Morning Report

08.05.2013

Norges Bank on hold today

NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90 1.85 1.80 1.75 1.70 1.65 08-May
3m (rha)

We expect that Norges Bank will leave the folio rate unchanged at 1.5 percent at todays meeting. Data for German industrial orders contributed to a moderately positive market development yesterday. Orders rose by 2.2 percent from February to March, against an expected fall of 0.5 percent (Reuters). In Q1 as a whole, orders were up 1.7 percent annualized, driven by rising demand from the domestic market. While export orders declined by 4 percent annualized, domestic orders surged 9.5 percent. Thus, it appears that the German economy might be strengthening somewhat, after experiencing depressed economic growth last year. In Sweden industrial output increased by 0.8 percent from February to March, twice as much as expected, and leaving the quarterly growth rate at an acceptable 1.2 percent annualized. Compared to pre-crisis levels this isnt very strong, but it shows a somewhat more positive development in industrial output thus far in 2013 compared to the norm from last year. Stock markets rose, albeit moderately, in the US and Europe. In particular, the DAX index was lifted by 1.0 percent. The euro appreciated marginally versus the dollar, and EURUSD is up 0.1 percent. The Norwegian krone remains stable versus both EUR and USD ahead of todays meeting at Norges Bank. Sovereign yields in the US and Germany are up from yesterday, but also here the movements have been minor. In Asia today, the positive development has continued, with Asian bourses up by 0.3 1.0 percent. This mornings trade data from China are reported to lead the development, as exports surprised on the upside with a growth of 14.7 percent y/y in April. Also imports edged up more than expected, but not enough to leave the trade surplus at $18 bn, which is $3 bn higher than expected. As discussed in this report yesterday, the Chinese trade data are somewhat uncertain, as the development is not traceable in other sources. A report published by the US Labor Department yesterday showed that the number of unfilled positions fell by 55 to 3.84 million in March. Yesterday's report provides an overview of hiring and layoffs (voluntary and involuntary). The decline in unfilled positions may be an indication that companies are somewhat more reluctant to increase hiring by holding back on newly advertised positions in light of the uncertainty about the sequester in Q1. According to the Fed's Janet Yellen, this report is one that she will monitor closely going forward to get a better overview of the development in the US labor market. According to Yellen, the report has shown that the number of layoffs have returned to pre-crisis levels, while new hirings have remained at depressed levels. Unless the latter improves, it may be an indication that the Fed will keep its expansionary monetary policy even if we were to see further decline in the unemployment rate, which in April fell to 7.5 percent. Yesterday the Norwegian government published the revised national budget (RNB) for 2013. According the revised budget, the government plans to spend an equal amount of oil money as was indicated in the National Budget for 2013 which was presented in October last year. The structurally oiladjusted deficit is estimated at 124.6 bn NOK, which is about 3.3 percent of the capital in the Government Pension Fund Global. The budget impulse, which shows the change in the structurally adjusted deficit, is revised upwards from 0.1 percent to 0.6 percent. Thus, the budget no longer should be seen as neutral to economic activity, but instead somewhat expansionary. The reason for this adjustment is that oil spending last year was lower than previously projected. A todays monetary policy meeting, we expect Norges Bank to leave its folio rate unchanged at 1.5 percent. There is, however, some uncertainty about the decision. Since Norges Bank presented its last interest rate path in March, which contained a significant probability for a rate cut in May, the wage settlement has come in a bit weaker than Norges Bank probably expected. The same applies for inflation, which was below 1 percent in March (CPI-JAE). But the krone has weakened considerably since March, which in isolation reduces the probability for a rate cut today. Data for German manufacturing output is expected to show a decline of 0.3 percent in March, but in light of the most recent positive order numbers, the output data might surprise on the upside. Tomorrow the Norwegian markets will be closed, which implies that this report first will be published again on Friday. ole.kjennerud@dnb.no Yesterdays key economic events (GMT) As of 08:30 Sweden Manufacturing output Mar 09:45 Norway Revised budget 11:00 Germany Manufacturing orders Mar As of Todays key economic events (GMT) 03:00 China Exports apr 11:00 Germany Manufacturing output, prel. mar 13:00 Norway Norges Bank interest rate decision Unit m/m % m/m % Unit / % m/m % % Prior 0.5 2.2 Prior 10.0 0.5 1.5 Poll 0.4 -0.5 Poll 10.3 -0.3 1.5 Actual 0.8 2.2 DNB 14.7 1.5

08-Apr

23-Apr

EURNOK

Norw ay: 10y Gov't Bond

2.2 2.2 2.1 2.1 2.0 08-Apr
Rate

23-Apr

95 90 85 80 75 70 08-May
Diff (bp, rha)

Headquarter Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen Bod Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Martin Brter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen Kristina Solbakken Magnus Vie Sundal

+47 03000

+ 1 212 681 2550 +44 207 283 0050 +65 6220 6144 +46 84 73 48 50

22 94 89 40 24 16 90 30

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 24 16 90 80 51 84 04 30 77 64 76 30 73 87 49 73 33 01 73 80 70 11 69 85 24 16 90 90

24 16 90 77

24 16 90 08 24 16 90 03 24 16 90 07 24 16 90 04 24 16 90 01 24 16 90 06 24 16 90 02

24 16 90 48 24 16 90 46 24 16 90 47 24 16 90 49 24 16 90 44 24 16 90 45 24 16 90 51 24 16 91 23

