- Risk sentiment improved yesterday after some well-received US corporate earnings and strong numbers from US housing starts which increased 6.9% in June – the fastest rate in almost four years. The US stock market closed with decent gains: S&P 500 was up 0.7% while Dow Jones industrial Average gained 0.8%. The positive sentiment was carried over into the Asian trading session where Nikkei is up by 0.8% and Hang Seng up by 1.7%. US bond yields are largely unchanged since markets closed in Europe yesterday with 10-year US bond yields at 1.49%. In the FX market, EUR/USD gained overnight and is trading around 1.2290 this morning while EUR/GBP is trading at 0.7849 and is thus still flirting around the lowest level since 2008 set yesterday at 0.78301. AUD got further tailwinds yesterday on the back of positive risk sentiment and reached its highest level in 11 weeks against the dollar. AUD/USD is trading at1.0392 this morning.
- The Federal Reserve said in its Beige Book released last night that the US economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions. Fed Chairman Ben S. Bernanke repeated in his testimony to the House Financial Services Committee yesterday that the central bank is “prepared to take further action as appropriate to promote a stronger economic recovery.”
- Focus today will be on data releases from the US: The Philadelphia Fed is likely to continue to point to a decline in manufacturing and the Conference Board Leading Index is expected to decline to -0.1 in June and point to slower growth through the fall. Initial jobless claims dropped to 350K last week and it will be interesting to see whether we are back above 370K this week.
- From Europe the most interesting data release is UK retail sales but French bond auctions will also get the market’s attention after the yield on the 10-year French government bond yesterday dropped to an all-time low of 2.058.
- In an otherwise empty European economic calendar, the market is set to focus on news and comments from the European political scene ahead of Friday’s Eurogroup meeting. Today, Germany and Finland will take centre stage as the German lower house of parliament will vote on the rescue plan for Spanish banks while the parliament of Finland will debate the issue and in particular the recent agreement with Spain to receive collateral in exchange for helping Spanish banks, see news from Reuters. The Finnish parliament is due to vote on the bailout programme tomorrow.
- Finally, the earnings season continues with Morgan Stanley, Nokia, Microsoft and Google reporting today
- There are no major market events in Scandinavia today.
Disclosure
This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the 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 authorized 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 Services Authority (UK). Details on the extent of the regulation by the Financial Services Authority are available from Danske Bank upon 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 high quality research based on research objectivity and independence. These procedures are documented in the research policies of Danske Bank. Employees within the Danske Bank Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to the Research Management and the Compliance Department. Danske Bank 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 over-all 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 upon request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text.
Expected updates
This publication is updated on a daily basis.
First date of publication
Please see the front page of this research report for the first date of publication. Price-related data is calculated using the closing price from the day before publication.
General disclaimer
This research has been prepared by Danske 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 which Danske Bank considers to be reliable. Whilst 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 judgment 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 the research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
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.