Morning Report

29.10.2012

Moderate GDP-growth in the US

NOK & 3m NIBOR 2.00 7.50 7.45 1.95 7.40 1.90 7.35 1.85 7.30 18-Sep 8-Oct 26-Oct
3m ra. EURNOK

U.S. GDP increased, as expected, with only 2.0% in the third quarter. Highlights this week is Wednesday's monetary policy meeting at Norges Bank and Friday's U.S. employment report. Market movements were minor on Friday and markets have been rather muted over the weekend as well. In the currency market both the EURUSD and EURNOK are unchanged from Friday morning. The largest change is found for the JPY which has strengthened a little in advance of tomorrow's policy meeting. The hurricane Sandy is expected to hit the U.S. East Coast hard, and all the stock markets will be closed today and probably also tomorrow. Major flooding and possible power outages are likely to affects New York and other areas. Air traffic and most of the other transport and economic activities will obviously also be affected. The crude oil prices have started to rise as a result of the hurricane. Friday's American GDP for the third quarter, showed an annualized rise of 2.0%. According to Reuters, an increase of 1.9% was expected. Private consumption rose by 2.0% - lifted by strong growth for consumer durables (8.5%). There was also a fresh rise in housing investment, which grew by robust 14.4%. American consumers hence do not seem to be particularly affected by the uncertainty surrounding the fiscal cliff. This is confirmed by the final figures for consumer confidence (Michigan) in October, which was also released Friday. The private sector investments fell by 1.3%, dragged down by fall for structures. Firms seem cautious due to political uncertainty. Paradoxically enough, the growth in public demand was strong in Q3, mainly due to higher defense spending. This will obviously only be a temporary effect as tightening can be expected from the beginning of 2013. Foreign trade made a negative contribution, with a decline in exports and imports remained almost unchanged. The PCEdeflator excluding food and energy increased by 1.3%, well below the Fed's inflation target (2.0%). We expect weaker growth in the fourth quarter and estimates that annual growth will fall by 2.1%. Todays data for private consumption, income and savings for September may shed some more light on the household situation. New grim figures for unemployment in Spain were released on Friday. The unemployment rate rose to 25% in the third quarter. There are now 5.8 million Spaniards looking for work, and youth unemployment is well above 50%. Unemployment is thus the highest since Franco's dictatorship ended in the mid-1970's. Further cutbacks and a decline in economic activity will probably imply even higher unemployment ahead. More positive was that news that the foreigners' holdings of Spanish government bonds rose in September and now stands at 35% of the total national debt. The markets are still awaiting signals from the Spanish authorities about a possible rescue package. Norwegian consumer confidence remains buoyant this autumn. According to ForbrukerMeteret confidence fell only by 0.7 points from September to October. The level is 6.6 - still higher than in the summer and far above the level of last fall, when the confidence index was well below zero. The decrease in October was due to weaker belief in the country's economy, which probably reflects the political and social unrest in South-Europe. The belief in own economy is still strong and was unchanged from September. Consumer confidence is pointing to continued good growth in private consumption. This week is packed with Norwegian data and is topped with Norges Bank's policy meeting on Wednesday. LFS unemployment, retail sales and currency purchases dropped all on Wednesday morning, while PMI coming Thursday and unemployment Friday. We expect that Norges Bank will keep the signal rate unchanged, but lower the interest rate path, so that it will indicate a later rise in interest rates than in June. We expect that the labour market data will show a relatively stable dsevelopment and we expect only a slight increase in retail sales. There are also a number of international figures and events due this week. Most important is the U.S. labor market report (payrolls) on Friday. The day before the ISM for US manufacturing will be released. There are also many speeches from Fed representatives this week. The Japanese central bank holds a monetary policy meeting tomorrow night. It is expected that the central bank will announce more QE and possibly other measures in an effort to strengthen economic activity and bring inflation closer to the target of 1%. knut.magnussen@dnb.no

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 18-Sep 8-Oct 1.70 1.60 1.50 1.40 26-Oct
EURSEK

3m ra.

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

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Sales Oslo (+47) Equity Fixed Income

22 94 89 40 22 01 78 20

Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

56 13 27 20 75 52 9910 69 39 41 50 62 54 14 82 52 72 09 06 61 24 79 56 38 07 28 62 22 01 76 50 51 84 04 30 77 62 96 80 73 58 74 89 33 01 73 80 70 11 69 85

Research Regional Sales (+47) Eirik Larsen 22 01 76 55

Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 22 01 77 41 22 01 76 57 22 01 76 67

Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

22 01 78 37 22 01 77 62 22 01 76 77 22 01 77 36 22 01 78 15

Yesterdays key economic events (GMT) 12:30 USA Core PCE Deflator 12:30 USA GDP, advance Todays key economic events (GMT) 07:30 Sweden Retail sales 12:30 USA Personal consumption 12:30 USA PCE deflator

As of 3. kv 3. kv As of Sep Sep Sep

Unit q/q ar % q/q ar % Unit m/m, % m/m, % m/m, %

Prior 1.7 1.3 Prior -0.4 0.5 0.1

Poll 1.3 1.9 Poll 0.3 0.6 0.1

Actual 1.3 2.0 DNB

Morning Report
29.10.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 120 115 110 105 18-Sep 8-Oct 94 93 92 91 26-Oct
$/b

NOK TWI r a.

