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Morning Report

28.05.2013

LFS unemployment up to 100,000


NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90

Somewhat surprisingly increased LFS unemployment rate in March and the number of unemployed reached 100,000 people. The rise in unemployment increases the likelihood that Norges Bank will cut interest rates later this year.
1.80
1.70

24-Apr

10-May

1.60 28-May
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond


2.3

2.2
2.1

2.0
24-Apr
Rate

10-May

90 85 80 75 70 65 28-May
Diff (bp, rha)

Norwegian LFS unemployment rose more than expected in March (average from February to April).The number of unemployed increased to 100,000 which is the highest since December 2005. The unemployment rate thus increased from 3.5% to 3.7%. According to Reuters it was expected that unemployment would stay unchanged. Unemployment increases because the growth in employment has leveled off, while the labor force continues to grow. Employment has been stable at around an average of 2.695 million last year. The decline in employment is probably related to slower growth in the Norwegian economy, but the slowdown has been clearly stronger for employment growth than for GDP. In the same period, the labor force has increased by 20,000, boosted by higher labour immigration. Thus, unemployment has also risen accordingly. The rise in unemployment was, however, most markedly in October and November last year. From December to February, the unemployment rate stayed unchanged. LFS unemployment should basically capture all who want to work, not just those who register with NAV. Normally it is still a relatively good correlation between gross unemployment from NAV (the sum of totally unemployed and people on labour market measures), and LFS unemployment. Historically, however, LFS unemployment has been much more volatile than gross unemployment. The difference between the two has been around 8500 on average, but the deviations are periodically much larger. Now the LFS unemployment rate over than 17 000 gross unemployment. This is in line with deviations in 2005 and 2008. Since LFS unemployment is most unstable, we normally put more emphasis on the NAV figures, which so far has only shown a modest increase in unemployment. Norges Bank estimated in March that LFS unemployment would be 3% this year and next year and then increase to 3% in 2015. Yesterday's figures thus imply that the unemployment rate is already higher than the 2015-estimate. Higher unemployment normally has a dampening effect on wage growth, and we have already seen that this year's wage settlements ended with lower wage growth than expected. Higher unemployment will thus make it even more difficult for the Bank to achieve the inflation target. In isolation the likelihood that the central bank will lower its key rate has increased. However, we believe that interest rates will still be kept unchanged at the next meeting on 20 June. There was no market impact of significance after the figures were known. Swedish retail sales disappointed in April. It was expected a rise of 0.5%, while sales only rose by 0.1%. The annual growth rate still rose slightly to 2.0%. Sales in March and April are disturbed by Easter, but overall the trend was weak for the two months as a whole, with a fall of 0.3%. Riksbanken believes in a new report on financial stability that Swedish banks are very solid in the short term, but it could be some systemic risk in the longer term. Financial markets have improved since last report. In the minutes from the monetary policy meeting, the Bank of Japan (released yesterday morning) showed that the consensus on the sharp shift in monetary policy can be based on a somewhat fragile basis. According to the minutes a few members (probably two) in the committee have pointed out that the change of policy may have been perceived as contradictory of the market, and thus contributed to increased market volatility. The purpose of these measures was to bring long-term rates down, but the result so far has been a rise. This may be due to the objective of lifting inflation up to 2%. This may have decreased liquidity and increased volatility in the bond markets, which are obviously undesirable effects of the change. With markets closed in the U.S. (Memorial Day) and the UK (Bank Holiday) markets were as expected relatively quiet yesterday. The yen weakened against the dollar and the Nikkei is up a good one per cent. The most important macroeconomic news today is the U.S. housing price index from CaseShiller which is expected to increase by 1% (seasonally adjusted) in March. In so, the increase will be smaller than in February and will bring annual growth up to 10.2%. Consumer confidence from the Conference Board is expected to rise from 68.1 in April to 71.0 in May. The high estimate is probably related to the fact that the Michigan's index (which measures the same) got a boost in May. knut.magnussen@dnb.no Yesterdays key economic events (GMT) 07:30 Sweden Retail sales 07:30 Sweden Retail sales 08:00 Norway LFS Unemployment Todays key economic events (GMT) 07:30 Sweden Trade Balance 13:00 USA Home Price (C/S) 14:00 USA CB consumer confidence As of Apr Apr Mar As of Apr Mar May Unit m/m % y/y % % Unit SEK bn y/y % % Index Prior -0.4 1.8 3.5 Prior 6.8 9.3 68.1 Poll 0.5 3.0 3.5 Poll 10.1 69.5 Actual 0.1 2.0 3.7 DNB

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
28.05.2013

3m LIBOR
0.135 0.130 0.125 0.120 0.115 0.110 0.105 0.28 0.28 0.27 0.27 0.27 0.27 28-May
USD (rha)

24-Apr
EUR

10-May

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 101.06 1.2922 0.8547 7.4534 8.5873 1.2449 7.5370 5.8350 5.78 87.84 101.14 8.822 6.057

