroeconomic forecast ...........................12
Financial forecast ............................................13
Calendar ................................................................14
Global macro and market themes

We focus on European deflation and conclude it is not ‘dangerous’. We expect growth
in Europe to pick up despite deflation.

US growth is slowing, but the economy remains strong and we expect higher yields
despite the prospect of even lower inflation.

Financial markets have started 2015 on a nervous footing, but we nevertheless remain
optimistic.
Financial views
Major indices
09-Jan
3M
12M
10yr EUR swap
0.77
0.85
1.05
EUR/USD
118
114
117
51
70
84
09-Jan
6M
12-24M
2062
0-5%
5-8%
ICE Brent oil
S&P500
Focus
Source: Danske Bank

Nordic Outlook, 8 January

Flash Comment: negative euro inflation in December, 7 January
US inflation tumbling
Inflation below Riksbank forecast
Editors
Allan von Mehren
+45 4512 8055
[email protected]
Source: Macrobond
Source: Macrobond
Important disclosures and certifications are contained from page 16 of this report.
Steen Bocian
+45 45 12 85 31
[email protected]
www.danskeresearch.com
Weekly Focus
Market movers
Global

After a lot of interesting numbers for the US over the Christmas period, we are due to
get the last figures for CPI and retail sales for 2014, while we are also set to receive
the first indicator of how the American consumer feels in the new year – the
preliminary University of Michigan consumer sentiment preliminary.
CPI to drop to lowest level since 2009
The consumer price index (CPI) continues to fall and we expect it to fall 0.3% m/m
and be 0.8% y/y in December. The yearly inflation has not been this low since
October 2009, when it was negative at -0.2% y/y following the major oil price fall in
2008. It is mainly lower energy prices that are affecting the headline index, while we
expect core CPI to stay at positive 0.1% m/m and 1.7% y/y.
US consumption is getting a lift from the fall in energy prices, as lower prices free up
income that can be spent on other items. This was evident in November retail sales
and our models suggest decent core sales in December as well. Thus, we expect core
retail sales (excluding cars, gasoline and building materials) to post an increase of
0.4% m/m. We expect total retail sales to post a decline of 0.2% m/m in December
but this is due primarily to lower gasoline prices dragging down nominal gasoline
sales.
Source: Macrobond Financial
University of Michigan consumer confidence is due to be released on Friday and will
give the first indication of consumer sentiment in 2015. The index ended on a strong
note last year, reaching the highest level since January 2007. The consensus
expectation is a further increase to 94.1 but we forecast a smaller increase to 93.7
from 93.6.
Furthermore, the calendar includes several Fed speeches. The rotation in voting rights
at the upcoming January meeting means that the only voting member scheduled to
speak is Dennis P. Lockhart (neutral). Three non-voting members will give comments
as well (Charles Plosser [hawk], Narayana Kocherlakota [dove] and Bullard [hawk]).
On top of this, the Fed’s Beige book is scheduled for release on Wednesday and the
LMCI is due on Monday.

In the euro area, focus will remain on the ECB, where expectations are increasing
that we will see a QE announcement at the upcoming meeting on 22 January. Next
week, an advocate general of the EU Court of Justice will give a non-binding opinion
on the legality of the ECB’s OMT programme. Although the opinion is non-binding,
it is likely to have impact on the current QE expectations. However, in our view, we
cannot compare the OMT programme directly to a new broad-based QE programme,
which the ECB would justify with the need to combat risks to price stability. At the
latest ECB meeting, Mario Draghi’s argument was that it would be illegal not to
pursue the mandate of maintaining inflation rates below but close to 2% over the
medium term.
ECB president Mario Draghi and German chancellor Angela Merkel are also speaking
at a conference organised by the German newspaper Die Welt and comments about
QE in particular will be followed closely ahead of the ECB meeting. Attention will
also be on comments about a potential Greek euro exit ahead of the Greek election on
25 January, although Merkel has this week dismissed suggestions of a Greek euro
exit.
2|
9 January 2015
Euro deflation for the first time since
the financial crisis in 2009
Source: Macrobond Financial
www.danskeresearch.com
Weekly Focus
The most interesting data release is German GDP for 2014, which will indirectly give
the first estimate of the Q4 growth rate. Our estimate is that the German economy
expanded 0.5% q/q in Q4, implying a yearly growth rate in 2014 of 1.5%. The higher
growth in Q4 compared with Q3, when the economy expanded only 0.1% q/q, is
driven mainly by higher private consumption. However, as German business
sentiment improved at the end of 2014, we also expect less headwind from declining
investments and reduction of inventories. In Q3, fixed investments declined 0.9% q/q
and there was a negative contribution to quarterly GDP growth from changes in
inventories of 0.5pp. Looking further ahead, demand from private consumption and
fading uncertainty should result in growth in business investments. Additionally, the
considerable fall in the effective exchange rate supports competitiveness and thus
exports and the continued fall in oil prices boosts consumption through higher real
wage growth. In light of this, we expect the German economy to perform better in
2015 than it has done in 2014.
