Morning Report

31.01.2013

Temporarily setback in U.S. GDP

NOK & 3m NIBOR 7.60 1.90 7.50 1.85 7.40 1.80 7.30 7.20 1.75 03-Jan 17-Jan 31-Jan
EURNOK 3m(rha)

Yesterday's weak U.S. GDP figures overshadowed positive ADP numbers In the U.S., the main stock indices fell back a bit, but the S&P500 index remained above 1500 - seen as an important key level. Also in Europe stocks fell slightly. U.S. Treasury yields were little changed from the day before. In currency markets, the euro strengthened further with a rise in the EURUSD at 0.5 percent since yesterday morning. The Swiss Franc strengthened 0.8 percent against the euro since yesterday morning. Both the Norwegian and the Swedish krona have weakened slightly against the euro. The import-weighted Norwegian krone remains strong, however, and I-44 index is at the moment of 84.7. There were some surprising key figures out yesterday. In Norway the Labour Force Survey (LFS) showed that the number of people employed fell by 12 from October to November. The labor force fell by 6 people and unemployment thus rose by 6 people, accounting for 3.5% of the labor force. This is the highest unemployment rate since November 2010. At the same time the number of people aged 15 to 74 years increased by 6. The number of people outside the working force thus increased by 12. These figures are three-month moving averages, and the November figures are actually fourth quarter figures. From Q3 to Q4 the employment decreased by 3 people. The labor force, however, increased by 7 persons and unemployment increased by 11 people. The unemployment rate rose from 3.1 per cent in Q3 to 3.5 per cent in Q4. The LFS figures can be volatile and may be revised. One should therefore be careful not to put too much emphasis on the individual monthly figures. The employment growth seems to have slowed the latter half of 2012, but a decline in employment in Q4 is way out of line with other figures. The decline will either be revised or we should see a later pickup in the employment figures. We expect growth in the Norwegian economy will moderate this year and that unemployment will tend up, but the slowdown in Q4 is too early. According to Statistics Norway December housing starts increased to 2780 homes. For the full year 2012 30,142 homes were started, the highest since 2007. Except for the years 2005-07, we must return to 1983 to find equally high annual housing starts. The underlying trend, however, seems to have started to slow. The other big surprise yesterday was the GDP growth in the U.S. in the fourth quarter. From Q3 to Q4 GDP fell by 0.1 percent on an annualized basis. Consensus expectations were 1.1 percent and growth in the third quarter was 3.1 percent. The weak figures hardly indicate that the U.S. economy is moving into a new recession. In the fourth quarter, there were several transitory effects that pulled GDP down. Government spending fell by 6.6 percent, pulled down by a decline in defense spending of 22 percent. It will not continue. Stock investment contributed with -1.2 percentage points. This is a factor that over time will give zero contribution to growth and we can expect an opposite effect in the first quarter of this year. Perhaps the decrease is affected by the storm Sandy. A fall in exports of 5.7 percent was perhaps the most substantial negative component. Exports were hit by weak global growth, but will probably look better in the first quarter. Private demand, from investments and consumptions, was in line with expectations. On the positive side yesterday was the ADP report. Here, the number of jobs in the private sector increased by 190 'in January, versus expected 165' (Reuters). The Federal Reserve did not come with any surprises. Policy rates were kept unchanged, and the Fed continues to purshase residential and government bonds for 85 billion USD per month. Also Fed had noted that activity had paused in recent months, but stated it were due to weather-related disruptions and other transitory factors. With Lacker out of FOMC Esther L. George took the role as hawk and voted against continuing the high level of quantitative easing. Today Norges Bank announces the daily FX purchases to the pension fund in February. We expect the purchases to continue at 300 mill. NOK/Dat. If the revenues from the petroleum sector and the nonoil budget deficit stay as projected, we expect NOK 300 million to be bought every day for the rest of the year. Norges Bank prefers, through the active use of the petrobufferportifolio, to keep the purchases evenly distributed through the year, thereby limiting the market impact. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 09:00 Norway Labour force survey 13:30 USA GDP Advance 19:15 USA Fed policy decision Todays key economic events (GMT) 09:00 Norway C2 Credit growth 09:00 Norway Retail sales 09:00 Norway NBs FX purchase, mill. As of Nov Q4 As of Dec Dec Feb Unit % q/q% y.r % Unit Y/y % % NOK/D Prior 3.2 3.1 0.25 Prior 7.1 0.2 300 Poll 3.2 1.1 0.25 Poll 7.0 -0.2 Actual 3.5 -0.1 0.25 DNB 7.1 -0.5 300

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 03-Jan
rente

17-Jan

100 80 60 40 20 0 31-Jan
Diff(bp,rha)

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
31.01.2013

3m LIBOR
0.16 0.15 0.14 0.13 0.12 0.11 03-Jan
EUR

17-Jan

0.31 0.31 0.30 0.30 0.29 31-Jan

USD(rha)

NOK & 3m NIBOR 7.60 1.90 7.50 1.85 7.40 1.80 7.30 7.20 1.75 03-Jan 17-Jan 31-Jan
EURNOK 3m(rha)

