Morning Report

28.08.2013

Fear of Military Strike against Syria

NOK & 3m NIBOR
8.30 8.10 7.90 7.70 7.50 1.90

Concerns over a possible US-led military attack against Syria showed up in the markets yesterday with movements towards safer positions. In the U.S., the S&P 500 fell 1.6 per cent, DJIA 1.1 per cent and Nasdaq 2.2 per cent. U.S. stock thus suffered their worst day since June. The VIX index, a measure of the volatility of the S&P 500 and often used as a "fear indicator", rose nearly 12 per cent yesterday. Also in Europe there was a decline in equity prices. Eurostoxx 50 fell 2.6 per cent and German DAX was down 2.3 per cent. The main index of the Oslo Stock Exchange fell 0.8 per cent, in line with the decline in the British FTSE 100. In Asia, the Nikkei 225 is down 1.5 per cent when typing (but was substantially more down earlier in the night), and also the Hang Seng index is down 1.5 per cent. In China and Korea market indices dropped 0.5 and 0.2 per cent respectively. In the government bond markets the 10-year U.S. Treasury yield lost 7 basis points from the day before. The yield on German 10-year Bund was down 5 bps. In currency markets, the Japanese yen and Swiss franc strengthened. Especially the latter is a typical safe-haven currency, but also the former uses to appreciate in times of international turmoil. Since yesterday morning USDJPY has dropped 0.9 per cent, while EURCHF is down 0.3 per cent. The gold price, which have risen for several days, has reached its highest level since mid-May. Oil prices have risen markedly, with an increase of around 6 USD per barrel for Brent since yesterday morning. Since yesterday morning, the NOK has strengthened 0.1 per cent against the euro. During the day however, it has been large movements, with EURNOK high at 8.10 at 8 GMT and low at 8.02 at 12:30 GMT. Swedish krona has appreciated 0.4 per cent against the euro. Most of this movement took place after the figures for household loan growth were released. In the U.S., consumer confidence increased slightly from July to August. The Conference Board confidence index rose 0.5 points to 81.5. It was expected a decline. Both indices for the current situation and future picked up. Lower gasoline prices and continued improvement in the labor market trumped lower equity prices and higher mortgage rates, and gave some improvement in confidence. The future situation index correlates best with consumption growth, and the August level points to a consumption growth of just under 3 per cent. But the confidence index has fluctuated a lot more than the consumption growth. In the housing market, Case-Shiller housing price index covering 20 major cities in the United States has increased 17 months in a row. In July, the increase was 0.9 per cent from the previous month, just below expectations. In Germany, the IFO index rose further in August. The benchmark index rose 1.3 points to 107.5 in July, compared with an expected increase to 107.0. Both the current situation index and expectations index rose. The increase was greatest for the former, while the latter correlates best with the GDPgrowth. The level of the expectation index is consistent with GDP growth around 2 per cent. Industry sub-indices show a marked increase for industrial and wholesale trade, while building / construction and retail sales fell back. The IFO index has a high correlation with German manufacturing production, and yesterday's figures support an improvement in activity. German manufacturing accounts for about one fifth of German GDP. In Sweden household borrowing increased 4.8 per cent from July last year to July this year. In June, the corresponding rise was 4.7 per cent. Mortgages increased by 5.1 per cent, while consumer loans rose 4.4 per cent. The central bank is concerned about the high household debt ratio, and the recent credit figures indicate further increase household debt to income ratio. It weakens the probability of further interest rate cuts. Norwegian households have for comparison a credit growth of just over 7 per cent and a higher debt level, but income growth is also higher. Swedish households paid an interest rate of new loans at an average of 2.99 per cent in July. This is a slight increase from the previous month and the first increase after a several months long decline. For new mortgage Swedes paid on average 2.88 per cent in July, up from 2.85 percent in June. Swedish trade figures for July showed a marginal increase in exports, but exports last three months compared with the previous three month were down 0.6 per cent. Imports rose 0.8 per cent in July and have increased the past three months as well. The trade balance is therefore weakened, but still the Swedes have a trade surplus of 2.5 billion SEK (seasonally adjusted). kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 04:30 Norway Consumer confidence 08:00 Germany IFO 14:00 USA Consumer confidence, CB Todays key economic events (GMT) 07:00 Sweden Consumer Confidence 07:00 Sweden Business Confidence 14:00 USA Pending home sales As of Q3 Aug Aug As of Aug Aug Jul Unit Index Index Index Unit Index Index Index Prior 22.8 106.2 80.3 Prior 100 93.8 111 Poll 107.0 80.3 Poll Actual 22.4

1.80
1.70

31-Jul

14-Aug

1.60 28-Aug
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond

3.5

3.0
2.5

2.0
31-Jul
Rate

14-Aug

115 105 95 85 75 65 28-Aug

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

DNB

Morning Report
28.08.2013

3m LIBOR
0.154 0.153 0.152 0.151 0.150 0.149 0.27

0.27
0.26

31-Jul
EUR

14-Aug

0.26 28-Aug
USD (rha)

Oil price & NOK TWI

100 98 96 94 92 110

105
100

31-Jul

14-Aug

95 28-Aug
USD/b (rha)

