Morning Report

02.04.2012

Strong Norwegian data

NOK & 3m NIBOR 7.70 7.60 7.50 7.40 7.30
3m ra.

2.80 2.60 2.40 2.20

EURNOK

Private consumption in Norway seems to start 2012 briskly and consumer confidence is rising. The PMI index for the manufacturing industry is rising sharply. House prices continue to rise, albeit more moderate than last autumn. Market reactions to the strong numbers were higher interest rates and a stronger NOK. Friday's bunch of Norwegian key figures gives the impression that the economy is starting to grow more briskly. Most importantly, the consumption figures suggest a very strong start to the year. Retail sales increased by 1% in both January and February, while consumption goods (which includes purchases of vehicles and energy) rose by 2.5% overall in the two months. The surge must partly be seen in the light of a weak ending to the last year: Commodity consumption and retail sales both fell by 0.7% overall for November and December. However, the turnaround this year is still strong and may indicate that Norwegian households' purchasing ability is about to accelerate. This is substantiated by the fact that consumer confidence, which was very lackluster last fall, has picked up considerably. The March edition of ForbrukerMeteret (a monthly consumer confidence index) showed a marked improvement from February. The trough was reached in December and since then the index has risen rapidly. In March, the indicator reached 8.3 - ie almost the same level as before the debt crisis started to impact Norwegian households last summer. The brighter outlook may mean that consumption will continue to grow in the coming months. Strong growth in employment, very low interest rates and a further rise in house prices may also contribute positively. House prices rose by 0.4% (seasonally adjusted) in March. The rise in prices has calmed down somewhat from last autumn, but the market is still fairly hot. It now takes an average only 13 days to sell a home in the two main cities Oslo and Bergen. Norwegian PMI for manufacturing also showed strong growth in March. The index rose 3 points to just under 60 and thus indicates that the Norwegian industry as a whole is very strong. We know that this overall picture conceals large differences among industries, with export-oriented businesses struggling with a strong NOK and weak markets abroad, while oil related industry is surging. What do the strong figures imply for Norges Bank? The central bank has allowed for a consumption growth of 3% this year. However, if the strong trend continues, it could mean that the interest rate cut from 14 March will have to be reversed more quickly than the market envisages. We believe interest rates will be hiked as early as the monetary policy meeting in late August. The US consumption data for February were also strong. Consumption increased by 0.8% and the growth in January was revised up to 0.4%. The increase was solid despite weak growth in household income (unchanged in January, up only 0.2% in February), and thus implies that the household savings ratio falls. However, this is perhaps not so worrying because US consumers have paid down much debt already. It appears that consumption will rise by about 2% (annualized) in the first quarter. Consumer confidence was revised markedly up in March, despite a further rise in petrol prices. Chicago PMI came on Friday and fell back slightly in March. The regional manufacturing index is still at a high level. This afternoon comes the important ISM index of manufacturing in the US. After a drop in February, a rise is expected for March. At the summit in the eurozone, it became clear Friday that emergency fund be increased temporarily to 940 billion euro until July 2013. The permanent fund (ESM) will be merged with the existing fund (EFSF) and thus make the overall fund a good deal larger than originally planned. However, nearly 200 billion of EFSF is already used to help Ireland, Portugal and Greece. And, the remaining lending capacity of the EFSF (240 billion euro) will only be used if the ESM (with an initial lending capacity of 200 billion) is empty. This weekend's numbers from Asia were of mixed quality. The national PMI index in China rose clearly in March, while the private index fell. The Tankan survey from Japan clearly disappointed in terms of expectations, particularly for the large industrial companies. knut.magnussen@dnb.no Yesterdays key economic events (GMT) 08:00 Norway Retails sales 08:00 Norway FX purchase 08:00 EMU CPI, flash 12:30 USA Private consumption Todays key economic events (GMT) 06:30 Sweden PMI 08:00 Norway C2 (credit growth) 14:00 USA ISM As of Mar Apr Mar Feb As of Mar Feb Mar Unit m/m % mill. /day y/y % m/m % Unit Index %, y/y Index Prior na 350 2.7 0.2 Prior 50.3 6.9 52.4 Poll -0.5 2.5 0.6 Poll 51.9 6.9 53.5 Actual 1.0 350 2.6 0.8 DNB 53.0 53.0

21-Feb 12-Mar 30-Mar

SEK & 3m STIBOR 9.0 8.9 8.8 8.7

3m ra.

