Morning Report

26.07.2013

Indications of weaker growth in the US

Weak durable goods orders in the US has weakened the dollar significantly. Orders for durable goods in the U.S. rose by 4.2 per cent from May to June, compared with an expected increase of 1.3 percent. The increase was entirely due to a sharp rise in defense and transportation orders. The former grew by 30 percent, while the latter rose by 13 percent. If we adjust for these volatile components, we get "core orders," which gives a much better picture of the underlying trend in the economy. In June core orders declined by 2.2 percent, which led to a 1.2 percent annualized drop from Q1 to Q2. Neither was it encouraging core shipments, which are an important component of business investments, fell by 1.2 percent in Q2. This implies that the private sector (ex. residential and commercial construction) may have reduced investments in Q2. Thus, it appears that the rate of growth in both private consumption and business investment has declined from Q1 to Q2. These components of GDP together make up about 80 percent of total demand. We should therefore not be very surprised if GDP growth is substantially weaker in Q2 than in Q1, when sequential growth was 1.8 percent annualized. Admittedly, the report also contained some positive news. Developments in orders for non-defense capital goods (ex. aircraft) rose by 0.7 percent in June and 8.3 percent annualized in Q2. This may be an indication of a somewhat better development in business investments in Q3. Swedish households are gradually becoming more optimistic. In July, consumer confidence rose by 4.5 points to 8.8. This is somewhat above the long-term average, and the highest level for the index since July 2011. The increase is due to an improvement in all indices, and both micro and macro index rose to levels we previously saw in 2011. Thus, it appears that the Swedes have more confidence in both their own finances and the broader economy than before, which may indicate that private consumption will continue to drive growth in GDP, as has been the case over the last two quarters. Junes unemployment figures also support this picture. Despite an increase in the unemployment rate of 0.1 percentage point to 8.0 percent in June, unemployment (seasonally adjusted) remains below the average in Q1. Admittedly, the unadjusted unemployment rate surged from 8.2 percent in May to 9.1 percent in June, but the increase is entirely due to seasonal variations due to the summer holiday, and should therefore be temporary since unemployment normally falls quite sharply in July. In Germany, the IFO index rose by 0.3 points to 106.2 in July. This was slightly better than expected. Although the index has not changed much from last month it still indicates a pretty good increase in GDP growth going forward. The current level normally corresponds with annual GDP growth between 1.5 and 2.0 percent. In comparison, German GDP grew by 0.7 percent in 2012. In the UK, activity growth is on the rise. In Q2 GDP grew by 0.6 percent q/q, up from 0.3 percent in Q1. Growth was particularly driven by the service sector, which reported a growth of 0.6 percent, or 0.5 percentage points of the overall growth in GDP. The report came in exactly as expected, and thereby confirms the picture we have of the British economy from the monthly data, which over the last few months have improved significantly. For example, unemployment has declined, while employment growth has accelerated. This has provided a basis for an improvement in retail growth, in spite of continued low real wage growth. Meanwhile the housing market has been improving as well, which has had a positive effect on households by lifting households net worth. But also other sectors have reported some improvement in recent months. Among others, industrial orders have increased, while the CIPS index for the services sector in June rose to the highest level since 2009. The weak order data from the United States have contributed to a marked weakening of the dollar, especially against the yen. USDJPY is down by 1.4 percent, while the EURUSD is up 0.6 percent. Also against the Norwegian krone the dollar has depreciated. The rise in USDJPY has triggered a sharp fall in the Tokyo Stock Exchange today, and the Nikkei is down 2.6 percent. Elsewhere in Asia the picture is more moderate. Meanwhile, US equities were more positive in the US yesterday. Admittedly, US treasury yields have declined somewhat, probably on expectations that weak GDP figures in Q2 may lead the Fed to postpone the planned tapering of QE later this year. Today, there are a few key data on the calendar. From the United States we get the final result of Michigan consumer confidence index. It is expected that the index will be revised up 0.3 points to 100 in July. We also get consumer confidence from France, which is expected to rise by 1 point to 79 in July. In addition, we trade figures from Sweden. The Swedish export sector has struggled for a long period, and over the past two years, exports fell by 13 percent. ole.kjennerud@dnb.no Yesterdays key economic events (GMT) 08:00 Germany Ifo Businnes climate 08:30 UK GDP (prel.) 12:30 USA Durable goods orders Todays key economic events (GMT) 06:45 France Consumer conf. 07:30 Sweden Trade balance 13:55 USA Michigan cons.conf (final) As of Jul Q2 Jun As of Jul Jun Jul Unit Index q/q % m/m % Unit Index SEK bn Index Prior 105.9 0.3 5.2 Prior 78.0 5.7 83.9 Poll 106.1 0.6 1.3 Poll 79.0 Actual 106.2 0.6 4.2 DNB
NOK & 3m NIBOR
8.10 1.90 1.80 1.70 1.60 1.50 26-Jul
3m (rha)