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 98.23 1.3375 0.8587 7.4597 8.7289 1.2328 8.0740 6.0398 6.15 92.63 108.30 9.409 6.554

Today 97.35 1.3376 0.8625 7.4600 8.6962 1.2292 8.0636 6.0298 6.19 92.79 108.10 9.352 6.563

Spot rates and forecasts In 1m Nov-13 Feb-14 Aug-14 FX 0700 -0.9 98 100 102 105 AUD 0.0 1.30 1.28 1.26 1.26 CAD 0.4 0.85 0.84 0.83 0.83 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.4 8.70 8.70 8.80 8.90 RUB -0.3 1.24 1.25 1.27 1.30 GBP -0.1 7.75 7.75 7.80 7.90 HKD -0.2 5.96 6.05 6.19 6.27 KWD 0.7 6.08 6.05 6.07 5.97 LTL 0.2 89.1 89.1 88.6 88.8 LVL -0.2 104.0 104.0 104.7 106.0 NZD -0.6 9.12 9.23 9.40 9.52 SEK 0.1 6.25 6.20 6.14 6.08 SGD

USD 0.893 1.050 0.919 19.252 33.190 1.551 7.756 0.285 2.582 0.526 0.778 6.503 1.283

NOK 5.382 5.742 6.563 31.313 18.163 9.352 0.777 21.182 2.335 11.470 4.690 92.790 4.699

NOK TWI

US dollar 6.2 6.1 6.0 5.9 5.8 5.7

31-Jul 14-Aug
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 28-Aug

EURUSD(rha)

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

Prior 1.63 1.73 1.81 1.98 2.32 2.76 3.13 3.45

Last 1.63 1.73 1.81 2.00 2.30 2.73 3.09 3.41

Interest rates SEK Prior Last USD 1m 1.11 1.11 1m 3m 1.22 1.22 3m 6m 1.31 1.31 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.92 1.92 3y 5y 2.35 2.35 5y 7y 2.64 2.64 7y 10y 2.87 2.87 10y

Prior 0.18 0.26 0.40 0.68 0.94 1.76 2.40 2.96

Last 0.18 0.26 0.39 0.67 0.88 1.68 2.31 2.88

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

Prior 0.08 0.15 0.27 0.49 0.88 1.38 1.79 2.22

Last 0.08 0.15 0.27 0.48 0.84 1.33 1.72 2.14 Last 96.92 1.85 -0.87 10y sw ap 2.00 2.00 2.00

100.0 99.0 98.0 97.0 96.0 95.0 94.0

Japanese yen

31-Jul
USDJ PY

14-Aug

7.0 6.5 6.0 5.5 5.0 28-Aug

Norw ay Prior NST475 92.10 10y yld 2.94 - US spread 0.15 3m nibor 1.80 1.80 1.80

Norw ay Nov-13 Feb-14 Aug-14

Governm ent bonds Last SEK Prior Last US Prior 92.25 10y 91.52 91.56 10y 97.47 2.93 10y yld 2.45 2.45 10y yld 2.79 0.21 - US spread -0.34 -0.27 30y yld 3.77 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Nov-13 Feb-14 Aug-14 1.25 1.25 1.25 2.75 2.75 2.75 Nov-13 Feb-14 Aug-14 0.30 0.35 0.35

Last Germany Prior 98.11 10y 96.49 2.72 10y yld 1.90 3.69 - US spread -0.89 10y sw ap 2.75 2.75 3.00 3m euribor 0.20 0.25 0.25

Germany Nov-13 Feb-14 Aug-14

JPYNOK(rha)

SEKNOK & CHFNOK

95 93 91 89 87 6.8 6.6 6.4 6.2 6.0 28-Aug
CHFNOK (rha)

31-Jul

14-Aug

SEKNOK

Equities
16200 15700 15200 14700 14200 13700 31-Jul
Dow Jones

505 500 495 490 485 14Aug 28Aug

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.55 1.56 1 18.12.2013 0.31 Last 97.69 97.80 1.61 1.62 1 19.03.2014 0.56 Oil price: (Ldn,cl) 1m 1.63 1.62 0 18.06.2014 0.81 SPOT 118.52 117.15 1.69 1.68 -2 15.05.2015 1.71 Gold price 27.08.2013 PM 2.05 2.06 1 19.05.2017 3.73 AM: 1377.5 1419.3 2.92 2.91 -1 24.05.2023 9.74 Equities Today 0700 % last 2.92 2.91 -1 24.05.2023 9.74 Dow Jones 14776.13 -1.1% 2.94 2.93 -2 24.05.2023 9.74 Nasdaq C. 3578.52 -2.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6440.97 -0.8% 1.75 1.85 1m 1.73 1.63 Eurostoxx50 2749.27 -2.6% 1.76 1.89 3m 1.82 1.73 DAX 8242.56 -2.3% 1.83 1.99 6m 1.88 1.81 Nikkei 225 13388.91 -1.1% 1.93 2.09 12m 2.05 2.00 OSEBX 496.78 -0.8% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
28.08.2013
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