EFTA01447900

Deutsche Bank Markets Research Global Economics Early Morning Reid Macro Strategy I'll be honest and say that yesterday's EMR was a bit of a daze. I had a belated party for my 40th on Saturday and spent virtually the entire Friday night awake with my builders trying to put a house back together that has been owned by the builders for 8 months. I had 15 people there until 4am Friday night with 3 of them working non-stop until the first guests arrived at 230pm. Never have I been so stressed and tired. So all day Sunday and Monday morning were a bit of a daze. Sadly I'm now back living with builders again as they finish things off after the party. It was blissful for the few hours we were apart. At least we've moved out of the kitchen where we were living and sleeping for nearly 5 months before last week. Hopefully by the time the second half of the year ends I'll never have to see a builder again. Anyway, the second half has now begun for markets and in our H1/02/ June performance review today we show that most assets have had a positive year so far. So much so that if the year eventually goes to penalties it will end up being a very poor second half showing in line with many of England's in recent years!! We briefly review the numbers at the end but all the data and charts are in the pdf of this document. Its pretty rare to have almost all main global assets in positive territory this far into a year. Central bank liquidity continues to drive markets in our opinion which has helped this synchronised uplift in valuations. However we can't help sensing that there's less joy over these returns than might be expected. Investors are worried about valuations in numerous assets and worried that the Fed might become more hawkish soon. There's little chance of the ECB following suit anytime soon though and European Government bonds have had a very good 2014 so far. Over the last month we've again highlighted how many European Government bond markets have hit multi-century, all time yield lows. Well yesterday it was the turn of the Dutch 10 year yield to go through it's all time low again. The Dutch series is where we have our longest history of any government bond market with data going back to 1517 spanning almost half a millennia. The graph is in the pdf today and further shows just how unique the current situation is. The level of uncertainty about how this all ends must by definition be very high given this. So as we start H2. Asian markets are trading with a stronger tone this morning helped by a solid start to the global manufacturing PMIs. The official Chinese manufacturing PMI printed at 51.0. in line with consensus and at a six month high. The final HSBC Chinese manufacturing PMI came in at 50.7, slightly below the flash reading of 50.8, but this is also the highest print of the year. The PMIs for other Asian bellwethers including Indonesia and Taiwan were also up on a month-to-month basis. The Nikkei (+1.2%) is the clear outperformer today, on decent volumes and despite a drop in the Japanese Q2 tankan manufacturing index to 12 from 17 previously and 15 expected. The capex component of the Tankan survey was above expectations however (+7.4% vs 6.0%) expected, which is strongest rate of growth since 2007. This has helped USDJPY (+0.1%) today. Outside of Japan, activity has been subdued with Hong Kong markets shut for July 1st holidays. The Indonesian Date 1 July 2014 Jim Reid Nick Burns. CIA Anthciny p. CFA SUM 41 IMarket Data Index WC Crossover 11X Europe 126 COX 125 COX IN- p% SOP 500 Bron1016 Gold^ 10yr Treanor 1TX Sen Fin 11% Sub Fin CM EM 11X Japan MC Mayan IV MOM I wo Not Iwo COP Iwo 880 Won° eknOilt Stwerc Cap slotting HEM N41011, WY Index^ EFVUSI)" W Slav 030 1111)71 Hwy Sang ".ex r • Gnome non pants days 05 30 CLOP OS I 0 OAIT Levels 4105 JO Undo, terra Steam ant US =Oar Wow new re 'Staffthe nit sada Mow 242 59 10303 1960 112 !6 132/ 252 60 103 737 CS as 106 0915 103 13394 115 139 lit 10565 7902 1309 342 153:2 23191 11 .57 rare .3 .1 11 0 154 404% 400% •0113% .It t2 +3 44 a mph o wn WI Cl unott um, unto 000% -027% .031% 403% 41 17% 0% 431 Upcoming Events Ashes ISM enawlmlielog amyl ConstinctiPspn,460 IIAeH UM mob veldele %Wee ..Mne/ 06 Pen 550 t64 456 .05% .0." .05% 164M 16.714 16.314 Topical DB Publications Wotl Culbo1 7M Mn Wore the atom n June 2014 rx Cop This gaols nest imponerd quentuca b coloanaMn. 24 June 2014 European Stoning Lew Won d %eon% 26 ASP 2014 European Ego, Soapy • the won el Pe 030 Sea. 20 kw 7014 I cows Luropo• Dotal Mem ou. 20 Jun 2014 Deutsche Bank AG/London DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0102686 SDNY_GM_00248870 EFTA01447900