Morning Report

27.06.2012

Markets waiting for the summit

The market effects were small yesterday, both for equities, interest rates and FX. Everybody seems to be awaiting this week's most important event, the euro zone summit which starts tomorrow. The stock markets remained relatively stable in most economies yesterday. In Europe the leading stock exchanges dropped marginally, while US and Asian stock markets rose slightly. The euro weakened slightly against the dollar yesterday afternoon, but otherwise the EURUSD has traded under 1.25 since yesterday morning. There have also only been small movements for most major currencies, with the exception of the pound which strengthened yesterday morning. Government bond yields in Germany and France rose a little yesterday. Spanish and Italian government bond yields increased more markedly. Italy paid 4.7% interest rate on an auction for two-year government bonds. Tomorrow Italy will auction 5.5 billion euros in the market for of 5 - and 10-year bonds. Spain's auctions of government securities resulted in high interest rates compared to the level in May. Finance ministers of the four major euro zone countries (Germany, France, Italy and Spain) met in Paris yesterday. The purpose was to prepare the summit that starts tomorrow and try to clear the controversy of the road. It may be required. Germany's Merkel said, according to Reuters, that total European debt will not be shared in her life time. On Monday, she said that the euro bonds is economically wrong and counterproductive. Italy's Monti argues on the other hand for using the emergency funds (EFSF / ESM) to stabilize the financial markets. European Council President Rompuy presented a report yesterday arguing for more fiscal integration and a bank union, where he sees the issue of public debt in the medium term. Merkel will meet his French counterpart Hollande for a preparatory meeting today. Yesterday's figures from Europe showed that the mood among German consumers rose slightly, while it went the opposite way in France, although the decline was less than expected. The mood among U.S. consumers fell however, clearly more than expected. The confidence indicator from the Conference Board fell from 64.4 in May to 62.0 in June. It was expected a more moderate decline to 63.5. This was the fourth consecutive month of decline after a peak was reached in February. It is clear that the decline in gasoline prices is not enough to stave off the effects of falls in the stock market, growing unrest in the euro zone and a weak U.S. labor market. The expectation index, which is most correlated with actual spending, fell to 72.3. Normally, it indicates a consumption growth of only just over 1%. House prices from Case-Shiller were however a little better than expected. The price index for 20 cities rose by 0.7% from March to April, while it was expected to rise by 0.4%. The price level is some 2% lower than a year ago. Today durable goods orders will be released. A modest increase is expected in May after zero growth in April. Excluding the volatile transportation orders are expected to increase by 0.5% after falling in April. Pending home sales will also be published today. An increase of just over 1% in May is expected, after a marked fall in April. Yesterday's coverage of a likely Norwegian housing bubble got much attention. We believe there is little basis to argue that we have a bubble in the Norwegian housing market. The sharp rise over the last twenty years can largely be explained by strong household income growth, low interest rates, low unemployment and insufficient construction of new houses, especially since the migration took off after 2004. We recently adjusted our house price forecasts up to a growth of 7% for 2012, while we estimate an increase of 5% for next year. Today, the LFS unemployment rate for April is due. We expect the unemployment rate should show a decline from 3.0% to 2.9%, while the consensus is unchanged unemployment rate, according to Reuters. Norges Bank's estimates in its recent monetary policy report that LFS unemployment will be 3.0% on average for the whole of 2012 and for 2013. LFS report also includes figures on employment and workforce. The trend lately has been relatively strong increase in employment, accompanied by a more moderate increase in the workforce. We believe this trend can continue. [email protected]

SEK & 3m STIBOR 9.3 9.1 8.9 8.7 17-May 6-Jun 2.00 26-Jun
EURSEK

2.20

3m ra.

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

22 94 89 40 22 01 78 20

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 Magne stnor 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 57 22 01 76 67

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

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

Yesterdays key economic events (GMT) 14:00 USA Consumer conf., CB Todays key economic events (GMT) 08:00 Norway LFS unemployment 12:30 USA Durables goods orders

As of Jun As of Apr May

Unit Index Unit % m/m %

Prior 64.9 Prior 3.0 0.0

Poll 63.5 Poll 3.0 0.4

Actual 62.0 DNB 2.9

Morning Report
27.06.2012

SPOT RATES AND FORECASTS

NOK TWI r a.

