Morning Report

03.12.2012

Norwegian consumers disappoint

NOK & 3m NIBOR 7.50 7.40 7.30 7.20 23Oct
3m ra.

Shopped less in October, despite low unemployment and continued high optimism.
2.00 1.90 1.80 1.70

Movements in FX, fixed income and stock markets have been limited since Friday morning. EURUSD is trading just above 1.30, apparently unaffected by Moody's downgrade of Europe's emergency fund ESM on Friday (from AAA to Aa1). The Norwegian krone is also unaffected by the key macro data that came Friday, currently trading at 7.38 against the euro. Although 2012 has been a good year for Norwegian households, with strong real wage and job growth, and continued low interest rates, retailers have hardly experienced accelerated demand. Goods consumption rose by weak 0.2 percent in Q3. Q4 started even worse: Retail trade fell by 1.4 percent from September to October. Note that private consumption grew with solid 0.9 percent in Q3, pushed up by services and purchases of goods abroad, and underlying drivers remain strong. Norwegians are nevertheless saving more than before (currently nearly 9 percent of our disposable income), probably due to a desire to build financial buffers and pay down debt. Anxiety about the future is hardly the trigger: Consumer confidence edged down marginally in November, but the level is still high, and confidence in the respondents private economies is rising. The registered unemployment rate was unchanged at 2.3 percent in November. A decline in the number of vacancies in recent months does suggest that labor demand may be slowing. In its Financial Stability Report released last week Norges Bank again voiced concern for the vulnerability of households related to housing wealth and debt burden. Today we expect house prices grew by 0.7 percent from October to November, and that domestic credit growth declined from 6.9 to 6.8 percent y/y in October. As expected, Norges Bank announced Friday that there will be no FX purchases to the Pension Fund Global in December. We expect the central bank to start buying FX again in January, estimating daily purchases throughout the year at NOK 250 million. Today we get news from the manufacturing sector in a number of countries, in terms of purchasing manager indices that are normally good indicators of the current economic growth. The Chinese PMI (HSBC) released this morning increased from 49.5 in October to 50.5 in November (flash estimate was 50.4), the highest level in 13 months. Swedish manufacturing PMI is released 8.30 today. It fell to 43.1 in October, and we expect a further decline to 42.9 in November. If we are right, the Swedish krona could react negatively as consensus expects a slight increase to 44.0. Unlike consensus, we also expect a marginal decrease in the Norwegian PMI, to 48.5. Note that the latter has been a very poor indicator of actual production growth lately. The UK CIPS index is expected to rise by 0.5 p to 48.0 in November. The US ISM index is expected to come down slightly in November to 51.2. Flash PMI for the euro zone in November showed 46.2, and no revisions are expected in the final reading to be published this morning. Unemployment is continuing to increase in the euro zone, as should be expected given the current recession. In October the unemployment rate reached another record-high: 11.7 percent. There are huge variations between member states. In Austria, the unemployment rate is at 4.3 percent, in Spain it is at 26.2 percent. Inflation, which has been held up by high energy prices for some time, is now falling back rapidly. It came down from 2.5 percent y/y in October to 2.2 percent in November (consensus expected 2.4). The ECB expects inflation to fall below target (below but close to 2 percent) next year. In Q1 2013 we expect the ECB to cut its key rate by another 25 basis points, to 0.5 percent. At the ECB meeting on Thursday this week we do not expect any new measures to be taken, but the central bank's updated projections for economic growth and inflation will get attention. US real private consumption fell by 0.3 percent m/m in October. Disposable income was unchanged, and the saving rate edged up by 0.1 pp to 3.4 percent. This was slightly weaker than expected beforehand, but the numbers are influenced by the hurricane Sandy, which served to drag down both income and consumption temporarily. kjersti.haugland@dnb.no Yesterdays key economic events (GMT) 09:00 Norway Gross unemployment 09:00 Norway Retail sales 13:30 USA Core PCE deflator Todays key economic events (GMT) 07:30 Sweden PMI, manufacturing 08:00 Norway PMI, manufacturing 15:00 USA ISM, manufacturing As of Nov Oct Oct As of Nov Nov Nov Unit 1000 sa m/m % m/m % Unit Index Index Index Prior 81.6 0.7 0.1 Prior 43.1 48.7 51.7 Poll 81.6 0.3 0.2 Poll 44.0 49.0 51.2 Actual 82.2 -1.4 0.1 DNB 42.9 48.5

12Nov

30Nov
EURNOK

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 23-Oct 12Nov 30Nov 2.00 1.00 0.00
EURSEK

3m ra.

