Morning Report

03.06.2013

Stocks Down Despite Sold U.S. Figures

The labor market weakened at home, while concerns about credit growth accelerate. Solid figures for the United States went along with the decline in equity markets.
NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90

1.80
1.70

30-Apr

16-May

1.60 03-Jun
3m (rha)

Despite good U.S. macroeconomic figures Friday, U.S. stocks fell. Also in Europe there was a decline in the major stock indices. In Japan, the Nikkei 225 closed down 3.7 per cent today. In the U.S. bond yields rose a few bps. An improving U.S. economy increases expectations that the Fed will step down securities purchases. This may contribute to lower stock prices and demand for government bonds. The dollar has strengthened slightly since Friday morning with EURUSD is down 0.1 per cent. Lower risk appetite has strengthened both CHF and JPY. The Norwegian krone has depreciated 0.2 per cent against the euro, and it was small reactions to the Norwegian figures when they were released. Norges Bank announced Friday that it will reduce the daily foreign exchange purchases to the Pension Fund. For June, Norges Bank will buy FX for NOK 200 million per day, down from NOK 300 million per day in previous months. This was in line with our expectation and we believe that Norges Bank will maintain this level for a few more months. EURNOK did not react to the news. But there were several figures that were released at the same time. After a break in April, the number of registered unemployed increased by more than 2,160 people in May to around 69,900 adjusted for seasonally variations. Gross unemployment - which includes people on labour market measures - increased by more than 1,710 people on a seasonally adjusted basis an increase for the fourth consecutive month. Calculated as a percentage of the labor force the unemployment rate was 2.5 per cent (unadjusted). The consensus estimate was 2.4 per cent. Since January, gross unemployment has risen by more than 4,500 people. Also the number of initial claims rose further in May and has risen 13 per cent since February. NAV statistics indicate now clearly a weakening of the labor market so far this year, but the rise in registered unemployment has still been less than the SNs LFS survey has indicated. In its monetary policy report from March Norges Bank forecasted a stable unemployment rate of 2 per cent this year and the next two years. The recent development in the labour market, both in the NAV figures and LFS figures, suggests a weaker labor market than Norges Bank assumed. This could have pointed to the increased chance of rate cuts in Norway. Statistics Norway, however, presented figures for credit indicator C2 that pointed the opposite direction. It showed an overall increase from April last year to April this year of 6.5 per cent. It was expected a rise to 6.1 per cent (according to Bloomberg). For household credit growth was 7.7 per cent y/y, up from 7.4 per cent in March (revised up from 7.2 per cent). This is the highest growth rate since October 2008. Household credit growth in March was exceptionally low in the previous release of the figures. It could indicate that credit growth was slowing. Now the March credit figures were revised upwards and in April the growth rose further. Now there are few signs in figures that households are affected by tighter lending standards. High debt growth and a high level of debt is a major reason that the Bank choose to hold an interest rate well above that which would give an optimal development in inflation and output relative to the Norges Banks targets. The concern for financial stability may have increased after Friday's credit figures and counteracted the effects of weaker labour market figures.. In the U.S. consumer spending in April decreased by 0.2 per cent. Some of the decline was due to lower gasoline prices. Real consumption increased 0.1 per cent. Consumption of electricity etc.. for heating purposes fell in April after a cold March, and pulled the total number down. The figures still point to slower growth in consumer spending in the second quarter than in the first. But the Michigan University consumer confidence index was revised up 0.8 points to 84.5, its highest level since July 2007. For the first time in five years households say that their personal finances have improved. This may indicate better consumption figures ahead. Core PCE deflator fell in April to 1.1 percent y/y. It is well below the target of 2.0 per cent and the trend is decreasing. The biggest surprise in the U.S. numbers Friday was the Chicago PMI. This index rose from 49 to 58.7. It was expected a rise to 50 The May reading is the highest since March last year, and the increase was the sharpest at almost 30 years. All sub-indices except stock rose markedly and the index points to an increase of the ISM index that is released today. In the euro zone the unemployment in April rose by 95,000 to record high 19.4 million. The unemployment rate rose to 12.2 per cent. There was a slight decrease for Germany, but elevations of all the other major economies. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 08:00 Norway Reg. unemployment 08:00 Norway FX purchase 12:30 USA Core PCE Deflator Todays key economic events (GMT) 07:00 Norway PMI 07.58 EMU PMI, manufacturing 14:00 USA ISM, manufacturing As of May Jun Apr As of Jun Jun May Unit % Mill. m/m % Unit Index Index Index Prior 2.6 300 0.0 Prior 48.9 47.8 50.7 Poll 2.4 0.1 Poll 49.5 47.8 50.5 Actual 2.5 200 0.0 DNB 49.5 49.5

EURNOK

Norw ay: 10y Gov't Bond

2.3

2.2
2.1

2.0
30-Apr
Rate

16-May

90 85 80 75 70 65 03-Jun
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 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
03.06.2013

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 03-Jun
USD (rha)

30-Apr
EUR

16-May

Oil price & NOK TWI

94 93 92 91 90 110

105
100

30-Apr

16-May

95 03-Jun
USD/b (rha)

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 1.3036 0.8567 7.4550 8.5651 1.2454 7.6150 5.8410 5.78 88.99 102.17 8.889 6.115

Today 100.34 1.3017 0.8540 7.4556 8.5925 1.2453 7.6000 5.8388 5.82 88.46 101.95 8.899 6.104

