Morning Report

25.09.2012

IFO Disappointed the Markets

NOK & 3m NIBOR 7.50 7.40 2.50 2.35 2.20 7.30 2.05 7.20 1.90 15-Aug 4-Sep 24-Sep
3m ra. EURNOK

IFO index surprised on the downside and contributed to the weakening of the euro and a decline in equity markets. There was a thin key calendar yesterday. The more attention was therefore devoted to the German IFO index, which is an important indicator of developments in the German economy. The index for September fell to 101.4, the lowest level since February 2010 and the fifth consecutive month of decline. It was also weaker than expected. The expectation index, which correlates best with GDP, indicates a decrease of one percent in GDP year over year. The current situation index also declined. Looking atr various industries, the IFO for manufacturing and construction had the strongest declines. All in all, the index points toward a new downturn for the Euro zone's single largest economy. The figures led to a marked decline in the euro against the U.S. dollar, and EURUSD was quoted at 1.2889. It was the lowest rate since 13 September, but the rate rose slightly throughout the afternoon. From yesterday morning EURUSD has declined only 0.1 percent. The Norwegian krone has strengthened slightly against the euro in the past day and when typing the EURNOK is quoted 7.43, down a few re from yesterday. Also EURSEK is slightly down from yesterday. The movements in the foreign exchange markets have in general been moderate since yesterday morning but it is worth noting that the Japanese yen has appreciated slightly against the U.S. dollar. Many have expected that yen to rise ahead of half-year book-closing due to repatriation. But some reports suggest that any such repatriation largely been done and that further strengthening can hardly be expected. In the absence of other indicators and positive events, yesterday's IFO index led the decline in world stock markets. In the U.S., the S & P500 declined 0.2 percent. In Europe many indices were down 0.5-1 percent. Today, the Japanese Nikkei 225 and Hong Kong Stock Exchange are down 0.2 percent. In the U.S. and euro zone long-term interest rates headed downwards but just a few basis points. To support the negative impact from the IFO figures, IMF chief Christine Lagarde not surprisingly warned that the IMF will revise down its growth forecasts from July, when the new World Economic Outlook is released in October. Today, the house price figures from the U.S. will be released. It can provide additional confirmation that the U.S. housing market is about to improve. Previously we have seen that sales figures have risen. Certainly, turnover remains low, but there are clear signs that the bottom is passed. The NAHB index, which measures house builders' expectations, has also risen sharply. House prices have started to rise, but not much. But now it is expected an increase of 0.9 percent from June to July. Later in the day figures for consumer confidence from the Conference Board will be released. The confidence is expected to decline. In Europe, several confidence indices will be released. In Germany GfK consumer confidence for October has already been released, showing unchanged level from September as expected. The French statistical office will soon release the INSEE index, an indicator of business sentiment. In Italy, the consumer confidence figures for September will be released. With the trend we've seen lately, there is little reason to expect much recovery in these indices, and consensus expectations are largely unchanged levels or slightly down. On the calendar today is a meeting between German Chancellor Angela Merkel and ECB chief Mario Draghi in Berlin. Moreover, the finance ministers of Germany, Finland and the Netherlands also meet today. According to the auction calendar to Spain to publish Treasury bills today, while Italy and the Netherlands will post Treasuries. kyrre.aamdal@dnb.no

SEK & 3m STIBOR 8.8 2.40 8.6 1.60 8.4 0.80 8.2 8.0 0.00 15-Aug 4-Sep 24-Sep
3m ra. EURSEK

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

Yesterday's key economic events (GMT) 08:00 Germany IFO total 08:00 Germany IFO expectations 12:30 USA Chicago Fed activity Todays key economic events (GMT) 06:45 France INSEE buisness sent. 13:00 US Case-Shiller home prices 14:00 US FHFA home prices 14:00 US CB consumer confidence

As of Sep Sep Aug As of Sep Jul Jul Sep

Unit Index Index Index Unit index m/m % m/m % index

Prior 102.3 94.2 -0.12 Prior 90.0 0.9 0.7 60.6

Poll 102.4 95.0 Poll 90.0 0.8 62.0

Actual 101.4 93.2 -0.87 DNB

Morning Report
25.09.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 125 115 105 95 85 15-Aug 94 93 92 91 90 24-Sep
$/b

4-Sep

NOK TWI ra.