7.90
7.70

7.50 28-Jun

12-Jul

EURNOK

Norw ay: 10y Gov't Bond

2.8 2.6 2.4 2.2 2.0 28-Jun
Rate

125

105
85 12-Jul

65 26-Jul
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
26.07.2013

3m LIBOR
0.155 0.150 0.145 0.140 0.135 0.130 28-Jun
EUR

12-Jul

0.28 0.28 0.27 0.27 0.26 0.26 26-Jul

USD (rha)

Oil price & NOK TWI

98 97 96 95 94 93 110

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 100.08 1.3208 0.8617 7.4580 8.5960 1.2378 7.8356 5.9335 5.93 91.25 105.11 9.098 6.332

Today 98.66 1.3285 0.8629 7.4566 8.6059 1.2339 7.8436 5.9058 5.99 91.21 105.24 9.094 6.359

Spot rates and forecasts In 1m Oct-13 Jan-14 -1.4 98 102 107 0.6 1.30 1.26 1.30 0.1 0.85 0.85 0.86 0.0 7.45 7.45 7.45 0.1 8.55 8.45 8.50 -0.3 1.24 1.25 1.27 0.1 7.80 7.70 7.70 -0.5 6.00 6.11 5.92 1.0 6.12 5.99 5.54 0.0 91.2 91.1 90.6 0.1 104.7 103.4 103.4 0.0 9.18 9.06 8.95 0.4 6.29 6.16 6.06

Jul-14 FX 0700 110 AUD 1.32 CAD 0.87 CHF 7.45 CZK 8.60 RUB 1.30 GBP 7.70 HKD 5.83 KWD 5.30 LTL 89.5 LVL 103.4 NZD 8.85 SEK 5.92 SGD

USD 0.928 1.027 0.929 19.519 32.630 1.540 7.757 0.285 2.599 0.529 0.809 6.477 1.263

NOK 5.475 5.745 6.356 30.241 18.090 9.087 0.761 20.740 2.271 11.162 4.776 91.140 4.675

28-Jun

12-Jul

95 26-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6

28-Jun 12-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 26-Jul

EURUSD(rha)

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

Prior 1.66 1.71 1.78 1.93 2.13 2.57 2.93 3.28

Last 1.65 1.71 1.78 1.91 2.13 2.58 2.96 3.30

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

Prior 1.10 1.19 1.28 1.69 2.11 2.40 2.67

Interest rates Last USD 1.10 1m 1.19 3m 1.28 6m #N/A 12m 1.69 3y 2.11 5y 2.40 7y 2.67 10y

Prior 0.19 0.26 0.40 0.68 0.79 1.54 2.16 2.76

Last 0.19 0.26 0.40 0.68 0.79 1.57 2.19 2.79

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

Prior 0.08 0.15 0.26 0.47 0.74 1.18 1.55 1.97

Last 0.08 0.15 0.26 0.47 0.71 1.17 1.55 1.99 Last 98.43 1.68 -0.90 10y sw ap 1.75 1.75 2.00

102.0 100.0
98.0

Japanese yen

96.0 28-Jun
USDJ PY

12-Jul

7.0 6.5 6.0 5.5 5.0 26-Jul

Norw ay Prior NST475 94.55 10y yld 2.64 - US spread 0.03 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.35 10y 93.51 93.51 10y 92.64 2.66 10y yld 2.21 2.21 10y yld 2.60 0.08 - US spread -0.39 -0.37 30y yld 3.66 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 92.84 10y 98.60 2.58 10y yld 1.66 3.64 - US spread -0.95 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

93 6.6

91
89

6.4
6.2

87 28-Jun
SEKNOK

12-Jul

6.0 26-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 28-Jun 12-Jul

Dow Jones

510 500 490 480 470 460 450 26-Jul

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.56 1.59 3 18.12.2013 0.40 Last 95.32 95.13 1.44 1.46 2 19.03.2014 0.65 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.90 SPOT 108.33 107.56 1.45 1.43 -2 15.05.2015 1.80 Gold price 25.07.2013 PM 1.73 1.73 0 19.05.2017 3.82 AM: 1335.0 1326.0 2.61 2.64 3 24.05.2023 9.83 Equities Today 0700 % last 2.61 2.64 3 24.05.2023 9.83 Dow Jones 15555.61 0.1% 2.64 2.66 2 24.05.2023 9.83 Nasdaq C. 3605.19 0.7% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6587.95 -0.5% 1.72 1.81 1m 1.73 1.65 Eurostoxx50 2740.29 -0.4% 1.71 1.81 3m 1.78 1.71 DAX 8298.98 -1.0% 1.72 1.86 6m 1.83 1.78 Nikkei 225 14136.18 -2.9% 1.74 1.91 12m 1.98 1.91 OSEBX 496.16 -0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
26.07.2013
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 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 t he Financial Advisers Regulations (FAR). The Singapore branch of DNB Bank ASA is a financial adv iser 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.

