Morning Report

20.09.2012

Chinese PMI disappoints

NOK & 3m NIBOR 7.50 7.40 7.30 7.20
3m ra.

A marginal increase in the Chinese PMI has trigged a decline in Asian stock markets. The poor PMI reading from France this morning indicates that euro zone PMIs might disappoint as well.
2.50 2.35 2.20 2.05 1.90

10-Aug 30-Aug 19-Sep

EURNOK

The pace of deterioration in Chinese manufacturing seems to have stalled in September. Flash PMI flash edged up from 47.6 in August (the lowest level in nine months) to 47.8 in September. The subindices for new orders, employment and order backlogs increased. On the other hand, the output index fell to 47.0, the lowest level in ten months. Last week the Chinese government announced new measures to help exporters, including tax rebates and extended credit to export companies and small businesses. The markets had apparently expected a larger rise in the PMI, and Asian markets have opened in negative territory today. Yesterday there was a slight rise in most stock markets, one of the exceptions being the Oslo Stock Exchange, which was weighed by a steep fall in oil prices. German and US government bond yields have edged down again, but are still well above the trough earlier this year. The impact of the Bank of Japan's extended asset purchases on the Japanese yen proved short-lasting. The yen has appreciated by 1.4 percent against the dollar since yesterday morning. The euro has depreciated, and EURUSD is currently trading at just below 1.30. The US housing market recovery is gaining traction. Housing construction rose by 2.3 percent m/m in August, to 750 000. This was slightly lower than expected (765 ', according to Reuters). Construction has rebounded since the through at 480 ', but large excess capacity in the wake of very high construction activity in the years before the crisis continues to put a damper on recovery. At the peak in January 2006 annual construction was at 2.3 million. The recovery is hence stronger in the market for existing homes, where sales rose by 7.8 percent m/m in August. Annualized, this corresponds to a sale of 4.82 million units, the highest level since May 2010. Fed purchases of mortgage-backed securities will probably boost affordability of housing through a further decline in borrowing costs. The 30-year fixed mortgage rate is currently at 3.72 percent. Releases today: Initial claims are expected to have declined somewhat, after a clear upward trend since mid-August. The Philadelphia Fed index is expected to show an improvement from -7.1 in August to -4.0 in September. Government of Sweden has released its budget proposal for 2013 this morning, in which the measures total to SEK 22.7 billion, investing in the future. Corporate taxes will be cut by 4.3 percentage points to 22 percent in order to facilitate increased investment and increased employment. Other measures include investments in infrastructure and measures to reduce youth unemployment. The government expects a slight deficit this year and the next year, followed by an improvement in net lending in the years thereafter. Todays euro zone news:. The headline PMI index is expected to rise from 46.3 to 46.6, with a slight increase in both the manufacturing and service index. The disappointing French PMI published at 7.00 AM, showing a drop from 48.0 to 44.1, indicates that the outcome for the euro wide PMI will be lower than expected. The consumer confidence index has plummeted in recent months to a level well below normal. In September consensus (Reuters) expects a marginal increase (from -24.6 to -24.0). This level would still indicate declining consumption. Spain issues new long-term government bonds today. The authorities aim to raise a total of 4.5 billion euros in the market, in 3 and 10 year bonds. In the secondary market, the Spanish 10-year yield has continued to fall. According to Reuters analysts expect todays borrowing cost for the 10-year bond to come to 5.75 percent, down from 6.65 percent in a similar auction 2 august. UK retail sales will be released today. After a steep decline in April, retail sales have rebounded strongly. In July sales increased by 0.3 percent m/m and the trend (as measured by 3m/3m annualized rate) was at 4.3 percent. As the development in households real incomes is very weak, there is reason to believe that the London Olympics have had a positive (but temporary) effect on sales. Consensus (Reuters) expects a decline of 0.4 percent m/m in August. Yesterday's minutes from the monetary policy meeting on 6 September supported market expectations for more quantitative easing. One member (Miles) wanted to increase the asset purchase program at this meeting, and many believed that the purchases will probably have to be raised "in due course". kjersti.haugland@dnb.no Yesterday's key economic events (GMT) 14:00 USA Existing home sales 02:30 China Flash PMI manufacturing Todays key economic events (GMT) 07:58 EMU PMI, flash 08:30 UK Retail sales 12:30 USA Initial claims As of Aug Sep As of Sep Aug Week 37 Unit mill Index Unit Index m/m % 1000 Prior 4.5 47.6 Prior 46.3 0.3 382 Poll 4.6 Poll 46.6 -0.4 375 Actual 4.8 47.8 DNB

SEK & 3m STIBOR 8.8 8.6 8.4 8.2 8.0

3m ra.

2.40 1.60 0.80 0.00

EURSEK

10-Aug 30-Aug 19-Sep

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

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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

Morning Report
20.09.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 125 115 105 95 85 10-Aug
NOK TWI ra.