EUR vs GBP & CHF 1.20 1.20 1.20 0.82 0.81 0.80

0.79 1.20 17-May 6-Jun 26-Jun

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

Prior 79.51 1.249 0.799 1.201 7.514 8.825 7.434 6.015 7.568 0.853 9.407 7.066 8.895 1.175 11.054

Last 79.46 1.250 0.800 1.201 7.517 8.833 7.434 6.015 7.573 0.853 9.416 7.074 8.901 1.177 11.044

% -0.1% 0.1% 0.1% 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1% -0.1%

In 1 m ...3 m 80 84 1.23 1.30 0.79 0.83 1.20 1.20 7.60 7.50 9.10 9.00 7.45 7.45 6.18 5.77 7.72 6.87 0.84 0.83 9.6 9.0 7.40 6.92 5.92 5.82 1.20 1.20 11.52 10.84

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.20 1.30 7.50 7.60 9.00 9.00 7.45 7.45 5.56 5.43 6.54 6.39 0.83 0.84 8.8 8.7 6.67 6.43 5.67 5.46 1.20 1.18 10.59 10.34

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

USD 1.0067 1.0245 0.9610 20.74 5.9474 1.5638 7.7592 126.49 0.2807 2.7620 0.5576 0.7903 3.4041 1.2780 32.8900

% 0.03% 0.00% -0.07% -0.08% -0.08% -0.02% 0.00% -0.04% -0.04% -0.13% -0.21% -0.10% -0.08% -0.04% -0.12%

EURSEK & OMXS 9.3 9.1 8.9 8.7 17-May 6-Jun 500 450 400 350 26-Jun

OMXS ra. EURSEK

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

NIBOR Prior 1.99 2.31 2.62 2.79 2.70 2.97 3.21 3.44

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.00 1.89 1.89 0.32 2.34 2.13 2.13 0.56 2.65 2.38 2.37 0.86 2.82 2.51 2.51 1.03 2.70 1.82 1.82 0.96 2.97 1.99 2.01 1.30 3.20 2.16 2.17 1.62 3.43 2.31 2.32 1.95

Last 0.32 0.56 0.86 1.03 0.95 1.30 1.62 1.95

USD LIBOR Prior Last 0.25 0.25 0.46 0.46 0.73 0.73 0.90 0.90 0.63 0.64 0.98 0.98 1.35 1.35 1.76 1.76

Gov. Bonds, 10y 1.75 1.50 1.25 3.00 2.50 2.00

1.50 1.00 17-May 6-Jun 26-Jun

10y 10y yield vs bund

NORWAY Prior Last 117.6 98.70 2.11 2.14 0.59 0.61

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 118.23 118.28 102.294 102.07 101.10938 1.51 1.50 1.52 1.53 1.63 -0.01 -0.02 0.11

Last 101.09 1.64 0.11

13.0 12.5

JPY and DowJones

81 79

12.0 17-May

6-Jun

77 75 26-Jun

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.40 3.50 2.10 2.50 0.65 2.25 2.50 3.75 2.05 2.75 0.65 2.75 2.85 4.25 2.20 3.00 0.65 3.25
% - 0.16 0.02 - 0.03 - 0.0 Last 90.5 93.0 1576.0

US 3m libor 10y swap 0.50 2.25 0.50 2.50 0.50 3.00

USDJPY ra. DowJones, 1000

USD and gold 1670 1620 1570 1520

1.30 1.25 1.20

17-May 6-Jun 26-Jun

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today SEP 2. 26 2. 26 0.00 NOK 94.01 DEC 2. 25 2. 26 -0.01 SEK 117.49 MAR 2. 25 2. 25 0.00 EUR 99.55 JUN 2. 27 2. 28 -0.01 USD 82.36 FRA SEK 3m Prior chg GBP 83.60 SEP 1. 86 1. 85 0.00 Comm. Today DEC 1. 70 1. 70 0.00 Brent spot 90.5 MAR 1. 65 1. 65 0.00 Brent 1m 92.8 JUN 1. 63 1. 63 0.00 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 12,534.7 Nasdaq 2,854.1 FTSE100 5,447.0 Eurostoxx50 2,128.0 Dax 6,136.7 Nikkei225 8,717.7 Oslo 382.77 Stockholm 462.14 Copenhagen 561.39

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