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Morning Report

30.04.2013

Mixed data, but markets are enthusiastic
NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 27-Mar 1.90 1.85 1.80 1.75 1.70 30-Apr
3m (rha)

An end to the political vacuum in Italy, a successful auction of Italian government bonds and good U.S. housing data overshadowed weak sentiment indices in Europe. With a new government in place in Italy and good housing market data from the U.S., stock markets were up yesterday. EuroStoxx50 rose 1.3 percent, while the S&P 500 rose 0.7 percent. Asian markets are opening up today. A successful auction of Italian government bonds yesterday also contributed to a strengthening of the euro yesterday. The Norwegian krone continues to appreciate gradually since the peak of over 7.70 against the euro last week. Changes in the inflation outlook meant that the central bank lowered the interest rate path and delayed first interest rate hike to late 2014 at the meeting on 16 April. Although the new interest rate path indicates greater likelihood that interest rates are cut than raised towards the second half of 2014, there were none of the majority of four in the Executive Boars that considered a rate cut at the previous meeting, according to the Minutes, which was published yesterday. In recent months, the central bank seemed almost indifferent to the level of the Swedish krona, in stark contrast to Norges Bank which has opened the door to lower interest rates if the Norwegian crown would be too strong. This has contributed to a sharp depreciation of the Norwegian against the Swedish krona. The Minutes, however, confirm what we have argued, that the conduct of monetary policy in the two central banks with regard to the exchange rate is hardly any different. The isolated effect of a stronger exchange rate is lower inflation, and thus lower interest rate. As both Governor Ingves and af Jochnick noted in the Minutes. Retail trade in Sweden fell by 0.4% m/m in March, which was the weaker than expected. Yet the first quarter as a whole was strong, with a rise of 6.7% annual rate compared with the fourth quarter last year. The Business Tendency Survey for manufacturing, mining and quarrying fell from 5 to 1 in Q1, slightly below the historical average. And as before, there are large differences between industries. Those who produce intermediate goods report continued lower production, lower employment and falling prices. Particularly difficult is the situation for traditional export industries. The producers of capital goods report weaker output growth and fewer report a shortage of qualified labor. This is due to lower orders in domestic and export markets. Nevertheless, the stock of orders is at a high level. Employment and planned capital investments increases. Industries that produce consumer goods report leveling off in production volume and a decrease in employment. Reduced demand for exports and fewer employees in competitive industries were contributing causes. There were few bright spots in the sentiment indices from the Eurozone yesterday. The only one would have to be the marginal improvement in the consumer confidence index, which rose from -23.5 to -22.3, despite the fact that unemployment is still rising. But the level is still low. The same can be said about the business confidence index and the overall index (ESI), both of which fell more than expected in April. The level has historically coincided with a decline in GDP of 1.5% y/y. In the UK, GfKs consumer confidence fell in April after pessimism about personal finances increased. Pending home sales from the US suggests a recovery in sales of existing homes in the spring after a slowdown in recent months. The index rose 1.5 percent from February to March, while there was expected increase of 1.0 percent. There is an extensive calendar today. We also see the usual array of Norwegian figures on the last day of the month. After two strong months in the beginning of the year, retail sales in March are expected to be somewhat weaker. We expect -0.3% m/m (Consensus 0.2% (Reuters)). LFS unemployment has increased somewhat in recent months, but is expected to remain unchanged from February to March. Norges Bank's daily foreign exchange purchases is also expected unchanged from April to May, at 300 million NOK per day. Later in the day Chicago PMI and the Conference Board consumer confidence from the United States is published. Wednesday markets are closed in the euro zone, Scandinavia and China. This means that by the next Morning Report this week on Thursday, Chinese manufacturing PMI from both NBS and HSBC is published. From the UK we get house prices and manufacturing PMI. Most important is undoubtedly the ISM manufacturing from the U.S. and the Fed interest rate decision. magne.ostnor@dnb.no Yesterday’s key economic events (GMT) 07:30 Sweden Riksbank Minutes 09:00 EMU Consumer sentiment 14:00 USA Pending Home Sales Today’s key economic events (GMT) 08:00 Norway Retail sales 08:00 Norway LFS unemployment 14:00 US Consumer Confidence As of Apr Mar As of Mar Feb Apr Unit Index Index Unit m/m % % Index Prior -23.5 104.8 Prior 0.5 3.6 59.7 Poll -22.3 Poll 0.1 3.6 59.5 Actual -22.3
105.7

15-Apr

EURNOK

Norw ay: 10y Gov't Bond 2.3 100

2.2
2.1

90
80 27-Mar
Rate

2.0
15-Apr

70 30-Apr
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 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 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 -0.3 3.6

Morning Report
30.04.2013

3m LIBOR
0.140 0.135 0.130 0.125 0.120 0.115 27-Mar
EUR

15-Apr

0.29 0.28 0.28 0.27 0.27 30-Apr
USD (rha)