EUR vs GBP & CHF 0.82 1.22 1.22 0.80 1.21 0.78 1.21 0.76 1.20 18-Sep 8-Oct 26-Oct
GBP r.a CHF

FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK

Prior 79.67 1.294 0.803 1.210 7.474 8.674 7.460 5.777 7.251 0.863 9.301 6.703 8.415 1.164 10.798

Last 79.70 1.292 0.804 1.210 7.456 8.673 7.459 5.775 7.246 0.862 9.293 6.711 8.421 1.164 10.796

% 0.0% -0.2% 0.0% 0.0% -0.2% 0.0% 0.0% 0.0% -0.1% -0.2% -0.1% 0.1% 0. 1% 0.0% 0. 0%

In 1 m ...3 m 78 76 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.55 8.55 7.45 7.45 5.75 6.04 7.37 7.95 0.85 0.85 9. 1 9.3 6.73 7.13 5.25 5.42 1.17 1.18 10.69 10.96

...6 m ...12 m 76 78 1. 20 1.25 0.78 0.80 1.20 1.20 7. 25 7.40 8.50 8.60 7.45 7.45 6.04 5.92 7. 95 7.59 0. 85 0.86 9.3 9.3 7.08 6.88 5. 38 5.37 1.17 1.16 10. 90 10.75

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0362 0.9990 0.9362 19.32 5.7736 1.6086 7.7505 127.55 0.2815 2.6719 0.5394 0.8218 3.2069 1.2208 31.4406

% -0.14% 0.22% 0.06% 0.09% 0.10% -0.13% 0.00% 0.10% 0.11% 0.12% 0.11% -0.17% 0.16% -0.01% 0.10%

EURSEK & OMXS 575 8.9 8.7 500 8.5 425 8.3 350 8.1 18-Sep 8-Oct 26-Oct
OMXS ra. EURSEK

1m 3m 6m 12m 3y 5y 7y 10y

NIBOR Prior 1.73 1.88 2.08 2.19 2.28 2.59 2.91 3.24

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.74 1.40 1.40 0.06 1.86 1.49 1.48 0.13 2.06 1.62 1.62 0.28 2.18 1.72 1.71 0.42 2.27 1.39 1.40 0.61 2.58 1.59 1.60 0.99 2.90 1.83 1.84 1.37 3.25 2.08 2.08 1.80

Last 0.06 0.13 0.28 0.42 0.62 0.98 1.37 1.81

USD LIBOR Prior Last 0.21 0.21 0.31 0.31 0.55 0.54 0.72 0.72 0.51 0.52 0.85 0.86 1.28 1.28 1.80 1.78

Gov. Bonds, 10y 1.70 1.60 1.50 2.40 2.20 2.00

1.80 1.40 18-Sep 8-Oct 26-Oct

NOK, ra. SEK

10y 10y yield vs bund

NORWAY Prior Last 99.25 99.23 2.08 2.08 0.55 0.57

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 117.08 117.09 99.648 99.85 98.890625 1.57 1.57 1.53 1.52 1.75 0.03 0.05 0.22 INTEREST RATE FORECASTS SWEDEN GERMANY 3m stibor 10y swap 3m euribor 10y swap 1.30 2.25 0.35 1.75 1.30 2.25 0.25 1.75 1.30 2.50 0.25 2.00

Last 99.02 1.74 0.23

JPY and DowJones 81 14.0 13.5 79 13.0 77 12.5 75 12.0 18-Sep 8-Oct 26-Oct
USDJPY ra. DowJones, 1000

In 3m 6m 12m

NORWAY 3m nibor 10y swap 1.90 3.25 1.90 3.25 2.15 3.50

US 3m libor 10y swap 0.45 1.75 0.45 1.75 0.45 2.25

USD and gold 1820 1720 1620 1520

EURUSD ra.

1.32 1.28 1.24 1.20

Gold

18-Sep 8-Oct 26-Oct

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % DEC 1.84 1.84 0.00 NOK 93.31 - 0.05 MAR 1.84 1.85 -0.01 SEK 115.33 0.03 JUN 1.87 1.89 -0.02 EUR 101.37 - 0.08 SEP 1.91 1.91 0.00 USD 80.12 0.15 FRA SEK 3m Prior chg GBP 84.00 Last DEC 1.42 1.42 0.00 Comm. Today MAR 1.25 1.25 0.00 Brent spot 109.7 109.7 JUN 1.21 1.21 0.00 Brent 1m 109.1 109.6 SEP 1.22 1.22 0.00 Spot gold 0.0 1716.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 13,107.2 Nasdaq 2,988.0 FTSE100 5,806.7 Eurostoxx50 2,496.1 Dax 7,231.9 Nikkei225 8,929.3 Oslo 441.69 Stockholm 501.56 Copenhagen 643.24

% 0.0% 0.1% 0.0% 0.5% 0.4% 0.0% -0.8% 0.3% -1.5%

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