DB Today -Global/Macro:Monday 10th August 2015

Deutsche Bank Markets Research Global Periodical DB Today - Global/Macro Date 10 August 2015 Monday 10th August 2015 ________________________________________________________________________________________________________________ Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015. Greg Poole Equity Focus (+1) 212 250-9902 greg.poole@db.com Amy Wei Research Analyst (+1) 212 250-5574 amy.tan@db.com Mairead Smith Equity Focus (+44) 20 754-71054 mairead.smith@db.com John McNamara Equity Focus (+1) 212 250-4727 john.mcnamara@db.com MACRO HIGHLIGHTS Global Strategy - db140 weekender - Stuart kirk Goods and services – This week’s PMI data extends a curious recent trend: accelerating services growth coupled with a manufacturing slowdown across the world’s largest economies. For example, compared with a year ago the US manufacturing ISM has declined a hefty six points while the services gauge is reaching decade-highs. A similar divergence in China and Europe has sent the average gap between services and manufacturing PMIs for these three major blocks to a post-financial crisis record. Such a two-speed economy is a headache for central bankers. A weak manufacturing sector leads to disinflationary pressures via lower commodity prices. Meanwhile, with only one in six privately employed Americans working in goods-producing industries, a booming services sector drives the labour market tighter. The puzzle though is that as more Americans find jobs, why are they spending money on haircuts and not on hair brushes?. Details on page 08 Europe - Focus Europe - Mark Wall Euro area M1 grew 11.8% yoy in June. History implies that at this rate euro area GDP growth could reach 4%. We delve into the nonfinancial corporation (NFC) part of this growing cash pile. The ramifications for economic growth are positive, in our view, but less extreme. Corporate liquidity is not a reflection of rising profitability. The NFC sector’s net lending position since 2009 is a reflection of lower interest rates and the ECB’s accommodative policy stance. There is little evidence of deleveraging, and the recovery in investment spending is not widespread. Rather, corporate liquidity preference was pushed higher by funding constraints and weaker growth and inflation. These factors are slowly starting to reverse, implying corporate liquidity could start to find its way back to more productive uses. Details on page 09 Credit Strategy - Early Weekend Reid - Seb Barker We begin this week with a piece from our euro area economics team looking at the forces that can potentially influence perceptions of the euro area economic recovery, with a focus on China. Next we have an interesting piece from our Japanese economics team asking whether developed countries including Japan are headed for another bubble. The report includes the team’s tentative financial conditions index (FCI), which could indicate harbingers of a bubble, in order to verify symptoms of the bubble in developed countries. Details on page 09 Cont’d on next page GLOBAL MARKET WRAP INDEX Close 1D YTD %Chg %Chg S&P 500 2077.57 -0.29 0.9 NASDAQ 5043.54 -0.26 6.5 DOW 17373.38 -0.27 -2.5 DJ STOXX 50 3634.36 -0.10 15.5 FTSE 100 INDEX 6678.20 -0.60 1.7 HANG SENG INDEX 24492.68 -0.24 3.8 MSCI Asia ex Japan 541.45 0.15 -4.0 BRAZIL BOVESPA 48577.32 -2.87 -2.9 RTS-2 INDEX 711.75 -0.96 7.5 COMMODITY PRICES COMMODITIES Close 1D YTD %Chg %Chg West Texas 43.87 -1.77 -17.7 Brent 48.04 -0.02 -13.9 CRB 198.32 -0.11 -13.8 Copper 234.25 0.43 -17.1 Gold (Spot) 1095.18 0.10 -7.6 Alum. (LME) 1589.00 -0.22 -14.2 Baltic Dry 1200.00 -0.08 53.5 FOREIGN EXCHANGE PRICES FOREX (vs US$) Close 1D YTD %Chg %Chg HK$ 7.75 0.00 0.0 EUR 1.10 0.05 -9.3 JPY 124.49 -0.20 -3.8 GBP 1.55 -0.09 -0.6 Source: Bloomberg Finance Lp DERIVATIVES Current %-ile Value Rank SPX 3M Mat ATM-Strike Imp Vol 13.56 54.6 SPX 3M Mat 90%-110% IV Skew 10.22 47.4 SPX 3M Mat Realized Vol 10.76 26.2 Source: Bloomberg Finance Lp, CREDIT Credit Close 1D YTD %Chg %Chg CDX.NA.IG 74.65 0.20 12.5 ITRX.Europe 65.63 1.26 4.6 CDX.NA.HY 105.43 -0.15 -0.7 ITRAX.XOVER 304.29 1.13 -11.8 SOVX.WE 25.07 13.47 -12.5 Source: Bloomberg Finance Lp 10 August 2015 DB Today - Global/Macro Page 2 Deutsche Bank Securities Inc. MACRO HIGHLIGHTS Credit Strategy - Early Morning Reid - Jim Reid It was a busy wee