Morning Report

21.11.2012

Still healthy development in Norway

NOK & 3m NIBOR
7.50 2.00

The Norwegian moves forward at a healthy pace, Bernanke worries about the fiscal cliff, and European top leaders fails to agree on Greece.
1.90 1.80 1.70

7.40 7.30 7.20

11Oct
3m ra.

31Oct

20Nov
EURNOK

SEK & 3m STIBOR

8.7

8.6 8.5 8.4 11-Oct

31-Oct 20Nov

1.55 1.50 1.45 1.40 1.35

EURSEK

3m ra.

Mainland-GDP in Norway grew by 0.7 percent from Q2 to Q3. This was somewhat higher than consensus expectations, but in line with our estimations. Electricity output fell, and subtracted 0.2 percentage points from total growth. Thus, underlying growth was somewhat stronger than implied by the 0.7 percent that was reported. The traditional growth drivers showed a relatively healthy expansion. Growth in private consumption increased by 0.1 percentage points to 0.9 percent in Q3, helped by strong growth in consumption of services. Besides healthy growth in consumption, gross investments grew somewhat faster than we had expected, and investments in Mainland Norway expanded by 2.2 percent in Q3. Traditional exports (excl. oil and gas) also rose somewhat surprisingly by 0.5 percent. Nonetheless, this was not enough to offset growth imports which meant that net exports subtracted 0.3 percentage points from growth in Mainland GDP. In sum the GDP data shows that the Norwegian economy moves forward at a relatively healthy pace. Although growth came in as we had expected, there were some surprises to the numbers, e.g. an acceleration of growth in private consumption. In spite of this, we do not think the numbers are enough to alter Norges Banks interest rate policy. The central bank had estimated that mainland GDP would rise by 0.6 percent, which is somewhat lower than the actual development. But both Q1 and Q2 data were revised down by a few percentage points, which imply that the data do not deviate much from what Norges Bank presented in October. We stand by our belief that Norges Bank will leave rates on hold until October 2013. Yesterday Feds Ben Bernanke spoke to the New York Economic Club about the economic development in the US. In his speech, Bernanke discussed three topics: Causes of the sluggish economic recovery in the aftermath of the financial crisis; policy actions that have been taken by the Fed to support the economy; and his thoughts on factors that may affect economic development going forward. It is the latter of these that is most interesting. In his speech, Bernanke spent some time focusing on the headwinds that has been suppressing growth recently. One of these headwinds has been the housing market, but Bernanke now sees an improvement, as both sales, prices and construction has picked up. Bernanke also believes that residential investments will be a source of economic growth and new jobs over the next couple of years. The challenge, according to Bernanke, is that there are several factors suppressing the recovery. Banks may have tightened too much on credit expansion to households: the pendulum appears to have swung too far, restraining the pace of recovery in the housing sector." In addition, many households are struggling with negative balance sheets, and a large overhang of vacant homes is holding prices down. Bernanke also warned that the fiscal cliff, which involves an automatic reversal of tax cuts and tax exemptions and a reduction of public spending by New Year, will send the economy toppling back into recession. The Fed Governor highlighted that law makers must focus on two challenges: First that debt (both in terms of growth and level) is on an unsustainable path. Secondly, politicians must avoid to unnecessarily [add] to the headwinds that are already holding back the economic recovery. We believe that the politicians will manage to agree on the fiscal cliff, but that a change in economic policy is needed to move the federal budget on a more sustainable path. Then to some news that isnt really news: European politicians have not been able to agree on how to bring Greek debt down to sustainable levels. Thus, the release of the next loan tranche of 44 bn euros has been delayed (again). According to Reuters, a few more days are needed to resolve what is said to be technical matters. Reuters also reports that the euro leaders now have become aware that debt will not come down to 120 percent of GDP by 2020 unless someone is willing to take losses on their holdings of Greek government debt. The IMF a part of the troika has clearly stated that the someone needs to be European governments and the ECB. According to a note circulated among the European leaders prior to yesterdays meeting, debt will only be reduced to 144 percent of GDP by 2020 unless further action is taken. The failed euro meeting led to an immediate weakening of the euro, and EURUSD is down 0.3 percent. The yen has also continued to depreciate, and USDJPY is up 0.7 percent. Equities are mixed, with a modest rise on European bourses yesterday, while US markets were flat. In Norway forward rates increased by a few points, but this is most likely due to an increase in the corresponding euro-rates. ole.kjennerud@dnb.no As of Unit Prior Poll Yesterdays key economic events (GMT) 09:00 Norway Mainland GDP Q3 q/q % 1.0 0.5 17:15 USA Bernanke speech about the economy to the Economic Club EMU Eurogroup meeting As of Unit Prior Poll Todays key economic events (GMT) 09:00 Norway LFS unemployment Sep % 3.1 10:30 UK Minutes from MPC meeting 14:55 USA Michigan consumer conf. Nov Index 84.9 Actual 0.7 DNB 3.1 84.5