Headquarters 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

+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 62 96 80 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

Morning Report
03.12.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 1.00 0.50 0.00 23-Oct 12-Nov 94 92 90 30-Nov
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.21 1.20 1.20 23Oct
GBP r.a

0.82 0.81 0.80 0.79 0.78 12Nov 30Nov

CHF

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

Prior 82.51 1.299 0.812 1.206 7.372 8.656 7.461 5.672 6.879 0.853 9.102 6.668 8.073 1.175 10.681

Last 82.30 1.304 0.813 1.206 7.386 8.671 7.461 5.666 6.887 0.852 9.089 6.650 8.084 1.175 10.671

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

In 1 m ...3 m 82 80 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.60 8.55 7.45 7.45 5.75 6.04 7.01 7.55 0.85 0.85 9.1 9.1 6.77 7.13 5.55 5.70 1.18 1.18 10.75 10.76

...6 m ...12 m 78 80 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 7.75 7.40 0.85 0.86 9.1 9.1 7.08 6.88 5.53 5.50 1.17 1.16 10.70 10.60

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

USD 1.0412 0.9930 0.9254 19.40 5.7232 1.6041 7.7500 125.56 0.2816 2.6487 0.5344 0.8206 3.1487 1.2206 30.8803

% -0.16% -0.15% -0.33% -0.36% -0.41% 0.16% -0.01% -0.39% -0.08% -0.24% -0.28% 0.05% -0.52% 0.00% 0.04%

EURSEK & OMXS 8.7 8.6 8.5 8.4 23-Oct 520 500 480 460 30-Nov
EURSEK

12-Nov

OMXS ra.

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

NIBOR Prior 1.93 1.93 2.11 2.24 2.25 2.53 2.82 3.15

SWAP AND MONEYMARKET RATES EURIBOR STIBOR Last Prior Last Prior SEK1MDFI= 0.06 1.88 1.40 updated SEK3MDFI= 0.13 1.91 Not1.45 to SEK6MDFI= technical 0.24 2.08 due1.53 SEK9MDFI= 0.36 2.20 problems 1.63 2.24 1.36 1.37 0.53 2.53 1.57 1.58 0.87 2.82 1.82 1.82 1.25 3.19 2.08 2.08 1.68

Last 0.06 0.13 0.24 0.36 0.53 0.88 1.24 1.68

USD LIBOR Prior 0.21 0.31 0.53 0.70 0.46 0.76 1.15 1.65

Last 0.21 0.31 0.53 0.70 0.47 0.77 1.19 1.66

Gov. Bonds, 10y 1.80 1.60 1.40 1.20 23Oct 12Nov 30Nov
SEK NOK, ra.

2.40 2.20 2.00 1.80

10y 10y yield vs bund

84 82 80 78 76

NORWAY Prior Last 98.96 99.00 2.11 0.73 2.11 0.74

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.65 117.70 101.057 101.17 1.49 0.11 1.49 0.11 1.38 1.37

US Prior 100.0781 1.62 0.24

Last 100.11 1.62 0.25

JPY and Dow Jones 14.0 13.0 12.0 23-Oct 12Nov 30Nov

USDJPY ra. DowJones, 1000

USD and gold 1800 1750 1700 1650 23Oct 12Nov 30Nov
Gold

1.32 1.30 1.28 1.26 1.24

EURUSD ra.

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y sw ap 3m stibor 10y sw ap 3m euribor 10y sw ap 3m libor 10y In 3m 1.90 3.25 1.30 2.25 0.30 1.75 0.35 6m 1.90 3.25 1.30 2.25 0.25 1.75 0.35 12m 2.15 3.50 1.30 2.50 0.25 2.00 0.35 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today DEC 1.93 1.93 0.00 NOK 92.36 0.22 Dow Jones 13,025.6 MAR 1.91 1.92 -0.01 SEK 115.19 0.03 Nasdaq 3,010.2 JUN 1.90 1.91 -0.01 EUR 102.77 0.24 S&P 500 1,416.2 SEP 1.91 1.90 0.01 USD 79.99 - 0.30 Eurostoxx50 2,575.3 FRA SEK 3m Prior chg GBP 0.00 - 100.0 Dax 7,405.5 DEC 1.44 1.45 -0.01 Comm. Today Last Nikkei225 9,458.2 442.08 MAR 1.28 1.28 0.00 Brent spot 111.8 valid field( Oslo JUN 1.21 1.22 -0.01 Brent 1m 111.2 111.2 Stockholm 516.01 641.70 SEP 1.19 1.21 -0.02 Spot gold 0.0 1726.0 Copenhagen Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25

% 0.0% -0.1% 0.0% -0.2% 0.1% 0.0% 0.1% 0.1% 0.1%

Morning Report
03.12.2012
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