94 93 92 91 90 30-Aug 19-Sep
$/b

EUR vs GBP & CHF 1.22 1.22 1.21 1.21 1.20

GBP r.a

0.82 0.80 0.78 0.76

CHF

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

Prior 78.40 1.305 0.805 1.210 7.442 8.498 7.454 5.705 7.282 0.877 9.271 6.515 8.306 1.143 10.569

Last 78.16 1.295 0.802 1.208 7.446 8.503 7.455 5.748 7.355 0.876 9.296 6.568 8.405 1.143 10.618

% -0.3% -0.7% -0.4% -0.2% 0.0% 0.1% 0.0% 0.8% 1.0% -0.1% 0.3% 0.8% 1.2% 0.0% 0.5%

In 1 m ...3 m 78 76 1.27 1.15 0.79 0.76 1.20 1.20 7.30 7.20 8.40 8.40 7.45 7.45 5.75 6.26 7.37 8.24 0.87 0.86 9.2 9.5 6.61 7.30 5.16 5.55 1.15 1.17 10.63 11.05

...6 m ...12 m 76 78 1.15 1.20 0.78 0.80 1.20 1.20 7.30 7.40 8.50 8.50 7.45 7.45 6.35 6.17 8.35 7.91 0.86 0.87 9.4 9.3 7.39 7.08 5.62 5.53 1.16 1.15 10.90 10.63

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

USD 1.0375 0.9812 0.9332 19.24 5.7580 1.6169 7.7536 123.72 0.2809 2.6654 0.5379 0.8216 3.2270 1.2272 31.6460

% -1.06% 0.67% 0.64% 0.72% 0.77% -0.35% 0.00% 0.73% 0.09% 0.73% 0.73% -0.71% 1.43% 0.22% 1.36%

10-Aug 30-Aug 19-Sep

EURSEK & OMXS 8.7 8.5 8.3 8.1

OMXS ra. EURSEK

575 500 425 350

10-Aug 30-Aug 19-Sep

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

NIBOR Prior 1.80 1.92 2.16 2.29 2.33 2.66 2.98 3.33

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.85 1.54 1.52 0.07 1.96 1.65 1.62 0.16 2.21 1.85 1.83 0.40 2.35 1.95 1.93 0.55 2.31 1.54 1.50 0.65 2.65 1.75 1.71 1.06 2.96 2.00 1.96 1.46 3.31 2.23 2.19 1.89

Last 0.07 0.16 0.39 0.54 0.60 0.99 1.39 1.82

USD LIBOR Prior Last 0.22 0.22 0.38 0.38 0.66 0.66 0.82 0.82 0.47 0.47 0.84 0.81 1.31 1.24 1.84 1.76

Gov. Bonds, 10y 1.60 1.40 1.20 1.00

NOK, ra.

3.00 2.50 2.00 1.50

SEK

10-Aug 30-Aug 19-Sep

10y 10y yield vs bund

NORWAY Prior Last 97.3 97.30 2.29 2.29 0.67 0.71

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.08 117.11 99.091 99.27 1.58 1.58 1.61 1.58 -0.03 0.00

US Prior 98.65625 1.77 0.16

Last 99.05 1.74 0.16

81 14.0 13.5 79 13.0 77 12.5 75 12.0 10-Aug 30-Aug 19-Sep

USDJPY ra. DowJones, 1000

JPY and DowJones

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 1.90 3.25 1.65 2.25 0.25 1.75 1.90 3.25 1.65 2.25 0.25 1.75 2.05 3.50 1.65 2.50 0.25 2.00

US 3m libor 10y swap 0.45 1.75 0.45 1.75 0.45 2.25

USD and gold 1820 1720 1620 1.32 1.28 1.24

1.20 1520 10-Aug 30-Aug 19-Sep

EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today DEC 1.87 1.89 -0.02 NOK 93.10 MAR 1.86 1.88 -0.02 SEK 113.16 JUN 1.88 1.92 -0.04 EUR 100.87 SEP 1.91 1.95 -0.04 USD 79.53 FRA SEK 3m Prior chg GBP 0.00 DEC 1.48 1.49 -0.01 Comm. Today MAR 1.36 1.38 -0.02 Brent spot 108.7 JUN 1.34 1.37 -0.02 Brent 1m 107.5 SEP 1.35 1.37 -0.02 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% 0.03 0.07 - 0.59 0.56 - 100.0 Last 108.7 112.0 1766.8

Stock ex. Today Dow Jones 13,578.0 Nasdaq 3,182.6 FTSE100 5,888.5 Eurostoxx50 2,567.7 Dax 7,390.8 Nikkei225 9,087.0 Oslo 453.37 Stockholm 519.78 Copenhagen #N/A ND

% 0.1% 0.2% 0.3% 0.6% 0.6% 0.0% -0.5% 0.5% :

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