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 97.62 1.3051 0.8408 7.4564 8.5535 1.2289 7.6304 5.8471 5.99 89.28 102.33 9.080 6.211

Today 97.78 1.3115 0.8460 7.4569 8.5847 1.2276 7.6178 5.8104 5.94 88.81 102.20 9.003 6.209

%

Spot rates and forecasts In … 1m Jul-13 Oct-13 Apr-14 FX 0700 0.2 98 100 105 110 AUD 0.5 1.30 1.32 1.33 1.34 CAD 0.6 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.4 8.50 8.45 8.50 8.60 RUB -0.1 1.22 1.22 1.25 1.27 GBP -0.2 7.55 7.50 7.45 7.40 HKD -0.6 5.81 5.68 5.60 5.52 KWD -0.8 5.93 5.68 5.33 5.02 LTL -0.5 88.8 88.8 87.6 86.0 LVL -0.1 101.3 100.7 100.0 99.3 NZD -0.8 8.88 8.82 8.66 8.51 SEK 0.0 618.85 614.75 596.00 582.68 SGD

USD NOK 1.037 6.021 1.011 5.747 0.936 620.628 19.586 29.653 30.965 18.756 1.550 9.005 7.761 0.748 0.284 20.416 2.632 2.206 0.534 10.884 0.857 4.977 6.544 88.746 1.233 4.709

27-Mar

15-Apr

95 30-Apr
USD/b (rha)

NOK TWI

US dollar

6.0 5.8 5.6 5.4 27-Mar

1.35 1.30
15-Apr

1.25 30-Apr
EURUSD(rha)

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

Prior 1.71 1.79 1.86 2.04 1.92 2.22 2.54 2.90

Last 1.74 1.79 1.85 2.01 1.92 2.21 2.55 2.89

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

Prior 1.16 1.23 1.29 #N/A 1.32 1.55 1.79 2.05

Interest rates Last USD 1.16 1m 1.23 3m 1.29 6m #N/A 12m 1.32 3y 1.55 5y 1.79 7y 2.04 10y

Prior 0.20 0.28 0.43 0.71 0.44 0.85 1.29 1.86

Last 0.20 0.27 0.43 0.71 0.44 0.80 1.27 1.82

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

Prior 0.06 0.13 0.21 0.40 0.46 0.74 1.06 1.47

Last 0.06 0.12 0.21 0.40 0.45 0.73 1.05 1.46

USDNOK

Japanese yen 105.0 7.0 100.0 95.0 6.0 90.0 85.0 5.0 27-Mar 15-Apr 30-Apr
USDJ PY JPYNOK(rha)

Norw ay Prior NST475 99.50 10y yld 2.06 - US spread 0.39 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 99.55 10y 99.15 99.18 10y 103.02 2.05 10y yld 1.59 1.59 10y yld 1.66 0.38 - US spread -0.08 -0.08 30y yld 2.86 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 102.97 10y 102.67 102.70 1.67 10y yld 1.21 1.21 2.87 - US spread -0.45 -0.46 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

SEKNOK & CHFNOK 91 6.3

90
89

6.2
6.1

88 27-Mar 15-Apr
SEKNOK

6.0 30-Apr
CHFNOK (rha)

Equities
15200

14700 14200
13700 27-Mar 15-Apr

490 480 470 460 450 440 30-Apr
Os lo (rha)

Dow Jones

Miscellaneous NOK sov. Prior Last Change Maturity year rem. NOK-index TWI Prior NST20 1.53 1.54 1 18.09.2013 0.39 Last 93.14 93.40 NST21 1.49 1.50 1 18.12.2013 0.64 Oil price: (Ldn,cl) 1m NST22 1.50 1.50 -1 19.03.2014 0.88 SPOT 103.18 103.56 NST471 1.19 1.19 0 15.05.2015 2.04 Gold price 29.04.2013 PM NST472 1.31 1.31 -1 19.05.2017 4.05 AM: 1471.5 1467.5 Invalid Instrument Name. 1.51 0.00 -151 Invalid Instrument Name. #VALUE! Equities Today 0700 % last NST475 2.07 2.07 0 24.05.2023 10.07 Dow Jones 14818.75 0.7% NST475 2.06 2.05 -1 24.05.2023 10.07 Nasdaq C. 3307.02 0.8% NOK FRA 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6458.02 0.5% JUN 1.72 1.80 1m 1.81 1.74 Eurostoxx50 2717.39 1.3% SEP 1.66 1.77 3m 1.90 1.79 DAX 7873.50 0.8% DEC 1.66 1.77 6m 1.95 1.85 Nikkei 225 13865.74 -0.1% MAR 1.67 1.78 12m 2.05 2.01 OSEBX 477.93 -0.6% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
30.04.2013
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