EFTA01447902

1 July 2014 Early Morning Reid: Macro Strategy autonomous Kurds plan a referendum for independence according to a regional government spokeperson (Reuters). The Kurds plan to keep control of the Kirkuk oil fields. There are some mixed headlines elsewhere in China. Firstly China's banking regulator announced a small change in the way that Loan-to-deposit ratios are calculated which our banking analysts think will reduce the system regulatory LDR ratio by 410bp based on end 2013 data. Our analysts think that this will pave the way for more relaxation of Chinese bank liquidity requirements. Secondly, the latest Macau gaming numbers were reported which showed June casino revenues fell 3.7% YoY in June. This is the first drop since 2009, but some are attributing this to the effects of the World Cup. Turning to the day ahead, the rest of the global manufacturing PMIs/ISMs will be released starting with the final PMIs for Europe. The US manufacturing ISM is expected to show a small bump up to 55.9 (vs 55.4 in May) which would mark a six month high. DB is expecting a print of 55.0. Other highlights on the US data docket are May construction spending and the IBDITIPP economic optimism index. YTD performance review In YTD terms, of the main indices we track the FTSE-MIB (+14.5%) and the IBEX (+12.8%) have been the star performers. Spanish, Portuguese and Italian bonds have not been far behind. Interestingly commodities make up quite a few of the other top ten places (with the CRB index, Gold, Silver and Oil returning between 7-11%), but also 2 of the worst 3 with Wheat and Copper both down more than 6%. Also negative was Chinese equities (-1.5%) after disappointing growth in HI which may explain some part of the weakness for certain commodities. The Nikkei (-6.1%) was the only other asset lower YTD in our sample. Apart from these four all the other assets saw a positive 2014 total return. Credit has put in a good performance in 2014 so far with most major indices returning between 4-7% which is impressive in the low yield, low spread environment. For the full numbers for the year, 02 and June see the charts and tables in today's pdf. We also show the YTD numbers all converted to dollars. Happy H2! iFigure Netherlands 10yr Government Bond Yields 30% Netherlands 10yr 25% 20% 15% 10% 5% 0% 15171547157716071637166716971727175717871817184718771907193719671997 Satre Des ene Sant G'O Deutsche Bank AG/London Page 3 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0102688 CONFIDENTIAL SDNY_GM_00248872 EFTA01447902