Morning Report

05.11.2012

Improving U.S. Labor Market

NOK & 3m NIBOR 7.50 7.45 7.40 7.35 7.30
3m ra.

Friday's U.S. employment figures were better than expects and immediately well received in the markets but not enough to prevent a decline in equity markets.
2.00 1.95 1.90 1.85 1.80

25-Sep 15-Oc t 2-Nov

EURNOK

S&P 500 fell 0.9 percent on Friday and stock markets continued to decline in Japan today. Nikkei 225 is down 0.5 percent when typing. European stock markets were positively affected by the employment data, but not by the decrease later in the evening. In the U.S. bond yields rose immediately after the employment numbers, but yields fell back later and closed almost unchanged from the day before. In currency markets, the euro this morning is 0.6 percent lower against the U.S. dollar since Friday morning. The USD has appreciated 0.2 percent against the Japanese yen. The Norwegian Krone is little changed against the euro on Friday morning, while the Swedish krona has appreciated a few re. The U.S. employment figures for October surprised on the positive side, but it was just not enough to give something more lasting boost to markets. Non-farm payrolls (establishment survey) increased by 171' in October. In advance it was expected a rise of 125', according to Reuters. We revised our forecast to 150' on the basis of the relatively strong ADP report earlier in the week. Not only was growth in October higher than expected, but the figures for September and August were revised up significantly. Unemployment increased from 7.8 percent in September to 7.9 percent in October. This was to be expected after two consecutive months of a marked decline. The immediate effects in the markets were a 5 basis points increase in the ten-year U.S. government bond yield and slightly strengthened U.S. dollar, most against the yen. The Employment Report also showed that wage growth was unchanged, which is negative in relation to household income. In Norway we got unemployment figures from the NAV. The unadjusted unemployment rate fell, as expected, from 2.4 percent to 2.3 percent in October. Number of registered unemployed, seasonally adjusted, fell by 760 people from September. There was a small increase in the number of people in the labor market measures, so that gross unemployment decreased by 479 to 81,594 people. Gross unemployment has not been lower since March 2009. This spring there was a tendency to increasing unemployment, but after summer it has turned into a new decline. There is also a slight downward trend in the number of initial claims and in October the new job seekers per working day 5% lower than in October last year. Unemployment fell and indicates that the labor market is still strong. All in all these data will hardly change the view of the central bank. This weekend the G-20 countries met in Mexico. The talks end today and a final communiqu will then be published. A draft communiqu being readied for the G20 policymakers said there were elevated risks facing the global economy, including Europe's crisis and potential problems in Japan according to Reuters. The Fiscal Cliff, which refers to the automatic tightening of U.S. fiscal budget at 607 billion USD from 1 January, will lead the U.S. into a recession with significant effects for the other G-20 countries. Most expect that the U.S. will find a solution to this, but is concerned that fractious Congress only will act in the last minute. When it comes to the situation in Europe, G-20 countries referred to differences among the European governments over how to build a banking union. Today the Greek government will propose to the parliament a new austerity package of 13.5 billion euros. The package is the result of negotiations with the IMF, EU and ECB. Approval of the reforms and the passage of the 2013 budget are crucial to unlocking 31.5 billion euros in aid from an International Monetary Fund and European Union bailout that has been on hold since May. Greece's powerful main public and private sector unions will launch a 48 hour strike against the legislation on Tuesday and plan marches in Athens' city centre. Journalists, doctors, transport workers and shopkeepers are also planning stoppages according to Reuters. This week, the U.S. presidential election taking will have attention in the markets. When it comes to key figures, many PMI index for the service sector will be released. It will also be published industrial production figures for several European economies. On Thursday Bank of England and the ECB will hold monetary policy meetings. Friday Statistics Norway releases inflation figures for October. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 09:00 Norway Reg. unemployment, ua 12:30 USA Non-farm payrolls 12:30 USA Unemployment Todays key economic events (GMT) 01:45 China PMI, tjenester 09:30 UK Manfacturing Production 15:00 USA Manfacturing Production As of Oct Oct Oct As of Oct Oct Oct Unit % 1000 % Unit Index Index Index Prior 2.4 148r 7.8 Prior 54.3 52.2 55.1 Poll 125 7.9 Poll 52.0 54.5 Actual 2.3 171 7.8 DNB 53.5

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 25-Sep 15-Oct

3m ra.

1.70 1.60 1.50 1.40 2-Nov

EURSEK

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
05.11.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 120 115 110 105 25-Sep 15-Oc t 94 93 92 91 2-Nov
$/b

NOK TWI ra.