2.40 2.20 2.00

EURSEK

21-Feb 12-Mar 30-Mar

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850

Sales Oslo (+47) Equity Fixed Income FX/IR

22 94 89 40 22 01 78 20 22 01 76 50

Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

56 13 27 20 75 52 9910 69 39 41 50 62 54 14 82 52 72 09 06 61 24 79 56 38 07 28 62 22 01 76 50 51 84 04 30 77 62 96 80 73 58 74 89 33 01 73 80 70 11 69 85

Research Regional Sales (+47) Eirik Larsen 22 01 76 55

Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Kyrre Aamdal

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 22 01 77 41 22 01 76 67

Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding se Haagensen Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

22 01 78 37 22 01 77 62 22 01 76 93 22 01 76 77 22 01 77 36 22 01 78 15

Morning Report
02.04.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 135 125 115 105 21-Feb 12-Mar 96 94 92 90 30-Mar
$/b

NOK TWI ra.

EUR vs GBP & CHF 0.86 0.85 1.21 0.84 1.21 0.83 1.20 0.82 21-Feb 12-Mar 30-Mar 1.22
GBP r.a CHF

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

Prior 82.84 1.335 0.833 1.204 7.595 8.831 7.442 5.695 6.879 0.863 9.137 6.626 8.003 1.164 10.584

Last 82.97 1.335 0.834 1.205 7.589 8.820 7.441 5.682 6.855 0.862 9.104 6.611 7.968 1.164 10.584

% 0.2% 0.1% 0.1% 0.0% -0.1% -0.1% 0.0% -0.2% -0.4% -0.1% -0.4% -0.2% -0.4% 0.0% 0.0%

In 1 m ...3 m 83 84 1.30 1.30 0.83 0.83 1.23 1.23 7.60 7.60 8.90 9.20 7.45 7.45 5.85 5.85 7.04 6.96 0.85 0.83 9.2 9.2 6.85 7.08 5.68 5.94 1.17 1.21 10.72 11.08

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.23 1.30 7.60 7.60 9.00 9.00 7.45 7.45 5.63 5.43 6.62 6.39 0.84 0.84 8.9 8.7 6.67 6.43 5.67 5.46 1.18 1.18 10.59 10.34

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

USD 1.0408 0.9968 0.9022 18.56 5.5733 1.6023 7.7652 126.60 0.2781 2.5866 0.5249 0.8211 3.1030 1.2543 29.3270

% 0.56% -0.12% -0.03% -0.29% -0.08% 0.04% -0.01% -0.06% 0.01% -0.10% -0.06% 0.28% -0.61% -0.33% 0.01%

EURSEK & OMXS 9.0 8.9 550 500 450 8.8 400 8.7 350 21-Feb 12-Mar 30-Mar
OMXS ra. EURSEK

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

NIBOR Prior 1.86 2.23 2.58 2.77 2.91 3.18 3.42 3.67

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.91 2.01 2.00 0.36 2.28 2.28 2.27 0.69 2.62 2.50 2.50 1.02 2.81 2.60 2.59 1.21 2.91 2.20 2.20 1.23 3.21 2.36 2.36 1.60 3.45 2.52 2.52 1.94 3.67 2.66 2.66 2.30

Last 0.36 0.68 1.02 1.20 1.22 1.61 1.98 2.33

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.73 0.73 0.88 0.88 0.76 0.79 1.26 1.30 1.77 1.80 2.28 2.31

Gov. Bonds, 10y 2.25 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

21-Feb 12-Mar 30-Mar

10y 10y yield vs bund

NORWAY Prior Last 114.45 110.60 2.45 2.44 0.64 0.60

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 113.859 113.86 101.785 101.42 98.109375 1.99 1.98 1.81 1.84 2.21 0.18 0.14 0.41

Last 97.92 2.25 0.41

13.5 13.0 12.5

JPY and DowJones

85 80

12.0 75 21-Feb 12-Mar 30-Mar

USDJPY ra. DowJones, 1000

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.30 3.50 2.15 2.75 0.80 2.50 2.45 3.75 2.10 2.75 0.80 2.75 2.60 4.25 2.00 3.00 0.80 3.25

US 3m libor 10y 0.50 0.50 0.50

swap 2.50 2.50 3.00

% 0.5% -0.1% 0.5% 1.0% 1.0% 0.0% 1.5% 1.7% 1.4%

USD and gold 1900 1.42 1800 1.38 1700 1.34 1600 1.30 1500 1.26 21-Feb 12-Mar 30-Mar
EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.24 2.25 -0.01 NOK 94.88 SEP 2.26 2.26 0.00 SEK 116.82 DEC 2.34 2.34 0.00 EUR 105.10 MAR 2.45 2.42 0.03 USD 78.92 FRA SEK 3m Prior chg GBP 81.80 JUN 2.12 2.13 0.00 Comm. Today SEP 1.99 2.00 -0.01 Brent spot 124.3 DEC 2.00 2.00 0.00 Brent 1m 123.2 MAR 2.02 2.01 0.01 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% Stock ex. Today - 0.14 Dow Jones 13,212.0 - 0.26 Nasdaq 3,091.6 0.08 FTSE100 5,768.5 - 0.04 Eurostoxx50 2,477.3 - 0.0 Dax 6,946.8 Last Nikkei225 10,109.9 124.3 Oslo 426.61 122.9 Stockholm 499.37 581.17 1662.5 Copenhagen

Morning Report
02.04.2012
IMPORTANT/DISCLAIMER This note (the Note) must be seen as marketing material and not as an investment recommendation within the meaning of the Norwegian Securities Trading Act of 2007 paragraph 3-10 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876. The Note has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bank organized under the laws of the Kingdom of Norway (the Bank), for information purposes only. The Note shall not be used for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (individually, each a DNB Party; collectively, DNB Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Note. DNB Parties are not responsible for any errors or omissions, regardless of the cause, nor for the results obtained from the use of the Note, nor for the security or maintenance of any data input by the user. The Note is provided on an as is basis. DNB PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE NOTES FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE NOTE WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Note, even if advised of the possibility of such damages. Any opinions expressed herein reflect the Banks judgment at the time the Note was prepared and DNB Parties assume no obligation to update the Note in any form or format. The Note should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. No DNB Party is acting as fiduciary or investment advisor in connection with the dissemination of the Note. While the Note is based on information obtained from public sources that the Bank believes to be reliable, no DNB Party has performed an audit of, nor accepts any duty of due diligence or independent verification of, any information it receives. Confidentiality rules and internal rules restrict the exchange of information between different parts of the Bank and this may prevent employees of DNB Markets who are preparing the Note from utilizing or being aware of information available in DNB Markets/the Bank which may be relevant to the recipients of the Note. The Note is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. Distribution of material like the Note is in certain jurisdictions restricted by law. Persons in possession of the Note should seek further guidance regarding such restrictions before distributing the Note. The Note is for clients only, and not for publication, and has been prepared for information purposes only by DNB Markets - a division of DNB Bank ASA registered in Norway with registration number NO 984 851 006 (the Register of Business Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet), Monetary Authority of Singapore, the Chilean Superintendent of Banks, and on a limited basis by the Financial Services Authority of UK. Information about DNB Markets can be found at dnb.no. Additional information for clients in Singapore The Note has been distributed by the Singapore branch of DNB Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of any product referred to in the Note, taking into account your specific financial objectives, financial situation or particular needs before making a commitment to purchase any such product. Recipients of the Note should note that, by virtue of their status as accredited investors or expert investors, the Singapore branch of DNB Bank ASA will be exempt from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the FAA), the Financial Advisers Regulations and associated regulations there under. In particular, it will be exempt from: - Section 27 of the FAA (which requires that there must be a reasonable basis for recommendations when making recommendations on investments). Please contact the Singapore branch of DNB Bank ASA at +65 6212 0753 in respect of any matters arising from, or in connection with, the Note. We, the DNB group, our associates, officers and/or employees may have interests in any products referred to in the Note by acting in various roles including as distributor, holder of principal positions, adviser or lender. We, the DNB group, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DNB group, our associates, officers and/or employees may buy or sell products as principal or agent and may effect transactions which are not consistent with the information set out in the Note. Additional Information, including for Recipients in the In the United States: This note (the Note) is a market letter, as the term is defined in NASD Rule 2211, and, thus, does not constitute a research report within the meaning of U.S. securities laws and regulations, including, without limitation, SEC Rule 15a-6, NASD Rule 2711 and Regulation AC.