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 90.91 1.3488 0.8566 7.4598 8.5899 1.2444 7.4164 5.5000 6.05 86.39 99.43 8.658 5.960

Today 90.88 1.3559 0.8569 7.4602 8.6218 1.2357 7.4346 5.4836 6.03 86.28 99.69 8.676 6.017

Spot rates and forecasts In 1m Apr-13 Jul-13 Jan-14 FX 0700 0.0 88 90 91 93 AUD 0.5 1.33 1.32 1.36 1.37 CAD 0.0 0.82 0.81 0.85 0.86 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.4 8.65 8.65 8.60 8.70 RUB -0.7 1.20 1.20 1.20 1.20 GBP 0.2 7.30 7.25 7.25 7.40 HKD -0.3 5.49 5.49 5.33 5.40 KWD -0.2 6.24 6.10 5.86 5.81 LTL -0.1 84.4 83.8 84.3 85.1 LVL 0.3 98.0 97.3 97.3 99.3 NZD 0.2 8.90 8.95 8.53 8.60 SEK 0.9 608.33 604.17 604.17 592.00 SGD

USD NOK 1.041 5.704 1.003 5.468 0.911 601.565 18.893 29.017 30.038 18.251 1.583 8.676 7.757 0.707 0.281 19.500 2.546 2.153 0.515 10.641 0.837 4.589 6.359 86.213 1.237 4.431

US dollar

5.7 5.6 5.5 5.4

03-Jan 17-Jan
USDNOK

1.40 1.35 1.30 1.25 31-Jan

EURUSD(rha)

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

Prior 1.83 1.88 2.00 2.24 2.40 2.75 3.04 3.35

Last 1.84 1.88 1.99 2.25 2.46 2.81 3.09 3.41

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

Prior 1.14 1.18 1.29 1.54 1.55 1.90 2.16 2.41

Interest rates Last USD 1.14 1m 1.18 3m 1.29 6m 1.54 12m 1.56 3y 1.91 5y 2.17 7y 2.41 10y

Prior 0.20 0.30 0.48 0.80 0.57 1.01 1.47 2.03

Last 0.20 0.30 0.47 0.79 0.56 1.02 1.50 2.06

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

Prior 0.06 0.15 0.27 0.49 0.83 1.17 1.49 1.87

Last 0.06 0.15 0.27 0.50 0.85 1.20 1.52 1.90 Last 98.35 1.68 -0.30 10y sw ap 1.75 1.75 2.00

Japanese yen

92.0 90.0 88.0 86.0 84.0

03-Jan
USDJ PY

8.0 7.0
17-Jan

Norw ay Prior NST475 94.76 10y yld 2.58 - US spread 0.58 3m nibor 1.85 1.85 1.85

6.0 31-Jan
JPYNOK(rha)

Norw ay Apr-13 Jul-13 Jan-14

Governm ent bonds Last SEK Prior Last US Prior 94.30 10y 112.71 113.13 10y 96.61 2.64 10y yld 1.99 1.95 10y yld 2.01 0.66 - US spread -0.01 -0.04 30y yld 3.19 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Apr-13 Jul-13 Jan-14 1.10 1.10 1.10 2.25 2.25 2.50 Apr-13 Jul-13 Jan-14 0.35 0.35 0.35

Last Germany Prior 96.81 10y 98.20 1.98 10y yld 1.70 3.17 - US spread -0.31 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany Apr-13 Jul-13 Jan-14

SEKNOK & CHFNOK 87 86 85 84 83 03-Jan 17-Jan

SEKNOK CHFNOK(rha)

6.1 6.0 5.9 5.8 31-Jan

Equities 14200 13700 13200 12700 12200 03-Jan 17-Jan

Dow J.I.

480 470 460 450 440 430 31-Jan

Os lo(rha)

NOK sov. NST19 NST20 NST21 NST471 NST472 NST473 NST475 NST475 NOK FRA MAR JUN SEP DEC

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 2.46 2.47 2 19.06.2013 0.38 Last 90.53 90.48 1.96 1.97 1 18.09.2013 0.63 Oil price: (Ldn,cl) 1m 1.95 1.72 -23 18.12.2013 0.88 SPOT 115.46 114.89 1.72 1.76 3 15.05.2015 2.28 Gold price 30.01.2013 PM 1.98 2.03 5 19.05.2017 4.30 AM: 1663.5 1677.5 2.14 2.19 5 22.05.2019 6.31 Equities Today 0700 % last 2.56 2.61 5 24.05.2023 10.32 Dow Jones 13910.42 -0.3% 2.58 2.64 5 24.05.2023 10.32 Nasdaq C. 3142.31 -0.4% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6323.11 -0.3% 1.90 2.03 1m 1.88 1.84 Eurostoxx50 2732.12 -0.6% 1.93 2.09 3m 2.00 1.88 DAX 7811.31 -0.5% 2.02 2.19 6m 2.10 1.99 Nikkei 225 11138.66 0.2% 2.13 2.30 12m 2.28 2.25 OSEBX 467.61 0.0% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
31.01.2013
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