Spot rates and forecasts In 1m Aug-13 Nov-13 May-14 FX 0700 -0.7 102 105 107 110 AUD -0.1 1.27 1.26 1.30 1.32 CAD -0.3 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.3 8.55 8.45 8.50 8.60 RUB 0.0 1.24 1.25 1.27 1.30 GBP -0.2 7.55 7.50 7.45 7.40 HKD 0.0 5.94 5.95 5.73 5.61 KWD 0.7 5.83 5.67 5.36 5.10 LTL -0.6 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 0.963 5.620 1.036 5.633 0.957 610.251 19.771 29.525 32.070 18.202 1.524 8.899 7.763 0.752 0.286 20.429 2.652 2.201 0.539 10.835 0.796 4.648 6.600 88.442 1.258 4.639

NOK TWI

US dollar 6.0 5.9 5.9 5.8 5.8 5.7

30-Apr 16-May
USDNOK

1.33 1.31 1.29 1.27 1.25 03-Jun

EURUSD(rha)

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

Prior 1.70 1.77 1.87 2.03 2.07 2.40 2.73 3.09

Last 1.66 1.75 1.84 2.01 2.07 2.42 2.74 3.09

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

Prior 1.17 1.20 1.25 1.47 1.79 2.07 2.36

Interest rates Last USD 1.17 1m 1.20 3m 1.25 6m #N/A 12m 1.47 3y 1.79 5y 2.07 7y 2.36 10y

Prior 0.19 0.27 0.42 0.69 0.63 1.17 1.70 2.27

Last 0.19 0.28 0.41 0.69 0.63 1.17 1.70 2.27

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

Prior 0.06 0.12 0.20 0.40 0.61 0.95 1.30 1.73

Last 0.06 0.12 0.20 0.39 0.58 0.95 1.30 1.74 Last 99.90 1.51 -0.63 10y sw ap 1.75 1.75 2.00

104.0 102.0 100.0 98.0 96.0 94.0

Japanese yen

30-Apr
USDJ PY

16-May

7.0 6.5 6.0 5.5 5.0 03-Jun

Norw ay Prior NST475 97.95 10y yld 2.23 - US spread 0.12 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 98.22 10y 96.01 95.90 10y 96.77 2.20 10y yld 1.93 1.94 10y yld 2.11 0.06 - US spread -0.18 -0.21 30y yld 3.27 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 96.47 10y 99.90 2.14 10y yld 1.51 3.30 - US spread -0.60 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 30-Apr 16-May
SEKNOK

6.3 6.2 6.1 6.0 5.9 5.8 03-Jun

CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 30-Apr
Dow Jones

16May

500 490 480 470 460 03-Jun

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 1.52 1.53 1 18.09.2013 0.29 Last 92.65 92.71 1.40 1.40 1 18.12.2013 0.54 Oil price: (Ldn,cl) 1m 1.47 1.48 0 19.03.2014 0.79 SPOT 99.76 100.01 1.17 1.16 -1 15.05.2015 1.95 Gold price 31.05.2013 PM 1.45 1.43 -2 19.05.2017 3.96 AM: 1413.5 1394.5 0.00 0.00 0 24.05.2023 9.98 Equities Today 0700 % last 2.21 2.20 -1 24.05.2023 9.98 Dow Jones 15115.57 -1.4% 2.23 2.20 -3 24.05.2023 9.98 Nasdaq C. 3455.91 -1.0% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6583.09 -1.1% 1.79 1.89 1m 1.77 1.66 Eurostoxx50 2769.64 -1.1% 1.76 1.88 3m 1.88 1.75 DAX 8348.84 -0.6% 1.77 1.89 6m 1.93 1.84 Nikkei 225 13261.82 -3.7% 1.79 1.92 12m 2.08 2.01 OSEBX 491.71 -1.0% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
03.06.2013
IMPORTANT/DISCLAIMER
This note (the Note) must be seen as marketing material and not as an investment recommendation within the meaning of the N orwegian 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 ass ume 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), The Monetary Authority of Singapore, and on a limited basis by the Financial Conduct Authority and the Prudential Regulation Authority of the UK, and the Financial Supervisory Authority of Sweden. Details about the extent of our regulation by local authorities outside Norway are available from us on request. 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. You have received a copy of the Note because you have been classified either as an accredited investor, an expert investor or as an institutional investor, as these terms have been defined under Singapores Financial Advisers Act (Cap. 110) (FAA) and/or the Financial Advisers Regulations (FAR). The Singapore branch of DNB Bank ASA is a financial adviser exempt from licensing under the FAA but is otherwise subject to the legal requirements of the FAA and of the FAR. By virtue of your status as an accredited investor or as an expert investor, the Singapore branch of DNB Bank ASA is, in respect of certain of its dealings with you or services rendered to you, exempt from having to comply with certain regulatory requirements of the FAA and FAR, including without limitation, sections 25, 27 and 36 of the FAA. Section 25 of the FAA requires a financial adviser to disclose material information concerning designated investment products which are recommended by the financial adviser to you as the client. Section 27 of the FAA requires a financial adviser to have a reasonable basis for making investment recommendations to you as the client. Section 36 of the FAA requires a financial adviser to include, within any circular or written communications in which he makes recommendations concerning securities, a statement of the nature of any interest which the financial adviser (and any person connected or associated with the financial adviser) might have in the securities. 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. The Note is intended for and is to be circulated only to persons who are classified as an accredited investor, an expert investor or an institutional investor. If you are not an accredited investor, an expert investor or an institutional investor, please contact the Singapore branch of DNB Bank ASA at +65 6212 0753. 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: The Note does not constitute an offer to sell or buy a security and does not include information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer; rather, it is a market letter, as the term is defined in NASD Rule 2211.