Morning Report

18.01.2013

China data fuel optimism

NOK & 3m NIBOR
7.50 2.00

GDP figures were slightly better than expected. The euro appreciates and USDJPY is above 90.
1.90 1.80 1.70

7.40 7.30 7.20

10Dec
3m ra.

Having declined for seven consecutive quarters, GDP growth in China picked up by 0.5 percentage points to 7.9 percent y/y in Q4 2012. This was slightly better than expected. The improvement is mainly due to an increase in public infrastructure investments, but also residential investment contributed. Exports have stabilized. GDP grew by 7.8 percent in 2012, the lowest level since 1999. The news from China gave a new impetus to the optimism that characterized yesterday's markets, which led to an increase in stock markets and long government bond yields. European FRA rates have risen by 12 basis points at the longest maturities, and Norwegian FRAs have followed to some extent, rising by up to 7.5 basis points. EURUSD has risen by 0.7 percent since yesterday morning, and now trades just below 1.34. EURCHF has risen by 1.3 percent, to just above 1.25. Asian stock markets are on the rise, with the biggest gain seen in the Nikkei index (2.7 percent). This reflects that the yen depreciation is back on track after a slight correction in the first part of this week. Currently the USDJPY is traded slightly above 90, an increase of 1.5 percent since yesterday morning. The much-discussed BoJ meeting is scheduled on Tuesday next week. Consensus expects the introduction of a 2 percent inflation target and an increase of the securities purchase program by 10 trillion yen. There are also speculations that the BoJ will remove the floor for short-term interest rates (0.1 percent) and introduce an open-ended securities purchase program, a la Fed. Strong US figures was a major contributor to market optimism yesterday. Initial claims dropped to its lowest level in five years in the first week of 2013, to 335 '. This is the lowest level in five years, and significantly better than analysts had expected. The housing market is clearly improving. The number of housing starts in December exceeded expectations by a wide margin, rising by as much as 12.1 percent to 954,000 units. The markets shrugged off another piece of bad news from US manufacturers. Like the NY Fed index on Tuesday Philly Fed was a negative surprise, falling by 10.4 p to -5.8 in January. Todays most important US data is the preliminary Michigan consumer confidence reading in January. It is expected to show a slight increase in the assessment of future prospects, with 1.4 p to 65.2. In December the index was a negative surprise, declining sharply from November to the lowest level since July. The Spanish governments debt auction success yesterday was clearly positive for the euro. Bonds for 4.5 billion euros were issued, maturing in 2015, 2018 and 2041. The 2041 bond also met solid demand, with an interest rate of 6 percent and a 2 per cent bid-to-cover ratio. Already after two auctions, the previous on 10 January, Spain has covered 9 percent of its borrowing requirements in 2013. The pound sterling followed, as it often does, the dollar's movement yesterday. With less unrest in the markets, the spotlight may come back to the domestic situation, which is far from strong. Todays UK retail sales release is expected to show an increase by 0.2 percent from November to December, following a flat development in the previous month. Norges Banks Q4 lending survey shows that banks continue to tighten their lending practices. For households this is particularly evident for first-time home mortgages. Banks point to the Financial Supervisory Authority's guidelines on prudent lending practices as the primary cause. Requirements for maximum debt-to-value are followed more stringently and margins have increased further. The knowledge that it has become harder than before to get a loan also leads to fewer applications. There was also a slight tightening of credit standards for enterprises, but this was particularly the case for commercial real estate loans. Stricter requirements for capital is the main cause behind the expectations of some further tightening kjersti.haugland@dnb.no

28Dec

17Jan
EURNOK

SEK & 3m STIBOR

9.0 8.8 8.6 8.4 8.2 10Dec
3m ra.

1.60

1.40 1.20
28Dec

1.00 17-Jan
EURSEK

Headquarters 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

+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

Yesterdays key economic events (GMT) 13:30 US Housing starts 13:30 US Initial claims 15:00 US Philly Fed 02:00 China GDP Todays key economic events (GMT) 09:30 UK Retail trade 14:55 US Michigan cons.confidence

As of Dec Week 1 Jan Q4 As of Dec Jan

Unit mill 1000 Index y/y Unit y/y % Index

Prior 0.861 372 4.6 7.4 Prior 0.9 63.8

Poll 0.890 365 5.8 7.8 Poll 1.1 65.2

Actual 0.954 335 -5.8 7.9 DNB

Morning Report
18.01.2013

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 1.00 0.50 0.00 10-Dec
28-Dec

94 92 90 17-Jan
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.26 1.24 1.22 1.20 1.18 10Dec
GBP r.a