Rebound in German growth in Q4 14
Source: Macrobond Financial
We expect Euro area industrial production for November to increase at 0.1% m/m
after a small increase in October.


In China, the most important releases next week will be the foreign trade data for
December and money supply and credit data for December. Foreign trade data are
very volatile and both export and import growth was subdued in November. Hence,
we expect to see some rebound in both export and import growth in December. We
estimate export growth improved to 10.9% y/y in December from 4.7% y/y in
November and import growth rebounded to 1.0% y/y in December after contracting
6.7% y/y in November. We expect the trade balance surplus to decline to USD46.4bn
in December, from USD54.5bn in November. However, the overall trend remains that
the Chinese trade balance surplus is again increasing substantially due mainly to
subdued import growth on the back of lower import prices. Credit growth has
stabilised in recent months, although year-on-year growth has continued to edge
lower. We estimate growth in the broad credit measure total social finance (which
also includes shadow finance) eased only slightly to 14.3% y/y in December, from
14.4% y/y in November.
In Japan, we have a relatively quiet week ahead of us, with only minor releases
scheduled. We estimate machinery orders rebounded in November after declining in
October. Domestic machinery orders are the best indicator for private business
investment. So far, domestic machinery orders suggest that private business
investments have recovered substantially in the wake of the slump following the
consumption tax hike in April. The Economic Watcher Survey (a business survey) for
December and the current account for November are also due to be released next
week.
China’s trade balance surplus is again
increasing
Source: Macrobond Financila, Danske Bank
Markets
In Japan, machinery orders have
rebounded following tax hike in April
Source: Macrobond Financial, Danske Bank
Markets
3|
9 January 2015
www.danskeresearch.com
Weekly Focus
Scandi


In Denmark, we estimate inflation fell to -0.3% m/m and 0.2% y/y in December,
from -0.2% m/m and 0.5% y/y in November. This should be seen in the light of
falling petrol prices on the back of lower oil prices. On average, petrol was
DKK0.85/litre cheaper in December than in November. We also expect prices for
books and clothing to exert a slight downward effect, as they were extraordinarily
high in November. There is still a real chance of the annual rate of inflation dipping
below 0.0% in January thanks to the combined effects of tax changes and oil prices.
Inflation expected to fall in December
We estimate December inflation in Sweden a tenth below the Riksbank estimate, both
for CPI and CPIF, possibly with a slight downside risk. This will continue to add
pressure on the Riksbank to deliver unconventional measures, perhaps not in February
but later in the spring. The reason is that we see inflation increasingly undershooting
the Riksbank’s inflation forecast (again).
Source: Statistics Denmark
The December budget borrowing requirement may be quite interesting. The
Norwegian Debt Office (NDO) kept the borrowing requirement almost unchanged at
SEK61bn for 2014 in its new forecast, while lifting it sharply (by SEK40bn to
SEK51bn) for 2015, the latter because of the deteriorating economic outlook. Still, we
are slightly confounded by monthly outcomes between June and November running
well ahead of the forecast, in particular tax revenues, implying a bigger reduction in
the 2014 total. The NDO’s most recent forecast for December was a BR of SEK77bn.

Inflation again below Riksbank path
There are no market movers in Norway in the coming week.
Source: Macrobond Financial, Danske Bank
Market movers ahead
Global movers
Event
Mon
12-Jan
Tue
13-Jan
Wed
Thurs
Fri
14-Jan
15-Jan
16-Jan
9:00
CHF
Centralbank - press briefing
Period
Danske
46.4
-
CNY
Trade balance
USD bn
Dec
10:30
GBP
CPI
m/m|y/y
Dec
9:30
EUR
Draghi and Merkel speaks at conference
9:30
EUR
EU court gives advice on ECB's OMT
11:00
EUR
Industrial production
m/m|y/y
Nov
14:30
USD
Retail Sales
m/m
Dec
10:00
DEM
GDP y/y
14:30
USD
PPI
m/m|y/y
Dec
14:30
USD
CPI
m/m|y/y
Dec
16:00
USD
University of Michigan Confidence, preliminary
Index
Jan
Scandi movers
12-Jan
9:00
DKK
CPI
Tue
13-Jan
8:00
SEK
PES Unemployment
9:30
SEK
Underlying inflation CPIF
49.0
54.5
-0.30%|1.00%
0.10%|..
