MACRO HIGHLIGHTS

Deutsche Bank Group Markets Research Global Periodical DB Today - Global/Macro Date 21 October 2016 Friday 21st October 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) 057/04/2016. Amy Tan Research Analyst (+1) 212 250-5574 amy.tan@db.com Mairead Smith Equity Focus (+44) 20 754-71054 mairead.smith@db.com Tim Pierotti Quantitative (+1) 212 250 8143 tim.pierotti@db.com Mark Braley, ACA Research Analyst (+44) 20 754-59904 mark.braley@db.com Table Of Contents Section Heading Page 00 Section Heading Page 00 Section Heading Page 00 Section Heading Page 00 Section Heading Page 00 Source: Deutsche Bank MACRO HIGHLIGHTS Europe Strategy – European Equity Strategy – Sebastain Raedler European mining has outperformed despite US dollar strength and copper weakness: European mining has outperformed by 90% since mid-January, leading its price relative to rise to a 17-month high. Initially, the outperformance was powered by the sector’s historical drivers – the copper price and the US dollar. However, since the middle of March, copper has fallen by 9% and the USD has risen by 2%, both negative signals for mining – yet, the sector has nonetheless outperformed by a further 30%. As a consequence, our model of European mining – based on copper, the USD & the US TIPS yields (with an R2 of 95% since 2013) – points to around 20% downside for the sector. Details on page 07 Credit Strategy - Early Morning Reid – Craig Nicol At a period of time in the current cycle where every other word spoken by central bankers gets debated to the nth degree, we instead find ourselves sitting here this morning mulling over what Draghi didn’t say at the ECB press conference yesterday. In one of the more dull ECB meetings in recent memory, Draghi has instead passed the baton on to December. The main takeaway was that Draghi confirmed that the ECB has not discussed tapering or extending the asset purchase program. Indeed there was no intention of using up the option to completely rule out tapering, or to openly pre-signal a QE extension. That said we don’t know what’s going on behind the scenes and it’s more than possible that his refusal to pre-commit to an extension is because he is trying to build a consensus on the council and that therefore the topic is being actively discussed. Details on page 08 Japan Strategy - Japan Economics Weekly- Mikihiro Matsuoka It has been nearly three years since the launch of the Nippon Individual Savings Account (NISA) system in January 2014, but we have seen no meaningful change in the strong preference of Japanese households for safe assets. The ratio of cash and deposits to total household financial assets is significantly higher in Japan than in the US and Europe. This report uses the target wealth hypothesis to show that it is logical for Japanese households to shun risk assets and hold cash and deposits as the bulk of their financial assets. Details on page 09 Cont’d on next page GLOBAL MARKET WRAP INDEX Close 1D YTD %Chg %Chg S&P 500 2141.34 -0.14 4.77 NASDAQ 5241.83 -0.09 4.68 DOW 18162.35 -0.22 4.23 DJ STOXX 50 3080.72 0.13 -5.72 FTSE 100 INDEX 7040.67 0.20 12.79 HANG SENG INDEX 23374.40 0.30 6.66 MSCI Asia ex Japan 551.05 0.07 10.22 BRAZIL BOVESPA 63837.85 0.52 47.26 RTS-2 INDEX 1041.11 0.39 64.52 COMMODITY PRICES COMMODITIES Close 1D YTD %Chg %Chg West Texas 50.43 -2.27 36.15 Brent 49.42 -0.34 38.24 CRB 188.78 -1.04 7.17 Copper 209.45 -0.07 -1.90 Gold (Spot) 1262.09 -0.29 18.91 Alum. (LME) 1612.00 -1.20 6.97 Baltic Dry 849.00 -2.64 77.62 FOREIGN EXCHANGE PRICES FOREX (vs US$) Close 1D YTD %Chg %Chg HK$ 7.76 0.00 -0.09 EUR 1.09 -0.32 0.35 JPY 103.95 0.00 15.65 GBP 1.22 -0.17 -16.99 DERIVATIVES Current %-ile Value Rank SPX 3M Mat ATM-Strike Imp Vol 13.21 23.90 SPX 3M Mat 90%-110% IV Skew 10.30 22.31 SPX 3M Mat Realized Vol 9.63 5.00 Source: Bloomberg Finance Lp, CREDIT Credit Close 1D YTD %Chg %Chg CDX.NA.IG 73.938 -1.65 -16.2119 ITRX.Europe 70.617 -2.71 -8.3575 CDX.NA.HY 104.439 0.22 3.1568 ITRAX.XOVER 317.9199 -3.96 1.1115 Source: Bloomberg Finance LP Distributed on: 21/10/2016 09:24:30 GMT 21 October 2016 DB Today - Global/Macro Page 2 Deutsche Bank Securities Inc. MACRO HIGHLIGHTS Japan Strategy - JAPAN FI Flash memo- Makoto Yamashita The Liberal Democratic Party (LDP