DB Today -Global/Macro：Monday 15th February,2016

Deutsche Bank Group Markets Research Global Periodical DB Today - Global/Macro Date 15 February 2016 Monday 15th February, 2016 ________________________________________________________________________________________________________________ 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. Amy Wei Equity Focus (+1) 212 250-5574 amy.tan@db.com John McNamara Equity Focus (+1) 212 250-4727 john.mcnamara@db.com Mairead Smith Equity Focus (+44) 20 754-71054 mairead.smith@db.com MACRO HIGHLIGHTS Global Strategy - db140 weekender - Stuart kirk US fundamentals – Janet Yellen spoke 15,000 words during her two-day ordeal on Capital Hill this week. Investors, though, are none the wiser. Ms Yellen’s obfuscation is understandable. While markets have given up on rate hikes in 2016, real data thus far is not as scary as the red screens suggest. Take this week’s release showing that three million Americans quit their jobs in December, the highest in nearly a decade. The quit rate, a Chicago Fed paper points out, has a 94 per cent correlation with the Employment Cost Index six months hence. Their historical relationship points to wage growth accelerating to three per cent later this year. And even if December seems a life-time ago, more recent data have pushed Atlanta Fed’s first quarter growth forecast to 2.5 per cent from 1.5 per cent last week. No wonder everyone is confused. Details on page 07 US Strategy - US Equity Insights - David Bianco Escalating the currency war will bring mutually assured destruction, in our opinion. The WMD are negative interest rates. Central banks must stop the proliferation now. Negative rates don't stimulate beyond currency devaluation. They began with small CBs fighting flight-to-safety surges in their currency. But negative rates set by larger CBs produce no benefit in a soft global economy because they are countered. If Euro plunges, then others from GBP to RMB will too, and then if a strong dollar breaks the US economy the whole world will suffer. This spiral risk destabilizes FX markets and price setting in other markets and threatens saver and financial system health. Stick with QE! Details on page 08 Europe Strategy - European Equity Strategy- Sebastian Raedler What is going on? Investors cannot quite agree on what the problem is that has led European equities to drop by around 20% from their November peak: is it the risk of a Chinese hard landing, the growing impotence of central banks or the concern about European bank balance sheets? We continue to think that the real issue is threefold: a) the rising risk of a US corporate default cycle (because of stressed US energy balance sheets); b) China’s capital flight crisis increasing the risk of a sharp one-off RMB devaluation; c) weakening global growth momentum (as a consequence of tighter global financial conditions). Details on page 09 Europe - Focus Europe - Mark Wall Confidence in European banking fell sharply this week. A new banking situation in Europe would have two consequences: it would hurt domestic demand and undermine the ECB policy transmission mechanism. If net new bank credit flow was zero this year, real GDP growth would be closer to 0.5% than our 1.6% forecast, adding to deflationary risks. The ECB should consider supplementary liquidity operations and shielding banks against negative deposit rates. The justification for more QE has also risen..Details on page 10 GLOBAL MARKET WRAP INDEX Close 1D YTD %Chg %Chg S&P 500 1864.78 1.95 -8.77 NASDAQ 4337.51 1.66 -13.38 DOW 15973.84 2.00 -8.33 DJ STOXX 50 2824.75 2.49 -13.55 FTSE 100 INDEX 5804.59 1.70 -7.01 HANG SENG INDEX 18918.14 3.27 -13.67 MSCI Asia ex Japan 441.35 -0.69 -11.72 BRAZIL BOVESPA 39808.05 1.25 -8.17 RTS-2 INDEX 592.40 1.40 -6.39 COMMODITY PRICES COMMODITIES Close 1D YTD %Chg %Chg West Texas 29.44 12.32 -20.52 Brent 32.66 1.18 -8.64 CRB 160.36 3.45 -8.96 Copper 208.25 2.64 -2.46 Gold (Spot) 1209.25 -2.32 13.93 Alum. (LME) 1500.00 1.04 -0.46 Baltic Dry 291.00 0.35 -39.12 FOREIGN EXCHANGE PRICES FOREX (vs US$) Close 1D YTD %Chg %Chg HK$ 7.78 0.06 -0.44 EUR 1.12 -0.50 3.17 JPY 113.85 -0.53 5.60 GBP 1.45 -0.03 -1.62 Source: Bloomberg Finance Lp DERIVATIVES Current %-ile Value Rank SPX 3M Mat ATM-Strike Imp Vol 22.70 97.2 SPX 3M Mat 90%-110% IV Skew 11.736 76.0 SPX 3M Mat Realized Vol