0.30%|..
0.10%|0.70%
-0.20%
0.10%
0.70%
1.50%
1.50%
0.10%
-0.40%|1.00%
-0.20%|1.40%
-0.30%|0.80%
-0.40%|0.70%
-0.30%|1.30%
93.7
94.1
93.6
Period
Danske
Consensus
Previous
m/m|y/y
Dec
-0.30%|0.20%
%
Dec
4.00%
m/m|y/y
Dec
-0.05%|0.20%
%
-0.20%|0.50%
4.10%
0.00%|0.30%
Source: Bloomberg, Danske Bank Markets
4|
9 January 2015
Previous
0.20%|0.70%
Event
Mon
Consensus
www.danskeresearch.com
0.00%|0.60%
Weekly Focus
Global Macro and Market Themes
Euro area to recover despite deflation
As expected the euro area went into deflation in December as inflation fell to -0.2%
y/y. It is likely to move even further into negative territory in coming months – we expect
-0.5% in March. However, it is important to stress that this is not the dangerous kind of
deflation. On the contrary it is currently giving a boost to growth. There are basically two
kinds of deflation: Good deflation, which is driven by improving productivity, and bad
deflation which is driven by weak demand. Fortunately it is mainly the good kind we are
experiencing at the moment. The productivity gain inducing deflation stems from the
improving technology in oil production which has led to the shale oil boom in US and
other countries. This has led to a sharp increase in oil supply and since OPEC has refused
to cut supply in response, oil prices have collapsed. Part of the decline is also due to weak
demand, but it seems plausible that the main part comes from higher supply. Otherwise
the oil price decline would be more gradual and not the big drop we have seen lately.
Key points
 Euro deflation is of the good kind
 Risk assets get rocky start – but
we are still positive
 More signs of euro area recovery
 US moves from 4.5% to 3%
growth pace
 German yields go Japanese
 We look for lower EUR/USD
The lower oil prices have translated into considerably cheaper gasoline and also
underpinned the move lower in food inflation. Both factors free up purchasing power for
consumers and are an important explanation of why euro area private consumption has
been so resilient this year. Strong euro retail sales this week gave more evidence of this as
they showed a decent rise of 0.6% m/m in November for the second month in a row, see
Flash Comment: decent euro retail sales with more to come, 8 January 2015. An easy
way to measure whether it is good or bad deflation is to look at real wage
development. If deflation was due to weak demand it would be driven by declining real
wages and thus nominal wages would also be falling. However, this is not the case. On
the contrary, real wage growth is rising around 1½% which is about the fastest pace
since 2009 at which time the euro area also saw oil-price induced deflation. Although
nominal wage gains are moderate at the moment, at 1.3% they are still not in negative
territory.
The negative inflation does pose a clear risk of de-anchoring inflation expectations and
the ECB has to react to this. It seems increasingly likely that the ECB will announce a QE
programme in government bonds on 22 January. The ECB’s Coure said on Thursday that
monetary policy must react to the inflation drop, and the Greek situation is not a reason to
delay the ECB decision. The ECB president has sent similar signals lately. Rumours
reported on newswires on Friday were that an ECB staff study was presented to policy
makers on 7 January outlining a plan for QE with investment up to EUR500bn in
investment grade government bonds.
Euro inflation to get more negative...
Source: Macrobond Financial
... as gasoline prices move lower still
More evidence of euro recovery
While inflation is turning negative we continue to see more signs that the euro area
is slowly recovering following the slowdown in most of 2014. The euro sentix index for
January again rose more strongly than expected and historically it has been a good
leading indicator for the euro economy. It also points to a further rise in the German ifo
5|
9 January 2015
Source: Macrobond Financial
www.danskeresearch.com
Weekly Focus
survey. Other German data point in the same direction: a) unemployment during Q4 fell
67k which is the biggest decline over a quarter since 2011, b) the trend in factory orders
and industrial production shows a bottoming in Q4 (despite a decline in December) and c)
retail sales grew decently towards the end of the year - probably a response to lower oil
prices. The improvement in Germany is interesting because it has been the euro economy
that slowed the most during last year.
On a euro area level real M1 growth and retail sales have also underpinned the
expectation of recovery. Looking forward we expect the euro economy to gain some
momentum during H1 in response to a sharp decline in gasoline prices, a substantial
weakening of the euro and the fading effect of the Ukraine crisis.