Morning Report
26.07.2013

3m LIBOR
0.155 0.150 0.145 0.140 0.135 0.130 28-Jun
EUR

12-Jul

0.28 0.28 0.27 0.27 0.26 0.26 26-Jul

USD (rha)

Oil price & NOK TWI

98 97 96 95 94 93 110

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 100.08 1.3208 0.8617 7.4580 8.5960 1.2378 7.8356 5.9335 5.93 91.25 105.11 9.098 6.332

Today 98.66 1.3285 0.8629 7.4566 8.6059 1.2339 7.8436 5.9058 5.99 91.21 105.24 9.094 6.359

Spot rates and forecasts In 1m Oct-13 Jan-14 -1.4 98 102 107 0.6 1.30 1.26 1.30 0.1 0.85 0.85 0.86 0.0 7.45 7.45 7.45 0.1 8.55 8.45 8.50 -0.3 1.24 1.25 1.27 0.1 7.80 7.70 7.70 -0.5 6.00 6.11 5.92 1.0 6.12 5.99 5.54 0.0 91.2 91.1 90.6 0.1 104.7 103.4 103.4 0.0 9.18 9.06 8.95 0.4 6.29 6.16 6.06

Jul-14 FX 0700 110 AUD 1.32 CAD 0.87 CHF 7.45 CZK 8.60 RUB 1.30 GBP 7.70 HKD 5.83 KWD 5.30 LTL 89.5 LVL 103.4 NZD 8.85 SEK 5.92 SGD

USD 0.928 1.027 0.929 19.519 32.630 1.540 7.757 0.285 2.599 0.529 0.809 6.477 1.263

NOK 5.475 5.745 6.356 30.241 18.090 9.087 0.761 20.740 2.271 11.162 4.776 91.140 4.675

28-Jun

12-Jul

95 26-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6

28-Jun 12-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 26-Jul

EURUSD(rha)

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

Prior 1.66 1.71 1.78 1.93 2.13 2.57 2.93 3.28

Last 1.65 1.71 1.78 1.91 2.13 2.58 2.96 3.30

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

Prior 1.10 1.19 1.28 1.69 2.11 2.40 2.67

Interest rates Last USD 1.10 1m 1.19 3m 1.28 6m #N/A 12m 1.69 3y 2.11 5y 2.40 7y 2.67 10y

Prior 0.19 0.26 0.40 0.68 0.79 1.54 2.16 2.76

Last 0.19 0.26 0.40 0.68 0.79 1.57 2.19 2.79

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

Prior 0.08 0.15 0.26 0.47 0.74 1.18 1.55 1.97

Last 0.08 0.15 0.26 0.47 0.71 1.17 1.55 1.99 Last 98.43 1.68 -0.90 10y sw ap 1.75 1.75 2.00

102.0 100.0
98.0

Japanese yen

96.0 28-Jun
USDJ PY

12-Jul

7.0 6.5 6.0 5.5 5.0 26-Jul

Norw ay Prior NST475 94.55 10y yld 2.64 - US spread 0.03 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.35 10y 93.51 93.51 10y 92.64 2.66 10y yld 2.21 2.21 10y yld 2.60 0.08 - US spread -0.39 -0.37 30y yld 3.66 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 92.84 10y 98.60 2.58 10y yld 1.66 3.64 - US spread -0.95 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

93 6.6

91
89

6.4
6.2

87 28-Jun
SEKNOK

12-Jul

6.0 26-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 28-Jun 12-Jul

Dow Jones

510 500 490 480 470 460 450 26-Jul

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.56 1.59 3 18.12.2013 0.40 Last 95.32 95.13 1.44 1.46 2 19.03.2014 0.65 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.90 SPOT 108.33 107.56 1.45 1.43 -2 15.05.2015 1.80 Gold price 25.07.2013 PM 1.73 1.73 0 19.05.2017 3.82 AM: 1335.0 1326.0 2.61 2.64 3 24.05.2023 9.83 Equities Today 0700 % last 2.61 2.64 3 24.05.2023 9.83 Dow Jones 15555.61 0.1% 2.64 2.66 2 24.05.2023 9.83 Nasdaq C. 3605.19 0.7% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6587.95 -0.5% 1.72 1.81 1m 1.73 1.65 Eurostoxx50 2740.29 -0.4% 1.71 1.81 3m 1.78 1.71 DAX 8298.98 -1.0% 1.72 1.86 6m 1.83 1.78 Nikkei 225 14136.18 -2.9% 1.74 1.91 12m 1.98 1.91 OSEBX 496.16 -0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets