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Morning report
Another Spanish downgrade
The pressure facing euro leaders is increasing ahead of Sunday's summit. Moody's havelowered Spain's credit rating, while Standard & Poor's has done the same with a numberof Italian banks. We expect Norges Bank to signal a freeze of further hiking plans untilspring next year.
19-Oct-2011
Yesterday evening Moody's became the third rating agency to downgrade Spain's credit rating inthe course of the last three weeks.
The rating was turned down two notches, from Aa2 toA1,
and the agency keeps a negative outlook, which means that a further downgrade is likely. Thereason is the dependence of banks, enterprises and government on foreign funding; making themhighly vulnerable in today's stressed financial markets. Disappointing economic growth also makesit harder for the government to achieve its fiscal targets.
Standard & Poors has downgraded 24Italian banks, three large and 21 regional.
The Italian 10-year government bond yield is at5.9% at the moment, up from 5.5% in the beginning of October. The equivalent Spanish yield hasrisen from 5.1% to 5.5% in the same period.
NOK & 3m NIBOR
2.903.003.103.2018-Oct28-Sep8-Sep7.407.607.808.00
 
3m ra.EURNOK
 
German and US government bond yields have pulled down slightly since yesterday morning,whereas stock markets have had an uneven development. Positive corporate result reports andrenewed optimism regarding a large, leveraged expansion of the EFSF fund (triggered by an articlein the British newspaper Guardian, which content was later in the day denied by senior Europeanofficials) contributed to a rise in the US stock market.
Asian stock markets have risen duringthe night, and the euro is stronger against the dollar.
SEK & 3m STIBOR
2.452.502.552.6018-Oct28-Sep8-Sep8.99.09.19.29.39.4
 Norges Bank's lending survey reveals that the current stress in financial markets also hits theNorwegian economy through the credit channel. Larger uncertainties regarding the economicdevelopments as well as harder access to foreign funding, has led to a tightening of bank's lendingpractice towards enterprises in Q3. A further tightening is expected in Q4, and banks expect totighten their credit practice towards households as well. The latter's credit demand is continuing toincrease, according to the same survey. The strong build-up of household debt, in parallel withsurging house prices, is the most important factor behind our belief that
Norges Bank will signalthat the next move is up, not down, in today's release of the Monetary Policy Report
 (featuring a new interest rate path). The hike next will, however, be very much delayed comparedto the previous path (released in June), indicated to come in March or in May. Internationaldevelopments will be the most important factor behind the flatter interest rate path, along withsomewhat lower expectations for wage growth, and higher money market premiums.
3m ra.EURSEK
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The outcome of yesterday's macro releases was mainly negative. According to the ZEW index
German investors have become even more pessimistic.
The index covering expectationsabout the future fell to -48.3, which is close to the trough in 2008. The current situation index alsofell, but its level remains well above the 2008-level.
UK inflation was markedly higher thanexpected in September,
displaying an annual growth at 5.2%, up from 4.5% in August. Higherfood and energy prices are only one part of the explanation: core inflation rose from 3.2% to 3.4%.This is bad news for Bank of England, which in spite of inflation far above target launched anotherround of asset purchases (GBP 75 bn) in the meeting on 5 – 6 October. The minutes from thismeeting is released today. It will provide us with further information about the assessments behindthe decision which came as a surprise to the market.The Norwegian interest rate decision, as well as the Monetary Policy Report, is released at noon,and half an hour later
US inflation numbers may have an impact on markets
. Core inflation(CPI excl food and energy) reached 2.0% in August, and is expected to increase further to 2.1% inSeptember. An outcome above expectations will lessen Fed's motivation to launch QE3 next year.
kjersti.haugland@dnbnor.no
Yesterday's key economic events (GMT)As of Unit Prior Poll Actual08:30 UK CPI sep y/y % 4.5 4.9 5.209:00 Germany ZEW index Oct Index -43.3 -45.0 -48.314:00 USA NAHB housing market index Oct Index 14 15 18Today’s key economic events (GMT)As of Unit Prior Poll DnB NOR12:00 Norway Interest rate decision % 2.25 2.25 2.2512:30 US CPI excl food/energy Sep m/m % 0.2 0.212:30 US Housing starts Sep mill 0.571 0.590
 
