EFTA01458643.pdf

Real Assets: Commodities — As China represents the bulk of global demand 22 5000 Index for industrial metals, the recent sell-off in metal 20 4500 prices, from copper to steel, was not unexpected. 18 4000 16 — Previously, the fall in commodity prices was seen 3500 14 as driven mainly by global oversupply but here 12 3000 the problem is on the demand side. 10 2500 — Figure 3 compares China's industrial production 8 2000 growth and the industrial metal price index. 8 4 1500 — In late 2010 China's manufacturing production 2 1000 growth was around 15%-20% as a consequence of China's huge fiscal stimulus being channelled re 40 re tie 49 49 e China's industrial production growth year-on-year (%. LHS) into investments and infrastructure, worth about —London Metal Exchange industrial metals prim index (RHS) 4% of GDP. — This led to a substantial increase in building and Figure a Industrial metals prices and Chinese industrial production Source: Bloomberg Finance L P. Deutsche AWM. production, contributing to a real estate Data as of September 30. 2015 overheating. When the correction started in 2012, economic growth in China fell and led to a downtrend in industrial metal prices. Focus of the week — To end the decline in industrial metals prices, we therefore might need both a reduction of supply Commodities: Industrial metals prices are likely and an increase in demand (from China in to remain closely tied to the state of China's particular). economy. Global FX: We expect EUR strength to continue Global FX to be affected by the level of ECB bond purchase activity. When a good is seen as increasing in supply, normally its price goes down as its scarcity reduces. The same is true for the EUR. 3600 112 3400 When the ECB signalled (about a year ago) its 3200 107 readiness to increase the supply of EUR via the 3000 driving its balance sheet size yet higher, markets 102 2800 logically started to anticipate a lower EUR. 2600 97 The increase in the ECB balance sheet has 2400 92 stalled in the last two months due to a slowdown 2200 in the buying of bonds by the ECB. This was 2000 mainly a function of less liquid bond markets in 1800 the summer lull, which has now ended. 1600 The latest comments of the ECB's president in e e S 14 / 4r3S. P 'P1' the press conference after its meeting point to a ECB Balance sheet in EUR bn (LHS) clear ECB bias to be ready to expand or prolong tide-weighted EUR (Bank of England index. RHS) its QE if needed. The only question is when and here markets are getting more impatient. Figure 4 The EUR and the ECB's balance sheet Source: Bloomberg Finance L P. Deutsche AWM. If the ECB does indeed push QE into a higher Data as of September 30. 2015. gear, this could weaken the EUR, as Figure 4 suggests. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to Deutsche Asset be incorrect. Past performance Is not indicative of future returns. Investments come with 4 & Wealth Manaciertteet risk. The value of an investment can fall as well as rise and you might not get back the October 2. 2015 amount originally invested at any point in time. Your capital may be at risk. CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 18644 CONFIDENTIAL SDNY_GM_00264828 EFTA01458643