A new event risk has turned up with the upcoming Greek election on 25 January. While it
is something that should be watched closely, we don’t believe it will ultimately result in a
Greek exit from the euro as is currently the fear. While there has been a lot of noise, both
European and Greek politicians favour Greece staying in the euro. It will probably
continue to add volatility to markets, though, until a clearer picture has emerged.
Euro sentix survey points to further
rise in German ifo
Source: Macrobond Financial
Euro real M1 growth points to 2%
growth in mid-2015
US economy robust despite fall in ISM, China
The US data flow has been mixed over the past week but overall still supporting a
picture of a robust economy, see Flash Comment: Charts on US data over the holiday
season – consumer-driven growth amid low inflation, 5 January 2015. ISM fell back more
than expected in December but it merely reflects a move in US growth from a 4.5%
growth pace in Q2/Q3 last year to around 3% growth in Q4 14 and H1 15. As trend
growth has likely fallen to around 2-2.5% in recent years, this still reflects a strong US
economy. Consumer spending data were strong in Q4 and consumer confidence is
moving higher still in response to the very sharp decline in gasoline prices (they now
stand at USD2.17 per gallon, down around USD1.5 over six months). Unemployment is
also falling and is expected to reach the Fed’s long-run estimate of 5.4% as early as Q2
15, six months ahead of the Fed’s own projection.
What will be very interesting for the Fed equation too is the development in
inflation. With the recent decline in gasoline prices we could be heading for inflation
at -0.5% in mid-2015 down from the current level of 1.3%. However, it will rise back
towards 2% towards the end of the year if we are right that oil prices move up towards
USD75-80 per barrel at the end of the year. The Fed knows that the decline in inflation
will only be temporary and will tend to look through this. Janet Yellen highlighted
this at the recent press conference following the December Fed meeting. However, the
Fed will watch the development in inflation expectations closely and also what happens
to core inflation. If this should fall much below the current level of 1.5% it may start to
impact the date of lift-off. Remember, though, that it has to be weighed against a faster
than expected drop in unemployment.
Source: Macrobond Financial
German domestic orders bottoming
Source: Macrobond Financial
US ISM falls as GDP growth moves
from 4.5% pace to 3%
Source: Macrobond Financial
6|
9 January 2015
www.danskeresearch.com
Weekly Focus
Nervous start to 2015
Risk assets got off to a nervous start to the year, taking a hit from the focus on the
Greek election and the further decline in oil prices. However, we continue to be
constructive on risk assets for the coming quarters. The global economy is expected to
gain strength during the first half of this year as the euro area recovers and US growth
continues to grow strongly, not least supported by the decline in oil prices. China is also
expected to recover somewhat from the current slowdown as policy is being eased
slightly. We should expect continued high volatility, though, as the risks from Greece and
oil will probably continue to pop up now and again. We do not think these risk factors are
enough to derail the recovery, though, and thus look for more upside in risk assets.
Core bond yields have continued the relentless decline driven by the very long end.
30-year government bond yields in Germany and the US have fallen to new lows of
1.25% (!) and 2.55%, respectively. Since the decline in yields is driven by the long end it
suggests that some European pension funds with guarantees are struggling as liabilities go
up when yields decline. Unless they are fully hedged it will reduce their reserves. The
strong move suggests that some funds are being forced to hedge by buying long duration
bonds or receiving in long swaps. Why else would you buy a 30-year bond at 1.25%? We
look for a moderate rise in German yields in the medium term as the Fed starts
hiking, pension flows ebb and the euro area recovers. The very negative inflation
prints may keep yields at very low levels in the short term, but as inflation starts rising
again in H2 we expect some upward pressure on yields from the historically low levels.
Stocks starting new year in volatile
fashion
Source: Macrobond Financial
Germany goes Japanese
Source: Macrobond Financial
With the sharp decline in yields the German yield curve is looking very similar to its
Japanese counterpart. The very low yields in these two countries are also pulling US
yields lower, even though the 2-year yield in the US has increased as the first Fed hike is
coming closer. The 2-10 curve has thus flattened enormously recently. It has been one of
our core views that the US yield curve would flatten. Over the coming year we could see
more flattening as 2-year yields are expected to go higher in response to the Fed lift-off.
But in the short term the risk-reward is not as favourable anymore.
Peripheral bond yields had a rocky start to the year in a risk-off move stemming
from Greek contagion. However, fears over a Greek exit are overblown in our view and
the upcoming QE programme from the ECB will give support to periphery bonds. We
thus still look for tighter peripheral spreads. However, given the low levels of spreads
currently we should expect higher volatility, as profit-taking on long periphery positions
comes faster following a rally. With higher volatility and lower spread the risk-reward is
obviously reduced, but in a very low-yield environment investors will continue to hunt for
yield and drive spreads lower.
