Morning Report

26.11.2012

Slightly less gloomy European data
NOK & 3m NIBOR 7.50 7.40 7.30 7.20 16Oct 5-Nov 23Nov
EURNOK 3m ra.

2.00 1.90 1.80 1.70

Without getting overtly optimistic, it is comforting nonetheless that the IFO Institute on Friday reported a small increase in the important IFO-index, after six consecutive months of decline: From 100.0 in October to 101.4 in November. The expectations index, which best explains variations in GDP, rose 2 points to its highest level in four months. The index remains close to recessionary terrain, however, as an expectations index around 95 historically have coincided with about unchanged GDP on year-on-year basis. Also, the French Insee-index increased by 3 points from October to November, which also is consistent with more or less unchanged GDP. In other words, better, but yet not good. Furthermore, it is hard to see what might have strengthened companies’ view on the future, as the past month has brought us few fundamentally positive news in Europe and the US. But somewhat better data from China in recent months may to some extent have lifted order intake for the export-dependent German industry. According to Statistics Norway, Norwegian housing starts fell from 3300 new homes in September to 2600 in October, a seasonally adjusted drop of 26%. But these numbers fluctuate widely from month to month, and the main trend remains very clear: This year housing starts will probably end up in excess of 30,000 units, 8% higher than last year, and the highest in five years. Higher housing starts are clearly a response to rising house prices, and may contribute to dampening house price inflation going forward. The US Christmas sale was apparently off to a flying start on the so-called Black Friday, the shopping day after Thanksgiving. In particular, online sales rose briskly, with a reported increase of more than 20%. But the significance of this is of course quite marginal. If households put forward their purchases due to one-off discounts, this does not affect overall consumption. What matters is the development in fundamentals - debt, saving behavior and income. Although households probably are done with debt consolidation, their real income growth is too low, at a meager 2% over the last year. This is not enough to lift GDP growth above trend. Last Friday's EU summit failed to reach an agreement on the EU budget for next year. About 30 billion euros separates the most expansionary - Italy, Spain and France - from the spendthrifts, such as the United Kingdom, the Netherlands and Germany. But the breakdown was apparently not given great weight by markets, which laid more emphasis on the fact that it a solution for Greece seems to be in the cards. By all accounts, the IMF is prepared to drop its demand that Greece's public debt ratio should be brought down to 120% of GDP "already" by 2020. That would, at least for the time being, make it possible to reach an agreement without any write-offs for the public holders of Greek debt. Thus, the road is probably cleared for the disbursement of another 44 billion euros in emergency loans to Greece. This payment is likely to be decided at today's meeting of the seventeen finance ministers of the Eurozone ("Euro Group"). Although this means that one continues to kick the can further down the road, the alternative - an uncontrolled Greek default – remains a much, much worse outcome. As before, we are confident that Greece will have to restructure its debt again to bring it down to sustainable levels, and we are almost as confident that Germany and other creditors sooner or later have to accept this. Yesterday's state election in Catalonia ended with a clear victory for those parties that are in favor of a referendum on Catalan independence from the rest of Spain. These parties gained 87 of the 135 seats in the state parliament. Thus, a referendum seems likely. However, full independence is still a long way off. Spain's government has - unsurprisingly - made it clear that this would conflict with the Spanish Constitution. One does not give away a fifth of the economy (and tax revenues) without a fight. As a sign of the times, this is not only a Spanish issue. The same discussion is taking place in Belgium and Scotland. Weak growth and tight budgets leads to an intensified discussion of where and how value is created and how it should be distributed. There is an obvious (and harsh) irony in this: The more coordinated and centralized the EU seems to be, the more it seems to disintegrate at the bottom. The euro shrugged off the dispute over the EU budget, rose nearly 1 cent against the USD during the Friday, and seems to maintain a level around 1.295 in the morning hours, after the Catalan state election. Against the NOK the euro appreciated 3 øre on Friday, and is now quoted at 7.344. Changes in interest rates were relatively modest Friday, while stock markets mostly ended up, after a generally positive week. The S&P500 rose 1.3% on Friday, and by 3.6% since last Friday, the best week since June. And the upturn continues in Asia in the morning hours of today. Like us, the markets seem pretty confident that both the Greek and the US cliffhangers will be solved. oystein.dorum@dnb.no Yesterday’s key economic events (GMT) 07:45 France INSEE business conf. 09:00 Norway Residential construction 09:00 Germany IFO, total Today’s key economic events (GMT) 09:00 Italy Consumer Confidence 12:00 Germany GfK Consumer Confidence Eurozone Eurogroup Meeting As of Nov Oct Nov As of Nov Dec Unit Index Quantity Index Unit Index +/Prior 85 3089 100.0 Prior 86.4 6.3 Poll 86 99.5 Poll 86.6 6.2 Actual 88 2284 101.4 DNB

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 16-Oct 5-Nov 23Nov 1.55 1.50 1.45 1.40 1.35
EURSEK

3m ra.

