Danske Daily: 26 October 2012‏

BNP Paribas had its rating cut one notch from ‘AA minus’ to ‘A plus’ by Standard and Poor's that also put 10 other French banks, including Societe Generale and Credit Agricole, on negative outlook due to increased economic risks as the recession across Europe has become more protracted. S&P cites a likely fall in house prices of between 10-15% over the next two to three years as one factor for the change. This is very much in line with our housing market analysis, 22 October.

South Korea posted disappointing 0.2% q/q (1.6% y/y) GDP growth in Q3 as the global slowdown hit exports. This is the lowest growth rate in three years and makes it virtually impossible to reach targets for 2012. Japanese consumer prices fell for a fifth month in September with consumer price inflation excluding fresh food standing at -0.1%.

The US equity markets posted modest gains yesterday with S&P500 increasing 0.3%, while Nasdaq increased 0.16% on the back of better-than-expected earnings reports following steeper declines in the indices in the previous two days. Fifty-four companies in the S&P500 index released results yesterday. US stock index futures fell after Apple’s earnings and earnings expectations for the next quarter disappointed. Novo Nordisk posted a 5.8% decline in US trading - the largest decline since 4 August 2011 - as US regulators announced that an advisory board will look at insulin's heart risk. This morning the sentiment is negative with Nikkei posting a 0.9% loss and Hang Seng down 0.8%.

US bond yields rose after a USD 29bn auction in seven-year notes met the weakest demand since May 2009 with a bid-to-cover ratio of 2.56. Before the auction treasuries had gained on the back of Fitch rating agency reiterating that its negative outlook on the US ‘AAA’ rating is unlikely to be changed before late 2013 as it is waiting to see deficit reduction plans following this year's elections. US government bond yields rose 5bp to 0.82% in the five-year segment but only 3bp for 10-year bonds to 1.82%.

In the FX markets the yen weakened against all major currencies and fell to the lowest level against USD yesterday peaking at 80.34 on speculation that Bank of Japan will add more stimulus by expanding its asset-purchase programme by JPY10trn at its monetary policy meeting on Tuesday. This morning USD/JPY is trading just above 80.0. The kiwi (New Zealand dollar) gained after the Reserve Bank of New Zealand left interest rates unchanged and said that market sentiment has improved and that inflation is likely to rise. EUR/USD has weakened slightly since Bini Smaghi yesterday said that the current economic situation justifies a weaker euro and argued that Spain must request European rescue funds.

To Read the Entire Report Please Click on the pdf File Below.