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

Morning Report
21.11.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 1.00 0.50 0.00 11-Oct
31-Oct

94 92 90 20-Nov
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.21 1.20 1.20 11Oct
GBP r.a

0.82 0.81 0.80 0.79 0.78 31Oct 20Nov

CHF

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

Prior 81.69 1.282 0.805 1.204 7.355 8.677 7.458 5.739 7.013 0.848 9.152 6.770 8.282 1.181 10.772

Last 82.07 1.277 0.803 1.205 7.346 8.664 7.457 5.754 7.015 0.848 9.157 6.785 8.270 1.180 10.797

% 0.5% -0.4% -0.3% 0.0% -0.1% -0.2% 0.0% 0.3% 0.0% 0.1% 0.1% 0.2% -0.1% -0.1% 0.2%

In 1 m ...3 m 78 76 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.55 8.55 7.45 7.45 5.75 6.04 7.37 7.95 0.85 0.86 9.1 9.3 6.73 7.13 5.25 5.42 1.17 1.17 10.69 10.84

...6 m ...12 m 76 78 1.20 1.25 0.78 0.80 1.20 1.20 7.25 7.40 8.50 8.60 7.45 7.45 6.04 5.92 7.95 7.59 0.86 0.87 9.3 9.3 7.08 6.88 5.38 5.37 1.16 1.15 10.82 10.63

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

USD 1.0374 0.9977 0.9442 19.90 5.8439 1.5908 7.7511 127.45 0.2826 2.7049 0.5456 0.8145 3.2343 1.2253 31.3832

% -0.15% 0.07% 0.43% 0.56% 0.43% -0.12% 0.01% 0.43% 0.06% 0.38% 0.39% -0.34% 0.32% -0.01% 0.21%

EURSEK & OMXS

8.7 8.6 8.5 8.4 11-Oct 520 500 480 460 20-Nov
EURSEK

31-Oct

OMXS ra.

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

NIBOR Prior 1.81 1.95 2.12 2.26 2.28 2.56 2.85 3.19

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.81 1.40 1.40 0.06 1.95 1.44 1.44 0.13 2.12 1.53 1.53 0.25 2.26 1.63 1.62 0.37 2.26 1.37 1.37 0.54 2.58 1.58 1.58 0.90 2.87 1.82 1.81 1.28 3.17 2.08 2.06 1.74

Last 0.06 0.13 0.25 0.37 0.53 0.90 1.28 1.73

USD LIBOR Prior 0.21 0.31 0.53 0.70 0.49 0.81 1.22 1.71

Last 0.21 0.31 0.53 0.70 0.48 0.80 1.22 1.69

Gov. Bonds, 10y 1.80 1.60 1.40 1.20 11Oct 31Oct 20Nov
SEK NOK, ra.

2.20 2.10 2.00 1.90 1.80

10y 10y yield vs bund

82 80 78 76

NORWAY Prior Last 98.91 99.20 2.12 0.71 2.09 0.68

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.54 118.01 100.765 100.87 1.51 0.10 1.46 0.05 1.40 1.41

US Prior 99.60938 1.67 0.26

Last 99.72 1.66 0.26

JPY and Dow Jones 14.0 13.0 12.0 11-Oct

31-Oct 20Nov

USDJPY ra. DowJones, 1000

USD and gold 1800 1750 1700 1650 1600 11Oct 31Oct 20Nov
Gold

1.35 1.30 1.25 1.20

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 1.90 3.25 1.30 2.25 0.35 1.75 0.45 6m 1.90 3.25 1.30 2.25 0.25 1.75 0.45 12m 2.15 3.50 1.30 2.50 0.25 2.00 0.45 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today DEC 1.95 1.97 -0.02 NOK 91.86 0.03 Dow Jones 12,788.5 MAR 1.90 1.92 -0.02 SEK 115.22 - 0.03 Nasdaq 2,916.7 JUN 1.90 1.91 -0.01 EUR 101.20 - 0.21 S&P 500 1,387.8 SEP 1.90 1.92 -0.02 USD 81.18 0.35 Eurostoxx50 2,509.6 FRA SEK 3m Prior chg GBP 83.70 Dax 7,173.0 DEC 1.42 1.43 -0.01 Comm. Today Last Nikkei225 9,142.6 MAR 1.22 1.29 -0.06 Brent spot 111.1 Invalid field(s). Oslo 439.78 JUN 1.14 1.20 -0.06 Brent 1m 110.2 109.8 Stockholm 499.31 SEP 1.13 1.18 -0.05 Spot gold 0.0 1732.3 Copenhagen 629.83 Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25

% -0.1% 0.0% 0.1% 0.6% 0.7% 0.0% 0.1% 0.3% 0.7%

Morning Report
21.11.2012
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