Morning Report

06.02.2013

A rhetorical battle
NOK & 3m NIBOR
7.60 7.50 7.40 7.30 7.20 09-Jan

23-Jan

1.90 1.88 1.86 1.84 1.82 1.80 06-Feb

3m(rha)

The rhetoric ahead of next week's G20 meeting hardens. Many want to improve competitiveness through a weaker exchange rate. But the Japanese politicians have been more successful than 1.92 their counterparts in the euro zone. Few are the dignitaries who publicly states that a currency war plays out. But, more and more attempt through their statements to weaken their own currency. This is the quickest and least painful way to improve their competitiveness. But where to draw the line of what may be called verbal interventions are difficult. Last week the Japanese finance minister pointed out that Japan since the outbreak of the financial crisis has put up with a strong currency. Saying that the time has come for Japan to improve their competitiveness at the expense of others and that no one has the right to criticize the effects in the foreign exchange markets by an extremely expansionary fiscal and monetary policy. This morning, BoJ policy board member Sato, stated that BoJ through the asset purchases want to lower interest rates. Which is not so surprising. Not even he would admit that the central bank deliberately tried to weaken the currency, but said at the same time that they wanted to make Japanese yen less attractive as a safe-haven currency. Two sides of the same coin if you ask me. Prime Minister Monti of Italy pointed out last week that an overly strong euro will hit euro zone exporters. The timing was no coincidence. The euro has appreciated by about 10 percent since ECB's Draghi held its well-known speech in London last summer. This constitutes a significant deterioration in competitiveness. The French president Hollande gave his Italian colleague support yesterday and asked European politicians for a medium term goal for the euro. And to defended the euro against irrational movements. The Germans pointed out that the important thing now was to improve the euro area's competitiveness, not weaken the euro. The U.S. Treasury still do not accuse any of their main trading partners of being currency manipulators in its semiannual report to the Congress. Quantitative easing contributes to the weaker domestic currency if the asset purchases are not sterilized. Fed does not sterilize their asset purchases. Neither do Bank of England nor Bank of Japan for that matter. The only two countries that are mildly criticized are China and South Korea. China for not letting the yuan float freely, and South Korea for increasing currency reserves in an attempt to halt the appreciation of KRW. This must be viewed in the context of the upcoming G20 meeting in Moscow from 15 to 16 February. There hosting Russians try to tone down the currency war theme and draws attention to halving of budget deficits which were agreed upon at the Toronto 2010 meeting, which has not been met by the majority of the member countries. The fact that Switzerland is invited to this year's meeting is probably accidental, and not because of their intervention in the foreign exchange market. But it is difficult to see that the effects of Japan's and other countries' fiscal and monetary policies will not be an issue next week. Despite the disappointing retail sales in the euro zone in December (down 0.8% m / m, expected -0.5%) and Hollandes comments, the euro appreciated yesterday. Service-PMIs for January from the euro zone was better than the flash estimates indicated, with Germany, Spain and Italy improving. As a result, the European stock markets rose yesterday with Eurostoxx50 up 1 percent. British pound sterling strengthened temporarily against the euro after service PMI (CIPS) for January rose more than expected. Also Swedish krona strengthened temporarily against the euro after a better than expected services PMI. But the Riksbank's company interviews showed deterioration from the previous round of interviews in September. Firms reported pessimistic outlook about the economic situation, profitability, employment, output/sales and orders. U.S. stock markets rose after good company results, despite a small but expected drop in service ISM'en in January. The data calendar today is thin. Data on German industrial orders are volatile, but have indicated a downward trend over the past eighteen months. It is the development in the domestic market that has pulled the numbers down in particular. For December, it is expected an increase of 0.9 percent from November, after a fall of 1.8 percent in November. The focus will probably still be on tomorrow's ECB meeting. The Spanish newspaper El Pais, which were those that rolled up the corruption scandal in Spain, has disclosed all the material they possess to the prosecutors. Tomorrow's auction of Spanish government bonds are worth to watch. magne.ostnor@dnb.no Yesterdays key economic events (GMT) 10:00 15:00 As of Unit Prior Poll Actual -0.8 55.2 DNB 0.5

EURNOK

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 09-Jan
rente

23-Jan

100 80 60 40 20 0 06-Feb
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

EMU Retail sales Dec m/m% USA ISM non-manufacturing Dec Index USA CBO forecasts on US government debt As of Unit Todays key economic events (GMT) 11:00 Germany Industrial orders Dec m/m% 12:00 USA MBA mortgage index Week 5 Index

-0.1 -0.5 55.7 55.2 Prior -1.8 822 Poll

Morning Report
06.02.2013

3m LIBOR
0.20 0.15 0.10 0.05 0.00 09-Jan
EUR

23-Jan

0.31 0.31 0.30 0.30 0.29 06-Feb

USD(rha)