EUR vs GBP & CHF 0.82 1.22 1.22 0.80 1.21 0.78 1.21 1.20 0.76 15-Aug 4-Sep 24-Sep
GBP r.a CHF

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

Prior 77.86 1.293 0.797 1.210 7.431 8.487 7.456 5.747 7.384 0.875 9.324 6.562 8.451 1.142 10.649

Last 77.78 1.290 0.795 1.210 7.422 8.505 7.456 5.754 7.398 0.872 9.346 6.594 8.477 1.147 10.710

% -0.1% -0.3% -0.3% 0.0% -0.1% 0.2% 0.0% 0.1% 0.2% -0.4% 0.2% 0.5% 0.3% 0.4% 0.6%

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 1.0424 0.9794 0.9383 19.33 5.7826 1.6235 7.7534 124.33 0.2813 2.6774 0.5403 0.8240 3.2181 1.2282 31.1625

% -0.04% 0.05% 0.25% 0.03% 0.27% 0.09% 0.00% 0.26% -0.15% 0.25% 0.26% 0.11% 0.20% 0.01% 0.02%

EURSEK & OMXS 8.7 8.5 8.3 8.1 15-Aug 4-Sep 575 500 425 350 24-Sep

OMXS ra. EURSEK

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

NIBOR Prior 1.79 1.90 2.18 2.32 2.29 2.61 2.92 3.26

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.79 1.49 1.48 0.07 1.89 1.60 1.59 0.15 2.13 1.80 1.79 0.38 2.28 1.90 1.89 0.53 2.27 1.46 1.46 0.56 2.59 1.66 1.65 0.94 2.90 1.91 1.90 1.33 3.24 2.15 2.13 1.78

Last 0.07 0.15 0.37 0.52 0.55 0.91 1.31 1.75

USD LIBOR Prior Last 0.22 0.22 0.37 0.37 0.66 0.65 0.82 0.82 0.48 0.48 0.79 0.80 1.21 1.22 1.73 1.73

Gov. Bonds, 10y 1.60 1.40 1.20 1.00

NOK, ra.

3.00 2.50 2.00 1.50

SEK

10y 10y yield vs bund

NORWAY Prior Last 97.74 97.82 2.24 0.64 2.23 0.70

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.33 117.39 99.407 99.72 1.56 -0.04 1.55 0.02 1.60 1.53

US Prior 99.1875 1.71 0.12

Last 99.27 1.71 0.18

15-Aug 4-Sep 24-Sep

14.0 13.5 13.0 12.5 12.0

JPY and DowJones

81 79 77 75

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y s wap 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 0.45 0.45 0.45

swap 1.75 1.75 2.25

15-Aug

4-Sep

24-Sep

USDJPY ra. DowJones, 1000

USD and gold 1820 1720 1620 1.32 1.28 1.24

1520 1.20 15-Aug 4-Sep 24-Sep

EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today DEC 1.86 1.85 0.01 NOK 92.81 MAR 1.86 1.85 0.01 SEK 113.28 JUN 1.89 1.88 0.01 EUR 100.31 SEP 1.91 1.90 0.01 USD 79.67 FRA SEK 3m Prior chg GBP 84.70 1.48 1.48 0.00 Comm. Today DEC MAR 1.35 1.33 0.01 Brent spot 109.4 JUN 1.33 1.31 0.02 Brent 1m 109.7 SEP 1.33 1.31 0.01 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% - 0.15 0.16 - 0.24 0.15 0.4 Last 109.4 109.8 1762.5

Stock ex. Today Dow Jones 13,558.9 Nasdaq 3,160.8 FTSE100 5,838.8 Eurostoxx50 2,557.9 Dax 7,413.2 Nikkei225 9,091.5 Oslo 453.07 Stockholm 516.32 Copenhagen 652.89

% -0.2% -0.6% -0.2% -0.7% -0.5% 0.0% -0.8% -0.1% 0.0%

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