Headquarters Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen Bodø Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Tromsø Trondheim Tønsberg Ålesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) Øystein Dørum Kjersti Haugland Ole André Kjennerud Knut A. Magnussen Camilla Viland Magne Østnor Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Martin Børter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rønningen Kristina Solbakken

+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 62 96 80 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

Morning Report
26.11.2012

SPOT RATES AND FORECASTS
Oil spot & NOK TWI 1.00 0.50 0.00 16-Oct 5-Nov 94 92 90 23-Nov
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.21 1.20 16Oct 5-Nov
GBP r.a

0.82 0.81 0.80 0.79 0.78 23Nov
CHF

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

Prior 82.43 1.298 0.809 1.205 7.349 8.599 7.459 5.668 6.876 0.856 9.091 6.632 8.042 1.171 10.632

Last 82.19 1.297 0.810 1.205 7.351 8.596 7.458 5.667 6.892 0.855 9.083 6.629 8.068 1.170 10.626

% -0.3% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% -0.1% 0.0% 0.3% -0.1% -0.1%

In 1 m ...3 m 82 80 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.60 8.55 7.45 7.45 5.75 6.04 7.01 7.55 0.85 0.85 9.1 9.1 6.77 7.13 5.55 5.70 1.18 1.18 10.75 10.76

...6 m ...12 m 78 80 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 7.75 7.40 0.85 0.86 9.1 9.1 7.08 6.88 5.53 5.50 1.17 1.16 10.70 10.60

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

USD 1.0459 0.9925 0.9287 19.57 5.7512 1.6028 7.7510 125.66 0.2820 2.6619 0.5371 0.8240 3.1705 1.2230 30.9900

% -0.04% -0.05% -0.02% -0.01% 0.02% -0.04% 0.00% 0.05% -0.23% 0.04% 0.04% -0.01% 0.03% -0.01% -0.21%

EURSEK & OMXS 8.7 8.6 8.5 8.4 16-Oct 520 500 480 460 23-Nov
EURSEK

5-Nov

OMXS ra.

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

NIBOR Prior 1.82 1.96 2.11 2.24 2.27 2.58 2.89 3.23

SWAP AND MONEYMARKET RATES EURIBOR STIBOR Last Prior Last Prior 1.82 1.40 1.40 0.06 1.95 1.44 1.44 0.13 2.12 1.53 1.53 0.25 2.22 1.63 1.64 0.37 2.27 1.42 1.41 0.56 2.58 1.63 1.63 0.92 2.88 1.88 1.87 1.31 3.23 2.13 2.12 1.76

Last 0.06 0.13 0.24 0.37 0.56 0.91 1.30 1.75

USD LIBOR Prior 0.21 0.31 0.53 0.70 0.49 0.82 1.22 1.72

Last 0.21 0.31 0.53 0.70 0.50 0.82 1.22 1.70

Gov. Bonds, 10y 1.80 1.60 1.40 1.20 16Oct 5-Nov 23Nov
SEK NOK, ra.

2.40 2.20 2.00 1.80

10y 10y yield vs bund
85 80 75

NORWAY Prior Last 98.21 98.35 2.19 0.76 2.18 0.75

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.23 117.20 100.56 100.64 1.54 0.11 1.54 0.11 1.43 1.43

US Prior 99.375 1.69 0.26

Last 99.58 1.68 0.25

JPY and Dow Jones 14.0 13.0 12.0 16-Oct 5-Nov 23Nov

USDJPY ra. DowJones, 1000

USD and gold 1800 1750 1700 1650 16Oct 5-Nov 23Nov
Gold

1.35 1.30 1.25 1.20

EURUSD ra.

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y sw ap 3m stibor 10y sw ap 3m euribor 10y sw ap 3m libor 10y In 3m 1.90 3.25 1.30 2.25 0.30 1.75 0.35 … 6m 1.90 3.25 1.30 2.25 0.25 1.75 0.35 … 12m 2.15 3.50 1.30 2.50 0.25 2.00 0.35 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today DEC 1.95 1.95 0.00 NOK 91.91 0.07 Dow Jones 13,009.7 MAR 1.91 1.91 0.00 SEK 114.26 0.04 Nasdaq 2,966.9 JUN 1.91 1.91 0.00 EUR 102.26 - 0.08 S&P 500 1,409.2 SEP 1.92 1.92 0.00 USD 80.21 - 0.01 Eurostoxx50 2,557.0 FRA SEK 3m Prior chg GBP 83.50 Dax 7,309.1 DEC 1.44 1.44 0.00 Comm. Today Last Nikkei225 9,388.9 444.02 MAR 1.30 1.28 0.02 Brent spot 111.8 valid field( Oslo JUN 1.24 1.24 0.00 Brent 1m 111.3 111.4 Stockholm 508.10 640.70 SEP 1.23 1.24 -0.01 Spot gold 0.0 1734.5 Copenhagen Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25
% 1.3% 1.4% 1.3% 0.9% 0.9% 0.0% -0.1% 1.0% 0.4%

Morning Report
26.11.2012
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