1.22 1.21 1.21

EUR vs GBP & CHF 0.82 0.80 0.78

1.20 0.76 25-Sep 15-Oc t 2-Nov

GBP r.a CHF

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

Prior 80.50 1.284 0.801 1.207 7.363 8.612 7.460 5.741 7.142 0.858 9.213 6.708 8.333 1.170 10.745

Last 80.31 1.279 0.799 1.207 7.348 8.578 7.460 5.748 7.159 0.858 9.201 6.707 8.362 1.169 10.742

% -0.2% -0.4% -0.3% -0.1% -0.2% -0.4% 0.0% 0.1% 0.2% 0.0% -0.1% 0.0% 0.3% -0.1% 0.0%

In 1 m ...3 m 78 76 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.55 8.55 7.45 7.45 5.75 6.04 7.37 7.95 0.85 0.85 9.1 9.3 6.73 7.13 5.25 5.42 1.17 1.18 10.69 10.96

...6 m ...12 m 76 78 1.20 1.25 0.78 0.80 1.20 1.20 7.25 7.40 8.50 8.60 7.45 7.45 6.04 5.92 7.95 7.59 0.85 0.86 9.3 9.3 7.08 6.88 5.38 5.37 1.17 1.16 10.90 10.75

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

USD 1.0362 0.9957 0.9435 19.77 5.8325 1.6015 7.7510 127.32 0.2823 2.6989 0.5448 0.8256 3.2198 1.2254 31.6800

% 0.20% -0.06% 0.30% 0.38% 0.35% -0.07% 0.00% 0.19% 0.00% 0.34% 0.41% -0.01% 0.60% 0.02% 0.60%

EURSEK & OMXS 8.9 575 8.7 500 8.5 425 8.3 8.1 350 25-Sep 15-Oct 2-Nov
OMXS ra. EURSEK

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

NIBOR Prior 1.77 1.85 2.07 2.19 2.29 2.61 2.92 3.26

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.77 1.41 1.41 0.06 1.87 1.48 1.48 0.13 2.06 1.59 1.59 0.28 2.19 1.70 1.70 0.41 2.30 1.37 1.39 0.55 2.60 1.56 1.58 0.93 2.91 1.79 1.81 1.32 3.24 2.04 2.05 1.76

Last 0.06 0.13 0.27 0.41 0.56 0.93 1.32 1.76

USD LIBOR Prior Last 0.21 0.21 0.31 0.31 0.54 0.54 0.72 0.72 0.49 0.49 0.83 0.82 1.26 1.24 1.77 1.74

Gov. Bonds, 10y 1.70 1.60 1.50 1.40

NOK, ra.

2.40 2.20 2.00 1.80

SEK

25-Sep 15-Oc t 2-Nov

10y 10y yield vs bund

NORWAY Prior Last 99.84 99.80 2.02 2.02 0.57 0.58

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 117.96 117.98 100.4 100.55 99.171875 1.47 1.47 1.45 1.44 1.72 0.02 0.03 0.27

Last 99.20 1.72 0.28

JPY and DowJones 14.0 81 13.5 79 13.0 77 12.5 12.0 75 25-Sep 15-Oct 2-Nov
USDJPY ra. DowJones, 1000

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 1.30 2.25 0.35 1.75 1.90 3.25 1.30 2.25 0.25 1.75 2.15 3.50 1.30 2.50 0.25 2.00

US 3m libor 10y 0.45 0.45 0.45

swap 1.75 1.75 2.25

USD and gold 1820 1720 1620 1520

EURUSD ra.

1.32 1.28 1.24 1.20

Gold

25-Sep 15-Oct 2-Nov

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % DEC 1.87 1.87 0.00 NOK 91.95 - 0.17 MAR 1.87 1.87 0.00 SEK 114.18 - 0.27 JUN 1.89 1.89 0.00 EUR 100.71 - 0.33 SEP 1.93 1.94 -0.01 USD 80.71 0.19 FRA SEK 3m Prior chg GBP 0.00 - 100.0 DEC 1.42 1.42 0.00 Comm. Today Last MAR 1.27 1.26 0.01 Brent spot 107.7 107.6 JUN 1.21 1.21 0.00 Brent 1m 105.8 105.7 SEP 1.21 1.21 0.00 Spot gold 0.0 1685.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 13,093.2 Nasdaq 2,982.1 FTSE100 5,868.6 Eurostoxx50 2,547.2 Dax 7,363.9 Nikkei225 9,007.4 Oslo 443.65 Stockholm 507.62 Copenhagen 640.20

% -1.1% -1.3% 0.1% 0.5% 0.4% 0.0% -0.5% 0.7% 0.9%

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