Morning Report
08.05.2013

3m LIBOR
0.135 0.130 0.125 0.120 0.115 0.29 0.28 0.28 0.27 0.27 08-May
USD (rha)

08-Apr
EUR

23-Apr

Oil price & NOK TWI

95 94 93 92 91 90 110

105
100

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 99.09 1.3083 0.8418 7.4529 8.5667 1.2268 7.6365 5.8380 5.89 89.20 102.52 9.079 6.228

Today 99.02 1.3092 0.8459 7.4527 8.5443 1.2306 7.6413 5.8356 5.90 89.49 102.52 9.036 6.211

Spot rates and forecasts In 1m Jul-13 Oct-13 Apr-14 FX 0700 -0.1 98 100 105 110 AUD 0.1 1.30 1.32 1.33 1.34 CAD 0.5 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.3 8.50 8.45 8.50 8.60 RUB 0.3 1.22 1.22 1.25 1.27 GBP 0.1 7.55 7.50 7.45 7.40 HKD 0.0 5.81 5.68 5.60 5.52 KWD 0.1 5.93 5.68 5.33 5.02 LTL 0.3 88.8 88.8 87.6 86.0 LVL 0.0 101.3 100.7 100.0 99.3 NZD -0.5 8.88 8.82 8.66 8.51 SEK -0.3 618.85 614.75 596.00 582.68 SGD

USD NOK 1.019 5.943 1.005 5.804 0.940 620.738 19.739 29.556 31.105 18.756 1.548 9.031 7.761 0.752 0.285 20.496 2.638 2.212 0.535 10.909 0.840 4.901 6.524 89.418 1.231 4.738

08-Apr

23-Apr

95 08-May
USD/b (rha)

NOK TWI

US dollar 6.0 5.9 5.8 5.7 5.6 5.5

08-Apr 23-Apr
USDNOK

1.33 1.31 1.29 1.27 1.25 08-May

EURUSD(rha)

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

Prior 1.70 1.75 1.82 1.98 1.91 2.21 2.55 2.91

Last 1.72 1.74 1.79 1.96 1.93 2.24 2.58 2.94

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

Prior 1.14 1.21 1.27 1.34 1.63 1.90 2.16

Interest rates Last USD 1.14 1m 1.21 3m 1.27 6m #N/A 12m 1.36 3y 1.64 5y 1.90 7y 2.17 10y

Prior 0.20 0.28 0.43 0.70 0.45 0.88 1.36 1.90

Last 0.20 0.28 0.43 0.70 0.46 0.88 1.40 1.94

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

Prior 0.06 0.12 0.20 0.39 0.46 0.75 1.10 1.53

Last 0.06 0.12 0.20 0.39 0.49 0.80 1.14 1.58

100.0 98.0
96.0

Japanese yen

94.0 08-Apr
USDJ PY

23-Apr

7.0 6.5 6.0 5.5 5.0 08-May

Norw ay Prior NST475 99.90 10y yld 2.01 - US spread 0.26 3m nibor 1.80 1.80 1.80

Norw ay Jul-13 Oct-13 Apr-14

Governm ent bonds Last SEK Prior Last US Prior 99.70 10y 97.52 97.52 10y 102.23 2.03 10y yld 1.76 1.76 10y yld 1.75 0.26 - US spread 0.01 -0.02 30y yld 2.96 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jul-13 Oct-13 Apr-14 1.20 1.20 1.20 2.25 2.25 2.50 Jul-13 Oct-13 Apr-14 0.35 0.35 0.35

Last Germany Prior Last 101.98 10y 102.28 101.87 1.78 10y yld 1.25 1.29 3.00 - US spread -0.50 -0.48 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

Germany Jul-13 Oct-13 Apr-14

JPYNOK(rha)

SEKNOK & CHFNOK

91 90 90 89 89 88 6.3

6.2
6.1

08-Apr
SEKNOK

23-Apr

6.0 08-May
CHFNOK (rha)

Equities
15200

14700 14200
13700 08-Apr 23-Apr 08May

490 480 470 460 450 440

Os lo (rha)

NOK sov. NST20 NST21 NST22 NST471 NST472 NST475 NST475 NST475 NOK FRA JUN SEP DEC MAR

Dow Jones

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.48 1.45 -3 18.09.2013 0.36 Last 93.50 93.46 1.48 1.49 1 18.12.2013 0.61 Oil price: (Ldn,cl) 1m 1.50 1.50 0 19.03.2014 0.86 SPOT 104.72 104.36 1.19 1.19 0 15.05.2015 2.02 Gold price 07.05.2013 PM 1.27 1.28 1 19.05.2017 4.03 AM: 1469.3 1444.3 0.00 0.00 0 24.05.2023 10.05 Equities Today 0700 % last 1.99 2.00 1 24.05.2023 10.05 Dow Jones 15056.20 0.6% 2.01 2.03 2 24.05.2023 10.05 Nasdaq C. 3396.63 0.1% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6557.30 0.5% 1.71 1.79 1m 1.77 1.72 Eurostoxx50 2769.08 0.7% 1.66 1.77 3m 1.85 1.74 DAX 8181.78 0.9% 1.67 1.77 6m 1.90 1.79 Nikkei 225 14335.03 1.1% 1.68 1.78 12m 2.03 1.96 OSEBX 485.97 0.2% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
08.05.2013
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