US 2-year and 10-year yields moving
in opposite directions
Source: Macrobond Financial
More US-Germany spread widening
supporting lower EUR/USD
EUR/USD to continue lower
We have been calling for a lower EUR/USD for a long time but it has moved faster than
we had expected. The collapse in oil prices, political uncertainty and ECB QE
expectations have weighed more on the EUR than we expected. Near term, we expect
EUR/USD to fall further ahead of an ECB QE announcement on 22 January and the
Greek election on 25 January. Medium term, rebounding euro area growth and monetary
repricing should support the EUR. We revise our EUR/USD forecast profile lower. We
now forecast EUR/USD at 1.16 in 1M and 1.14 (previously 1.22) in 3M but we
maintain the view that EUR/USD will eventually bounce back, bottoming around
1.12 (1.20) in 6M and grinding towards 1.17 (1.23) on a 12M horizon.
7|
9 January 2015
Source: Macrobond Financial
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,
QE fro m ECB and B o J and stimulus fro m P B o C are 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 as clo se to histo rical highs
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 f diverging gro wth and mo netary po licy
USD/JP Y - Higher
B o J easing, Fed hikes and pensio n refo rms
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 - weakness near term, reco very during the year
Oil glut and glo bal gro wth co ncerns to weigh near term. 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|
9 January 2015
www.danskeresearch.com
Weekly Focus
Scandi Update
Denmark – new forecast: low oil prices boost Danish economy
We published an updated forecast for the Danish economy during the week. We believe
that the economy is on the right track, as reflected in five successive months of positive
growth and will gain further momentum in the coming years. The slide in oil prices since
the summer is expected, in isolation, to boost domestic growth by 0.3-0.4pp both this year
and next, and we now forecast GDP growth of 1.6% in 2015 (revised up from 1.3%) and
2.0% in 2016. The main driver behind the increase is private consumption, buoyed by
growth in real wages and improvements in the housing market (see Nordic Outlook –
January 2015, 8 January 2015).
The past week has also brought a variety of economic data, including figures for the
labour market, where the positive trend seems to be continuing. Seasonally-adjusted gross
unemployment fell by 800 people from October to November and Statistics Denmark has
also begun to publish new monthly data on the number of employees, which rose by
2,900 from September to October. Manufacturing confidence, meanwhile, fell from -15 in
November to -19 in December and while the decrease is naturally a cause for concern, we
still feel that the data does not reflect economic realities. The indicator is down at the
levels seen when the crisis was at its worst in 2008-09, and the economy is in way better
shape than it was back then, both at home and in Europe.
Low oil prices good news for Denmark
Source: Statistics Denmark
Sweden – not much data since the New Year
There’s not been much data in Sweden over Christmas and New Year and the impression
has been somewhat split. For industry, the November trade balance was again a
disappointment suggesting Swedish exporters are still struggling with weak demand. The
rise in Manufacturing PMI is not much comfort until we see a lasting rebound in
European markets. The domestic front has been better. Retail sales continued to grow
strongly at 4.5% y/y in November but the outlook is more dimmed as there has been a call
for re-elections and that call being cancelled. The latter is really the ‘big news’ over the
past couple of weeks as we are currently trying to understand the implications of the socalled ‘December agreement’ between the Red/Green government and the right-wing
Alliance parties (opposition) for economic policies going forward.
The Riksbank’s minutes added no new information but re-emphasised that it is preparing
to use unconventional tools with FX interventions being quite unlikely, in particular as
the krona is already weak.
9|
9 January 2015
www.danskeresearch.com
Weekly Focus
Norway – households are holding up
Lower oil prices spell lower growth in the Norwegian economy. The direct effects via
lower oil investment and spill-over effects from the supply industry are obvious and
relatively easy to monitor, but the indirect effects via weaker business and consumer
confidence are more uncertain. The week’s housing data for December showed no signs
whatsoever of an effect on expectations, with strong demand for housing pushing up
prices and turnover. The retail sales figures for November confirmed that growth is
picking up again after slowing during the summer in 2014. Private consumption is
therefore on course for annualised growth of almost 2.5% in Q4 14, which will prop up
GDP growth. Given that the worst of the headlines did not come until December, it is
probably too early to sound the all-clear but as new car sales grew more than 5% m/m in
December, this suggests that Norwegian consumers remain upbeat.
10 |
9 January 2015
Private spending increasing
Source: Macrobond
www.danskeresearch.com
Weekly Focus
Latest research from Danske Bank Markets
8/1/15 Flash Comment - Decent euro retail sales with more to come
Euro area retail sales remain decent and looking ahead they should continue their positive
trend as they are supported by the sharp decline in the oil price.
8/1/15 Nordic Outlook - January 2015
Quarterly update on the Nordic economies.
7/1/15 Flash Comment - Negative euro inflation in December
Euro inflation declined below the deflation limit for the first time since the financial crisis
in 2009.
7/1/15 Flash Comment: FOMC minutes - Foreign economic developments the main risk
The minutes of the December 16-17 FOMC meeting didn't reveal much new information,
but there are a few things worth noticing.
6/1/15 Monitor: US labour market: downside risk to December payrolls
We expect non-farm payrolls to show an increase of 195,000 in December, below the
consensus estimate at 240,000.
5/1/15 Flash Comment: Charts on US data over the holiday season - consumer-driven
growth amid falling inflation
Below is an overview of US data over the holiday season. Overall, US data continues to
surprise on the upside, although there were a few negative surprises as well, notably the
ISM manufacturing index for December.
11 |
9 January 2015
www.danskeresearch.com
Weekly Focus
Macroeconomic forecast
Macro forecast, Scandinavia
Private
Public
Fixed
Stock
Ex-
Im-
Infla-
Unem-
Public
Public
Current
Year
GDP 1
cons.1
cons.1
inv.1
build.2
ports1
ports1
tion1
ploym.3
budget4
debt4
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
Private
Public
Fixed
Stock
Ex-
Im-
Infla-
Unem-
Public
Public
Current
Year
GDP 1
cons.1
cons.1
inv.1
build.2
ports1
ports1
tion1
ploym.3
budget4
debt4
acc.4
Euroland
2014
2015
2016
0.9
1.5
2.1
0.9
1.5
1.1
0.9
0.9
0.7
0.6
1.5
5.4
-0.1
0.0
0.0
3.7
4.6
4.2
3.6
4.3
4.1
0.4
-0.1
1.6
11.6
11.4
10.9
-2.6
-2.3
-1.9
94.5
94.6
93.3
2.5
2.6
2.5
Germany
2014
2015
2016
1.5
1.9
2.6
1.2
1.9
1.6
1.1
1.1
0.8
2.8
2.1
6.8
-0.1
0.0
0.0
4.1
5.5
4.9
3.7
5.4
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
0.3
0.8
0.6
2.0
0.8
0.4
-1.7
-0.8
3.1
-0.1
0.0
0.0
2.1
3.4
3.4
2.9
3.2
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
0.2
0.4
-2.6
-1.4
3.4
0.3
0.0
0.0
2.0
3.7
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
Private
Public
Fixed
Stock
Ex-
Im-
Infla-
Unem-
Public
Public
Current
Year
GDP 1
cons.1
cons.1
inv.1
build.2
ports1
ports1
tion1
ploym.3
budget4
debt4
acc.4
USA
2014
2015
2016
2.4
3.1
2.7
2.4
3.1
2.8
0.0
1.3
0.8
5.3
6.5
5.6
0.0
0.0
0.0
3.2
4.7
4.5
3.6
5.7
5.3
1.1
1.4
1.2
6.2
5.5
4.9
-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
3.0
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
Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.
12 |
9 January 2015
www.danskeresearch.com
Weekly Focus
Financial forecast
Bond and money markets
USD
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
09-Jan
+3m
+6m
+12m
EUR
JPY
GBP
CHF
DKK
SEK
NOK
Key int.
rate
0.25
0.25
0.25
1.00
0.05
0.05
0.05
0.05
0.10
0.10
0.10
0.10
0.50
0.50
0.50
0.75
-0.25
0.00
0.00
0.00
0.20
0.20
0.20
0.20
0.00
0.00
0.00
0.00
1.25
1.00
1.00
1.00
3m interest rate
2-yr swap yield
10-yr swap yield
Currency
vs EUR
Currency
vs USD
Currency
vs DKK
0.25
0.30
0.60
1.30
0.07
0.03
0.03
0.03
0.11
0.15
0.20
0.20
0.56
0.55
0.57
0.93
-0.10
0.05
0.05
0.05
0.29
0.20
0.20
0.20
0.26
0.25
0.25
0.25
1.43
1.15
1.20
1.20
0.85
0.95
1.40
1.90
0.17
0.15
0.15
0.15
0.15
0.20
0.20
0.25
0.89
1.10
1.20
1.60
-0.21
0.05
0.05
0.05
0.43
0.35
0.35
0.35
0.25
0.25
0.25
0.25
1.12
1.00
1.00
1.10
2.12
2.55
2.75
3.05
0.77
0.85
0.80
1.05
0.48
0.75
0.80
0.85
1.71
2.25
2.40
2.65
0.40
0.95
1.05
1.25
1.10
1.15
1.10
1.35
1.15
1.10
1.00
1.20
1.80
1.80
1.80
2.00
118.0
114.0
112.0
117.0
140.8
139.0
139.0
147.0
78.1
77.0
76.0
79.0
120.1
121.0
122.0
124.0
743.9
744.25
743.90
743.90
948.2
930.0
920.0
900.0
900.1
940.0
900.0
850.0
118.0
114.0
112.0
117.0
119.4
122.0
124.0
126.0
151.0
148.0
147.0
148.0
101.8
106.0
109.0
106.0
630.7
653.0
664.0
636.0
803.9
816.0
821.0
769.0
763.1
825.0
804.0
726.0
630.7
653.0
664.0
636.0
743.9
744.25
743.90
743.90
5.28
5.35
5.35
5.06
952.2
966.6
978.8
941.6
619.4
615.1
609.8
599.9
78.5
80.0
80.9
82.7
82.6
79.2
82.7
87.5
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%
10-15%
5-10%
5-10%
Neutral
Underweight
Overweight
Overweight
Overweight
Equity Markets
Regional
USA (USD)
Emerging markets (local curr)
Japan
Europe (ex. Nordics)
Nordics
Strong growth & earnings, expensive
Commodity-related equities are pressured
Monetary easing, attractive pricing
Stagnating economy, cheap valuation
Cyclical profile, expensive
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)
09-Jan
49
51
6,104
2,160
15,550
1,832
1,212
191
362
566
394
1,043
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
Q3
66
70
7,050
2,375
18,500
2,125
1,170
182
357
580
400
1,080
2016
Q4
74
78
7,175
2,400
19,000
2,175
1,160
183
361
585
405
1,090
Q1
78
82
7,300
2,425
19,250
2,225
1,150
185
364
590
410
1,100
Q2
80
84
7,375
2,450
19,500
2,250
1,150
186
367
595
415
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 |
9 January 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 3
During the week
Period
Danske Bank
Consensus
Previous
Sat 10 - 15
CNY
Aggregate Financing
bn CNY
Dec
1175
1200
1146.3
Sat 10 - 15
CNY
New Yuan loans
CNY bn.
Dec
675
880
852,7
Sat 10 - 15
CNY
Foreign Exchange Reserves
bn. Usd
Dec
3900
3887.7
Sat 10 - 15
CNY
Money supply M2
y/y
Monday, January 12, 2015
9:00
DKK
CPI
9:00
CHF
Centralbank - press briefing
9:30
SEK
Budget balance
16:00
USD
Fed's LMCI
18:40
USD
Fed's Lockhart (voter, neutral) speaks
Dec
12.50%
12.30%
Consensus
Previous
Period
Danske Bank
m/m|y/y
Dec
-0.30%|0.20%
SEK bn
Dec
11
m/m
Dec
2.9%
Tuesday, January 13, 2015
Period
Danske Bank
-0.20%|0.50%
Consensus
Previous
-
CNY
Trade balance
USD bn
Dec
46.4
49.0
54.5
-
CNY
Import
y/y
Dec
1.0%
-6.20%
-6.70%
10.9%
6.00%
4.70%
..|44.00
44.0|41.5
-
CNY
Export
y/y
Dec
0:50
JPY
Bank lending
y/y
Dec
6:00
JPY
Eco Watchers Survey Outlook (Current)
Index
Dec
8:00
SEK
PES Unemployment
%
Dec
9:30
SEK
CPI
m/m|y/y
Dec
-0.10%|-0.60% -0.10%|-0.50%
-0.05%|0.20%
2.70%
4.00%
4.10%
-0.10%|-0.20%
9:30
SEK
Underlying inflation CPIF
m/m|y/y
Dec
0.00%|0.30%
0.00%|0.60%
10:00
ITL
Industrial production
m/m|y/y
Nov
0.10%|-2.70%
-0.10%|-3.00%
10:30
GBP
CPI
m/m|y/y
Dec
0.20%|0.70%
10:30
GBP
PPI - input
m/m|y/y
Dec
10:30
GBP
PPI - output
m/m|y/y
Dec
-0.20%|-0.30%
0.20%|-0.10%
13:30
USD
NFIB small business optimism
Index
Dec
97.8
98.1
20:00
USD
Budget statement
USD bn
Dec
24.0
23:00
USD
Fed's Kocherlakota (non-voter, dovish) speaks
Wednesday, January 14, 2015
Period
0:50
JPY
Money supply M2
8:45
FRF
HICP
9:30
EUR
Draghi and Merkel speaks at conference
9:30
EUR
EU court gives advice on ECB's OMT
10:00
ITL
11:00
EUR
13:00
USD
MBA Mortgage Applications
14:00
USD
Fed's Plosser (non-voter, hawkish) speaks
14:30
USD
Retail Sales
m/m
Dec
14:30
USD
Retail Sales Control Group
m/m
Dec
14:30
USD
Retail sales less autos
m/m
Dec
14:30
USD
Retail sales less autos and gas
m/m
Dec
14:30
USD
Import prices
m/m|y/y
Dec
-0.30%|1.00%
-1.00%|-8.80%
Danske Bank
y/y
Dec
m/m|y/y
Dec
..|0.00%
HICP, final
m/m|y/y
Dec
...|-0.10%
Industrial production
m/m|y/y
Nov
0.10%|..
Consensus
Previous
3.60%
3.60%
-0.20%|0.40%
...|-0.10%
0.30%|..
0.10%|0.70%
%
11.1
-0.20%
0.10%
0.70%
0.30%
0.60%
0.10%
0.10%
0.50%
0.50%
0.30%
0.60%
-2.90%|…
-1.50%|-2.30%
Source: Danske Bank Markets
14 |
9 January 2015
www.danskeresearch.com
Weekly Focus
Calendar - continued
Thursday, January 15, 2015
Period
Danske Bank
Consensus
Previous
JPY
PPI
m/m|y/y
Dec
-0.30%|2.10%
-0.20%|2.70%
0:50
JPY
Machine orders
m/m|y/y
Nov
4.60%|-6.40%
-6.40%|-4.90%
1:01
GBP
RICS House Price Balance
Index
Dec
10%
13%
1:30
AUD
Employment change
1000
Dec
7.0K
42.7K
0:50
9:00
ESP
HICP, final
m/m|y/y
Dec
10:00
NOK
Trade balance
NOK bn
Dec
10:00
DEM
GDP y/y
10:00
DEM
Budget Maastricht % of GDP
11:00
EUR
Trade balance
14:30
USD
Initial jobless claims
1000
14:30
USD
Empire Manufacturing PMI
Index
Jan
5.0
-3.6
14:30
USD
PPI
m/m|y/y
Dec
-0.40%|1.00%
-0.20%|1.40%
14:30
USD
PPI core
m/m|y/y
0.10%|1.90%
0.00%|1.80%
Consensus
Previous
%
EUR
Moody's may publish Ireland's debt rating
0:50
JPY
Tertiary industry index
8:00
DEM
HICP, final
9:00
CHF
Retail sales
11:00
EUR
CPI
11:00
EUR
CPI - core, final
14:30
USD
CPI
14:30
USD
CPI - core
15:15
USD
Industrial production
15:15
USD
Capacity utilization
16:00
USD
University of Michigan Confidence, preliminary
19:10
USD
Fed's Bullard (non-voter, hawkish) speaks
-0.20%|-1.10%
24.6
1.50%
0.10%
1.50%
%
EUR bn
Friday, January 16, 2015
-
..|-1.10%
0.10%
Nov
19.4
294
Dec
Period
m/m
Nov
m/m|y/y
Dec
Danske Bank
-0.20%
0.20%
..|0.10%
0.10%|0.10%
y/y
Nov
m/m|y/y
Dec
%
Dec
m/m|y/y
Dec
-0.30%|0.80% -0.40%|0.70%
-0.30%|1.30%
m/m|y/y
Dec
0.10%|1.70%
0.10%|1.70%
0.10%|1.70%
m/m
Dec
0.20%
0.00%
1.30%
%
Dec
80.00%
80.10%
Index
Jan
94.1
93.6
22:00
USD TICS international capital flow, Net inflow
USD bn
The editors do not guarantee the accurateness of figures, hours or dates stated above
0.30%
..|-0.20%
-0.20%|..
-0.20%|-0.20%
0.80%
93.7
0.80%
Nov
178.4
For furher information, call (+45 ) 45 12 85 22.
Source: Danske Bank Markets
15 |
9 January 2015
www.danskeresearch.com
Weekly Focus
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.
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 analyst’s 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
Bank’s research policies. Employees within Danske Bank’s 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 Bank’s 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 |
9 January 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 Bank’s 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 |
9 January 2015
www.danskeresearch.com