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Morning Report

30.05.2013

Swedish growth surprises on the upside
NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90

1.80
1.70

Swedish GDP grew more than expected in the first quarter. Thus, the probability of an interest rate cut seems to abate. ECBs Nowotny does not want another interest rate cut and want the ECB to focus on ways to boost banks’ liquidity. The OECD released their Economic Outlook yesterday. The organization believes growth in advanced economies should strengthen gradually after the middle of 2013 and through 2014. Swedish GDP grew more than expected in the first quarter. GDP was 0.6 per cent higher than in Q4, while consensus had expected growth of 0.3 per cent. The main contributor to growth was private consumption which grew by 1.0 per cent, followed by inventories (+0.6% q/q). There were hardly any growth at all in net exports and public consumption, while investments fell. The Swedish economy surprises positively for the second quarter in a row. However as inventories pull growth up, the underlying picture does not seem as strong as the headline indicates. Yesterday’s figure seems to reduce the probability of an interest rate cut in Sweden. As a result the Swedish krona strengthened yesterday. We believe the Riksbank will leave rates on hold until late 2014, when they gradually will start to increase the interest rate. According to Ewald Nowotny from the European central banks, another interest rate cut from ECB is less likely than the market seems to believe. In an interview with Reuters Nowotny said on Tuesday that ECB is looking at ways to boost banks’ liquidity rather than cutting interest rates. As examples he mentioned reviving the asset-backed securities (ABS) market in Europe and lowering the mark down on such assets when used as collateral at the ECB. He said such measures could help unblock lending to small and medium-sized enterprises, which have been a concern for the central bank. He furthermore stated that he prioritized such measures to lowering the interest rates. One should not overestimate the effects of the interest rate at the low level, he said. However, he also underlined that the ECB is prepared to keep rates low for some time. Otherwise, Nowotny also said that he expected the economic activity to pick up in the second half of this year. This is in line with our expectations. OECD is not in particular positive to the economic development in the euro area. In their new forecasts, released yesterday, they have revised down their forecasts for the euro area and estimate that GDP in will decline by 0.6 per cent in 2013. They write that the euro area growth remain constrained by the lingering effects of the euro area crisis, the on-going drag from fiscal consolidation and weaknesses in credit markets. In 2014 growth is expected to pick up to 1.1 per cent. In general the OECD believe growth in advanced economies should strengthen gradually after the middle of 2013 and through 2014, helped by on-going support from accommodative monetary policies, improving financial market conditions and a gradual restoration of confidence. However the upturn diverges across countries, with the United States likely to grow faster than other large OECD countries. US GDP growth is expected to be 1.9 per cent this year and 2.8 per cent in 2014. Norwegian growth is expected to remain solid. Mainland GDP is expected to increase by 2.6 and 3.2 per cent in the same period. China is expected to be in the lead among the emerging economies, with growth of 7.8 and 8.4 per cent respectively in 2013 and 2014. OECD believes the labour markets in the USA and Japan are set to firm, while unemployment is likely to continue to rise further in the euro area. Regarding monetary policy the OECD writes that policy needs to remain extraordinarily easy in the United States. However, the pace of further easing through additional asset purchases may need to be gradually reduced. In the euro area they say additional easing of monetary policy is needed and that interest rates should be reduced as much as possible. In Norway they expect a gradual normalization of the interest rate level. The Norwegian krone has weakened versus currencies like the euro and Swedish krona. The weakening was in particular sharp in the aftermath of the Swedish GDP figures, indicating that investors preferred the SEK to the NOK. Month-end adjustments may also have contributed to the development. Versus the dollar the krona has however strengthened slightly. This seems to be mainly due to less demand for the US currency in response to falling US interest rates. The dollar has in particular weakened versus so called safe haven currencies, like the dollar and yen. USDJPY is currently trading around its lowest levels in three weeks. camilla.viland@dnb.no Yesterday’s key economic events (GMT) 07:30 Sweden GDP 07:55 Germany Unemployment 14:00 Canada Monetary Policy Meeting Today’s key economic events (GMT) 09:00 Norway Retail sales 10:00 EMU Consumer confidence 15:00 USA Pending Home Sales As of Q1 May n/a As of Apr May Apr Unit q/q % 1000 % Unit m/m% index m/m% Prior 0.0 4 1.0 Prior 0.2 -22.3 1.5 Poll 0.3 5 1.0 Poll 0.0 -22.0 1.6 Actual 0.6 21 1.0 DNB -0.2

26-Apr

14-May

1.60 30-May
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond
2.3

2.2
2.1

2.0
26-Apr
Rate

14-May

90 85 80 75 70 65 30-May
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

Morning Report
30.05.2013

3m LIBOR
0.130 0.125 0.120 0.115 0.110 0.105 0.28 0.28 0.27 0.27 0.27 0.27 30-May
USD (rha)