NOK & 3m NIBOR 7.60 1.92 1.90 7.50 1.88 7.40 1.86 1.84 7.30 1.82 7.20 1.80 09-Jan 23-Jan 06-Feb
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 92.43 1.3487 0.8557 7.4601 8.5512 1.2275 7.3998 5.4870 5.94 86.64 99.21 8.649 6.030

Today 93.81 1.3534 0.8648 7.4604 8.5870 1.2356 7.4390 5.4966 5.86 86.70 99.72 8.601 6.024

Spot rates and forecasts In 1m May-13 Aug-13 Feb-14 FX 0700 1.5 92 90 91 93 AUD 0.3 1.34 1.32 1.36 1.37 CAD 1.1 0.84 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 0.5 7.35 7.25 7.25 7.40 HKD 0.2 5.49 5.49 5.33 5.40 KWD -1.3 5.96 6.10 5.86 5.81 LTL 0.1 85.0 83.8 84.3 85.1 LVL 0.5 98.7 97.3 97.3 99.3 NZD -0.6 8.75 8.95 8.53 8.60 SEK -0.1 612.50 604.17 604.17 592.00 SGD

USD NOK 1.034 5.680 0.996 5.515 0.913 601.972 18.955 28.993 29.977 18.333 1.565 8.601 7.753 0.709 0.281 19.526 2.551 2.154 0.517 10.625 0.843 4.634 6.343 86.644 1.237 4.442

US dollar

5.7 5.6 5.5 5.4 5.3

09-Jan 23-Jan
USDNOK

1.40 1.35 1.30 1.25 06-Feb

EURUSD(rha)

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

Prior 1.82 1.89 2.04 2.28 2.41 2.77 3.07 3.38

Last 1.85 1.90 2.04 2.28 2.44 2.80 3.11 3.43

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

Prior 1.13 1.18 1.29 1.53 1.55 1.89 2.16 2.41

Interest rates Last USD 1.13 1m 1.18 3m 1.29 6m 1.53 12m 1.55 3y 1.89 5y 2.16 7y 2.41 10y

Prior 0.20 0.30 0.47 0.77 0.54 1.01 1.50 2.06

Last 0.20 0.30 0.47 0.77 0.56 1.01 1.51 2.07

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

Prior 0.06 0.15 0.28 0.50 0.78 1.11 1.45 1.85

Last 0.06 0.15 0.28 0.50 0.79 1.14 1.48 1.88 Last 98.76 1.64 -0.37 10y sw ap 1.75 1.75 2.00

Japanese yen

95.0 90.0
85.0

7.0 6.0

Norw ay Prior NST475 95.45 10y yld 2.51 - US spread 0.55 3m nibor 1.85 1.85 1.85

Norw ay

80.0
09-Jan
USDJ PY

23-Jan

5.0 06-Feb
JPYNOK(rha)

Governm ent bonds Last SEK Prior Last US Prior 95.10 10y 112.80 112.93 10y 97.02 2.55 10y yld 1.98 1.97 10y yld 1.96 0.55 - US spread 0.02 -0.04 30y yld 3.16 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 May-13 Aug-13 Feb-14 1.10 1.10 1.10 2.25 2.25 2.50 May-13 Aug-13 Feb-14 0.35 0.35 0.35

Last Germany Prior 96.66 10y 98.96 2.00 10y yld 1.61 3.21 - US spread -0.35 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany May-13 Aug-13 Feb-14

May-13 Aug-13 Feb-14

SEKNOK & CHFNOK 87 86 85 84 83 09-Jan 23-Jan

SEKNOK CHFNOK(rha)

6.1 6.0 5.9 5.8 06-Feb

Equities 14200 13700 13200 12700 12200 09-Jan 23-Jan

Dow J.I.

480 470 460 450 440 06-Feb

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 1.63 1.64 1 19.06.2013 0.36 Last 90.46 90.35 2.01 2.02 1 18.09.2013 0.61 Oil price: (Ldn,cl) 1m 2.00 1.76 -25 18.12.2013 0.86 SPOT 116.68 116.44 1.68 1.68 0 15.05.2015 2.27 Gold price 05.02.2013 PM 1.91 1.95 4 19.05.2017 4.28 AM: 1666.0 1673.5 2.06 2.11 5 22.05.2019 6.29 Equities Today 0700 % last 2.51 2.55 4 24.05.2023 10.30 Dow Jones 13979.30 0.7% 2.51 2.55 4 24.05.2023 10.30 Nasdaq C. 3171.58 1.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6282.76 0.6% 1.91 2.04 1m 1.88 1.85 Eurostoxx50 2651.21 1.0% 1.92 2.07 3m 2.02 1.90 DAX 7664.66 0.3% 1.99 2.15 6m 2.10 2.04 Nikkei 225 11463.75 3.8% 2.09 2.25 12m 2.28 2.28 OSEBX 467.00 -0.3% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets