Danske Daily

Asian equity markets follow the positive trend from the European markets. Some of the major Asian stock markets (including Japan)  are closed due to a public holiday, however.

Plenty of key macroeconomic data from the US with main focus on ISM. In Sweden minutes from the latest Riksbank meeting will be released, while Denmark  will release currency reserves for December.

Small movements in major FX crosses this morning. EUR/USD still below 1.30.

Markets Overnight

The US equity and bond markets were closed yesterday due to the New Year’s holiday.

The Asian equity markets that are open today have followed the positive sentiment from the European equity markets. Stock markets in China, Japan, Thailand and New Zealand are closed for a holiday, but the others saw decent gains. Hang Seng is up 2% this morning and the major Australian index rose by 1.1% driven by higher commodity prices and an increase in the Australian PMI, which follows the better-than-expected PMIs in Germany and China yesterday.

In the currency market the euro remains below the 1.30-level against the dollar. There is talk of a bigger write-down of Greek government debt. At first the write-down was proposed to be 21% and voluntarily. When the second support package was approved the haircut was raised to 50% and now there is talk of a 75% haircut in order to ensure greater debt sustainability. More conclusive information about the possible haircut on Greek debt is expected later this month.

The Scandi currencies are range bound versus  the euro with EUR/SEK trading at the 8.91-level and EUR/NOK trading at the 7.74-level in Asia this morning.

Global Daily

Focus today: US ISM will be the main release today. We expect to see a further increase to 53.2 in December from 52.7 in November. Consensus expects 53.4. GDP growth is now tracking 3% in Q4 from 1.8% in Q3 and this improvement should also be reflected in higher ISM. Jobless claims have also strengthened further recently supporting a stronger momentum in growth. Other data today will be UK PMI manufacturing and German unemployment and tonight minutes from the latest FOMC meeting will be released. The meeting was a non-event with no major changes in the statement. The minutes may reveal a few more nuances though, as to how high the bar for further stimulus is.

Fixed income markets: Yesterday European core bond markets took back some of the gains driven by safe-haven demand ahead of year-end, as 2012 started with a positive boost to sentiment from manufacturing data in China and Europe. With more good news out of China overnight and an expected further improvement in the US manufacturing ISM today, we believe that long bond yields have more upside today. The signs of relief in the Euribor fixings continue. The fixing has declined by 5bp over the past three days. We believe fixings will continue to fall and put further downward pressure on short EUR
swap rates. This should also be a positive signal for general risk appetite in the markets and eventually support a curve steepener  – in particular if the tentative signs of stabilization in European manufacturing data prove sustained.  
FX markets:  The risk-on sentiment that prevailed yesterday has supported cyclical currencies like AUD and CAD, whereas the dollar has fallen against 15 of its most-traded counterparts. Also the euro has gotten some support despite the eurozone debt problems and EUR/USD is once again trading just below 1.30. The so-called IMM data from  27 December showed that EUR net shorts have reached record levels, at  -127,900 (net contracts) or more than 46% of open interest. It indicates a very crowded speculative positioning, which in our view limits the downside in EUR/USD. If the positive risk-on sentiment continues it also opens the door for a significant short-covering in EUR/USD that potentially could push the cross well above 1.30. See IMM positioning..

Scandi Daily
Sweden: In the Riksbank Minutes (due at 09.30 CET) the starting point is that the rate cut must be justified (thus soft), but also the rate path should be motivated (which could be less soft). The most important, and the first to dig into, is comments from Mr Ingves and Ms Wickman-Parak (two members, Öberg and Nyberg, have left the Board, whereas Svensson and Ekholm are known rate cut forerunners). Catalysts for further rate cuts? Discussion on transmission  mechanism and liquidity measurers (probably not on the
cards). The Minutes are always a potential market mover.

Denmark:  Currency reserves for December  will be released and we look for a solid inflow given the recent rate cut from the Danish Central Bank that again cut rates more than the ECB. The solid investor interest is seen in the recent flow statistics regarding Danish government and covered bonds, which showed that foreign investors also in November continued their purchase of government and covered bonds.

Norway: Norwegian PMI will be published today. We believe we will see a stabilisation or even a slight rise in Norwegian PMI in December after the significant drop in the autumn and after it fell below 50 for the first time since March 2010 in November. Together with rising oil prices and Norges Bank only purchasing currency for a modest NOK350m per day in January it bodes well for NOK this week