26-Apr
EUR

14-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 102.38 1.2852 0.8555 7.4531 8.6354 1.2555 7.5810 5.9000 5.76 87.82 101.74 8.864 6.037

Today 100.72 1.2975 0.8554 7.4549 8.6035 1.2436 7.6315 5.8837 5.84 88.78 102.39 8.922 6.139

%

Spot rates and forecasts In … 1m Aug-13 Nov-13 May-14 FX 0700 -1.6 102 105 107 110 AUD 1.0 1.27 1.26 1.30 1.32 CAD 0.0 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.4 8.55 8.45 8.50 8.60 RUB -0.9 1.24 1.25 1.27 1.30 GBP 0.7 7.55 7.50 7.45 7.40 HKD -0.3 5.94 5.95 5.73 5.61 KWD 1.4 5.83 5.67 5.36 5.10 LTL 1.1 88.3 88.8 87.6 86.0 LVL 0.6 101.3 100.7 100.0 99.3 NZD 0.7 8.88 8.82 8.66 8.51 SEK 1.7 608.87 600.00 586.61 569.23 SGD

USD NOK 0.968 5.694 1.034 5.687 0.958 613.611 19.948 29.484 31.630 18.594 1.517 8.921 7.764 0.758 0.285 20.606 2.661 2.210 0.540 10.891 0.811 4.772 6.630 88.710 1.263 4.658

26-Apr

14-May

95 30-May
USD/b (rha)

NOK TWI

US dollar 6.0 5.9 5.9 5.8 5.8 5.7
26-Apr 14-May
USDNOK

1.33 1.31 1.29 1.27 1.25 30-May
EURUSD(rha)

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

Prior 1.72 1.78 1.87 2.05 2.04 2.35 2.69 3.05

Last 1.71 1.77 1.86 2.03 2.06 2.41 2.75 3.11

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

Prior 1.16 1.20 1.23 1.44 1.74 2.02 2.31

Not updated
2.33 10y

Interest rates Last USD 1.16 1m 1.20 3m 1.23 6m #N/A 12m 1.44 3y 1.75 5y 2.04 7y

Prior 0.19 0.27 0.42 0.68 0.54 1.04 1.55 2.14

Last 0.19 0.28 0.42 0.69 0.65 1.18 1.69 2.26

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

Prior 0.06 0.11 0.20 0.39 0.55 0.91 1.26 1.70

Last 0.06 0.12 0.20 0.39 0.61 0.96 1.30 1.74 Last 99.65 1.54 -0.57 10y sw ap 1.75 1.75 2.00

104.0 102.0 100.0 98.0 96.0 94.0

Japanese yen

26-Apr
USDJ PY

14-May

7.0 6.5 6.0 5.5 5.0 30-May

Norw ay Prior NST475 98.52 10y yld 2.17 - US spread -0.04 3m nibor 1.80 1.80 1.80

Norw ay Aug-13 Nov-13 May-14

Governm ent bonds Last SEK Prior Last US Prior 97.70 10y 96.03 96.01 10y 95.94 2.26 10y yld 1.92 1.93 10y yld 2.20 0.15 - US spread -0.28 -0.18 30y yld 3.34 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 Germany Prior 96.80 10y 100.03 2.11 10y yld 1.50 3.25 - US spread -0.71 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25

Germany Aug-13 Nov-13 May-14

JPYNOK(rha)

SEKNOK & CHFNOK
90

89
88

87 26-Apr 14-May
SEKNOK

6.3 6.2 6.1 6.0 5.9 5.8 30-May
CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 26-Apr
Dow Jones

500 490 480 470 460 14May 30May
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 1.36 1.47 11 18.09.2013 0.30 Last 93.04 92.43 1.42 1.40 -2 18.12.2013 0.55 Oil price: (Ldn,cl) 1m 1.44 1.46 2 19.03.2014 0.80 SPOT 101.69 102.72 1.14 1.18 4 15.05.2015 1.96 Gold price 29.05.2013 PM 1.40 1.48 8 19.05.2017 3.97 AM: 1376.5 1382.5 0.00 0.00 0 24.05.2023 9.99 Equities Today 0700 % last 2.15 2.23 8 24.05.2023 9.99 Dow Jones 15302.80 -0.7% 2.17 2.26 9 24.05.2023 9.99 Nasdaq C. 3467.52 -0.6% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6762.01 -2.0% 1.80 1.90 1m 1.77 1.71 Eurostoxx50 2835.87 1.5% 1.77 1.89 3m 1.88 1.77 DAX 8480.87 1.2% 1.78 1.89 6m 1.93 1.86 Nikkei 225 13582.06 -5.2% 1.80 1.94 12m 2.08 2.03 OSEBX 491.75 -0.9% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
30.05.2013
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