Morning report
 
19-Oct-2011
 
FX Prior Last % In 1 m ...3 m ...6 m ...12 m FX USD %USDJPY 76.84 76.74 -0.1% 80 80 80 90 AUD 1.0283 0.22%EURUSD 1.374 1.379 0.4% 1.35 1.35 1.30 1.25 CAD 1.0126 -0.29%EURGBP 0.875 0.876 0.1% 0.86 0.86 0.84 0.82 CHF 0.9002 0.06%EURCHF 1.236 1.241 0.4% 1.20 1.20 1.20 1.25 CZK 18.11 -0.41%EURNOK 7.717 7.730 0.2% 8.00 7.80 7.70 7.70 DKK 5.4009 -0.37%EURSEK 9.124 9.133 0.1% 9.30 9.10 9.00 9.00 GBP 1.5748 0.25%EURDKK 7.446 7.446 0.0% 7.45 7.45 7.45 7.45 HKD 7.7776 0.01%USDNOK 5.617 5.606 -0.2% 5.93 5.78 5.92 6.16 ISK 115.66 -0.24%JPYNOK 7.312 7.308 0.0% 7.41 7.22 7.40 6.84 KWD 0.2764 0.01%SEKNOK 0.846 0.847 0.1% 0.86 0.86 0.86 0.86 LTL 2.5042 -0.29%GBPNOK 8.817 8.831 0.2% 9.3 9.1 9.2 9.4 LVL 0.5122 -0.33%USDSEK 6.642 6.624 -0.3% 6.89 6.74 6.92 7.20 NZD 0.7972 0.16%JPYSEK 8.647 8.634 -0.2% 5.51 5.39 5.54 6.48 PLN 3.1605 -0.41%NOKSEK 1.183 1.182 -0.2% 1.16 1.17 1.17 1.17 SGD 1.2622 -0.46%GBPSEK 10.433 10.432 0.0% 10.81 10.58 10.71 10.98 RUB 30.9799 -0.62%
SPOT RATES AND FORECASTS (Source: Reuters and DnB NOR Markets)
 
Oil spot & NOK TWI
94969810018-Oct28-Sep8-Sep100105110115120125NOK TWI ra.$/b
 
EUR vs GBP & CHF
0.850.860.870.880.8918-Oct28-Sep8-Sep1.101.151.201.25
 
GBP r.aCHF
 
Prior Last Prior Last Prior Last Prior Last1m 2.88 2.83 2.32 2.32 1.31 1.31 0.24 0.243m 3.12 3.07 2.51 2.51 1.51 1.51 0.41 0.416m 3.35 3.32 2.53 2.53 1.72 1.72 0.60 0.6012m 3.52 3.49 2.58 2.58 1.89 1.89 0.75 0.753y 3.08 3.07 2.12 2.11 1.72 1.67 0.83 0.835y 3.40 3.42 2.30 2.30 2.07 2.03 1.41 1.397y 3.61 3.63 2.46 2.47 2.35 2.32 1.90 1.9010y 3.80 3.82 2.54 2.55 2.63 2.61 2.36 2.36Prior Last Prior Last Prior Last Prior Last10y 113.47 109.10 115.664 115.66 102.126 101.96 99.5625 99.5810y yield 2.65 2.66 1.86 1.86 2.02 2.03 2.17 2.19vs bund 0.63 0.63 -0.16 -0.17 0.16 0.163m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 3m libor 10y swapIn 3m 3.05 4.25 2.50 3.00 1.50 3.00 0.35 3.00… 6m 3.20 4.50 2.75 3.25 1.50 3.25 0.35 3.25… 12m 3.50 4.50 2.90 3.25 1.50 3.25 0.35 3.25
SWAP AND MONEYMARKET RATES (Source: Reuters)GOVERNMENT BONDS (Source: Reuters)INTEREST RATE FORECASTS
NIBOR STIBOR EURIBOR USD LIBORNORWAY SWEDEN GERMANY USNORWAY SWEDEN GERMANY US
 
Gov. Bonds, 10y
2.002.202.402.602.803.0018-Oct28-Sep8-Sep1.501.752.002.25NOK, ra.SEK
 
JPY and DowJones
76777818-Oct28-Sep8-Sep101112USDJPY ra.DowJones, 1000
 
USD and gold
1.321.341.361.381.401.4218-Oct28-Sep8-Sep150016001700180019002000
 
 
FRA NOK 3m Prior chg TWI Today % Stock ex. Today %DEC 2.91 2.91 0.00 NOK 96.69 0.13Dow Jones 11,577.11.6%MAR 2.66 2.65 0.01 SEK 120.36 0.06- Nasdaq 2,657.41.6%JUN 2.56 2.56 0.00 EUR 107.50 0.27FTSE100 5,410.4-0.5%SEP 2.56 2.56 0.00 USD 76.93 0.30- Eurostoxx50 2,306.8-0.4%FRA SEK 3m Prior chgGBP 79.10 0.13Dax 5,877.40.3% DEC 2.33 2.32 0.01Comm. Today LastNikkei225 8,772.50.0% MAR 2.00 2.00 0.00 Brent spot 112.1 112.1 Oslo 369.720.6%JUN 1.89 1.90 -0.01 Brent 1m 111.0 111.2 Stockholm 432.280.7%SEP 1.87 1.88 -0.01 Spot gold 1631.0 1631.0 Copenhagen 453.720.9%
 
EURUSD ra.Gold
 
EURSEK & OMXS
35037039041043045018-Oct28-Sep8-Sep8.89.09.29.4OMXS ra.EURSEK
 
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