Today 101.94 1.2924 0.8555 7.4538 8.5901 1.2499 7.5510 5.8460 5.73 87.97 101.39 8.828 6.045

Spot rates and forecasts In 1m Aug-13 Nov-13 May-14 FX 0700 0.9 102 105 107 110 AUD 0.0 1.27 1.26 1.30 1.32 CAD 0.1 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.0 8.55 8.45 8.50 8.60 RUB 0.4 1.24 1.25 1.27 1.30 GBP 0.2 7.55 7.50 7.45 7.40 HKD 0.2 5.94 5.95 5.73 5.61 KWD -0.7 5.83 5.67 5.36 5.10 LTL 0.1 88.3 88.8 87.6 86.0 LVL 0.2 101.3 100.7 100.0 99.3 NZD 0.1 8.88 8.82 8.66 8.51 SEK -0.2 608.87 600.00 586.61 569.23 SGD

USD NOK 0.964 5.632 1.035 5.645 0.967 604.201 20.065 29.116 31.400 18.605 1.511 8.825 7.764 0.752 0.286 20.412 2.671 2.187 0.543 10.765 0.809 4.724 6.645 87.911 1.264 4.621

24-Apr

10-May

95 28-May
USD/b (rha)

NOK TWI

US dollar 6.0 5.9 5.9 5.8 5.8 5.7 5.7


24-Apr 10-May
USDNOK

1.33 1.31 1.29 1.27 1.25 28-May


EURUSD(rha)

Interest rates NOK Prior Last SEK Prior Last USD Prior Last EUR Prior 1m 1.66 1.68 1m 1.15 1.15 1m 0.19 0.19 1m 0.06 3m 1.76 1.77 3m 1.19 1.19 3m 0.27 0.27 3m 0.12 6m 1.86 1.85 6m 1.24 1.23 6m 0.42 0.42 6m 0.20 The 12m time series 2.04 server 2.03 does not 12m have enough resources 12m to complete 0.69 the request 0.69 for: STISEK1YDFI= 12m 0.39 3y 2.04 2.04 3y 1.34 1.35 3y 0.54 0.54 3y 0.51 5y 2.37 2.39 5y 1.64 1.65 5y 1.04 1.04 5y 0.87 7y 2.71 2.72 7y 1.93 1.94 7y 1.56 1.55 7y 1.22 10y 3.07 3.09 10y 2.23 2.23 10y 2.14 2.14 10y 1.66 Governm ent bonds Last SEK Prior Last US Prior 97.60 10y 97.04 96.93 10y 97.66 2.27 10y yld 1.81 1.83 10y yld 2.01 0.22 - US spread -0.20 -0.22 30y yld 3.17 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Aug-13 Nov-13 May-14 1.20 1.20 1.45 2.25 2.25 2.50 Aug-13 Nov-13 May-14 0.35 0.35 0.35

Last 0.06 0.12 0.20 0.39 0.54 0.89 1.24 1.68

104.0 102.0 100.0 98.0 96.0 94.0

Japanese yen

24-Apr
USDJ PY

10-May

7.0 6.5 6.0 5.5 5.0 28-May

Norw ay Prior NST475 97.85 10y yld 2.24 - US spread 0.23 3m nibor 1.80 1.80 1.80

Last Germany Prior Last 97.30 10y 100.60 100.39 2.05 10y yld 1.43 1.46 3.21 - US spread -0.57 -0.59 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

Norw ay Aug-13 Nov-13 May-14

Germany Aug-13 Nov-13 May-14

JPYNOK(rha)

SEKNOK & CHFNOK


90

89
88

87 24-Apr 10-May
SEKNOK

6.3 6.2 6.1 6.0 5.9 5.8 28-May


CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 24-Apr
Dow Jones

500 490 480 470 460 450 10May 28May


Os lo (rha)

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

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.35 1.36 1 18.09.2013 0.31 Last 92.11 92.08 1.36 1.42 6 18.12.2013 0.56 Oil price: (Ldn,cl) 1m 1.44 1.44 0 19.03.2014 0.81 SPOT 101.46 102.50 1.16 1.16 0 15.05.2015 1.96 Gold price 27.05.2013 PM 1.40 1.43 3 19.05.2017 3.98 AM: 1380.5 1390.3 0.00 0.00 0 24.05.2023 9.99 Equities Today 0700 % last 2.26 2.25 -1 24.05.2023 9.99 Dow Jones 15303.10 0.1% 2.24 2.27 3 24.05.2023 9.99 Nasdaq C. 3459.14 0.0% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6654.34 -0.6% 1.79 1.89 1m 1.77 1.68 Eurostoxx50 2795.01 1.1% 1.75 1.86 3m 1.88 1.77 DAX 8383.30 0.9% 1.76 1.87 6m 1.93 1.85 Nikkei 225 14313.09 1.2% 1.78 1.90 12m 2.08 2.03 OSEBX 491.26 0.8% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
28.05.2013
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