0.84 0.82 0.80 0.78 28Dec 17Jan

CHF

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

Prior 89.89 1.338 0.836 1.237 7.407 8.645 7.463 5.570 6.195 0.858 8.919 6.498 7.225 1.167 10.396

Last 90.12 1.339 0.838 1.255 7.457 8.699 7.463 5.569 6.183 0.858 8.903 6.503 7.214 1.168 10.386

% 0.3% 0.1% 0.1% 1.4% 0.7% 0.6% 0.0% 0.0% -0.2% 0.0% -0.2% 0.1% -0.2% 0.1% -0.1%

In 1 m ...3 m 88 90 1.33 1.32 0.82 0.81 1.20 1.20 7.30 7.25 8.65 8.65 7.45 7.45 5.49 5.49 6.24 6.10 0.84 0.84 8.9 8.9 6.50 6.55 5.72 5.90 1.18 1.19 10.55 10.62

...6 m ...12 m 91 93 1.36 1.37 0.85 0.86 1.20 1.25 7.25 7.40 8.60 8.70 7.45 7.45 5.33 5.40 5.86 5.81 0.84 0.85 8.9 8.9 6.32 6.35 5.75 5.91 1.19 1.18 10.56 10.47

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

USD 1.0531 0.9876 0.9374 19.11 5.5750 1.5983 7.7531 128.57 0.2818 2.5792 0.5217 0.8364 3.0723 1.2258 30.2211

% -0.15% 0.14% 0.45% 0.04% -0.11% -0.07% 0.01% -0.09% -0.16% -0.11% -0.02% 0.00% -0.02% 0.16% 0.15%

EURSEK & OMXS

9.0 8.8 8.6 8.4 8.2 10-Dec 560 540 520 500 17-Jan
EURSEK

28-Dec

OMXS ra.

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

NIBOR Prior 1.80 1.85 1.97 2.08 2.32 2.65 2.95 3.30

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.81 1.18 1.18 0.05 1.86 1.22 1.22 0.13 2.00 1.32 1.32 0.23 2.13 1.44 1.44 0.35 2.32 1.47 1.48 0.75 2.65 1.76 1.76 1.07 2.95 2.01 2.02 1.39 3.31 2.26 2.27 1.80

Last 0.05 0.14 0.24 0.35 0.79 1.08 1.41 1.82

USD LIBOR Prior 0.21 0.30 0.49 0.66 0.52 0.92 1.39 1.91

Last 0.20 0.30 0.49 0.66 0.55 0.93 1.39 1.93

Gov. Bonds, 10y 2.00

1.00

0.00 10Dec 28Dec 17Jan

NOK, ra.

2.60 2.40 2.20 2.00 1.80

10y 10y yield vs bund

NORWAY Prior Last 96.54 96.32 2.38 0.84 2.41 0.78

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 114.37 114.43 99.63 98.81 1.82 0.27 1.81 0.18 1.54 1.63

US Prior 97.6875 1.88 0.34

Last 97.63 1.90 0.27

SEK

JPY and Dow Jones 14.0 95 90 13.5 85 13.0 80 12.5 75 102817-Jan Dec Dec
USDJPY ra. DowJones, 1000

USD and gold 1750 1700 1650 1600 10Dec 28Dec 17Jan
Gold

1.35
1.30

1.25

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 1.85 3.25 1.10 2.25 0.25 1.75 0.35 6m 1.85 3.25 1.10 2.25 0.25 1.75 0.35 12m 1.85 3.50 1.10 2.50 0.25 2.00 0.35 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today MAR 1.89 1.89 0.00 NOK 93.25 0.30 Dow Jones 13,596.0 JUN 1.90 1.90 0.00 SEK 115.18 0.25 Nasdaq 3,136.0 SEP 1.96 1.93 0.03 EUR 107.44 0.18 S&P 500 1,480.9 DEC 2.02 1.99 0.03 USD 79.70 - 0.00 Eurostoxx50 2,718.9 FRA SEK 3m Prior chg GBP 82.10 Dax 7,735.5 MAR 1.19 1.18 0.01 Comm. Today Last Nikkei225 10,913.3 JUN 1.20 1.17 0.03 Brent spot 111.8 Invalid field(s). Oslo 466.10 SEP 1.23 1.20 0.03 Brent 1m 111.3 111.1 Stockholm 540.49 DEC 1.26 1.26 -0.01 Spot gold 0.0 1675.0 Copenhagen 693.99 Sources to all tables and graphics: Reuters and DNB Markets

sw ap 2.00 2.00 2.25

% 0.6% 0.6% 0.6% 0.6% 0.6% 0.0% 1.0% 0.6% 0.4%

Morning Report
18.01.2013
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