Morning Report

16.05.2013

Record long recession in the euro area

NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90

1.80
1.70

GDP has declined six quarters in a row in the euro area, making it the longest recession ever. Developments in Japan are far better. Abes expansionary policies seem to be working and the Japanese economy has now grown two consecutive quarters. Today, Norwegian GDP data are released. The positive sentiment on the equity markets continues and stock markets in both Europe and the US rose yesterday. Both the Dow and S&P 500 hit new highs. Despite of this, US Treasuries rose. This is among other factors due to disappointing manufacturing data from the US. Industrial production declined by 0.5 per cent m/m in April. Consensus had expected -0.2 per cent m/m. In addition the March figures were slightly revised down. The weak figures were seen as a sign that the US economy is weighed down by slow international growth. British economic data released yesterday did, however, surprise positively. The number of jobless claimant count fell much more than expected in April and the unemployment rate declined to 4.5 per cent, the lowest in two years. The figures give, seen together with other recent data from the UK, the impression that the British economy is improving. And, according to the Bank of England Inflation Report, which was released yesterday, growth will pick up going forward. By historical standards, growth is likely to remain at low levels and downside risks still dominate. However, still, the Central Bankss view on the economy is more optimistic now than in February and GDP growth in 2013 is expected to be 1.1% (Up from 0.9 per cent in February). Bank of England has also revised their view on inflation. They now see inflation at 2.0 per cent in two years, down from 2.3 per cent in February. Considering the last assessments from the central bank, the probability of further asset purchases seems to have declined. We still believe in more quantitative easing, but not before Mark Carney takes on the position as Bank of England governor. Preliminary data show that GDP in the euro area, declined by 0.2 per cent q/q in the first quarter, slightly worse than expected (-0.1%q/q). This is the sixth consecutive quarter that growth fell and the euro area is as a result in its longest recession ever (data dating back to 1995). No details of the data have yet been released. However figures show that GDP declined in France, Spain and Italy in the first quarter, while there was small, but positive growth in Germany (+0.1%q/q). Compared to the first quarter last year, GDP has declined in all the major euro area countries. Looking ahead we expect a slightly more positive development and expect growth to slowly pick up over the next few quarters. The euro weakened on the disappointing figures. EURUSD is currently trading around 1.287, the lowest levels since the beginning of April. In Japan, developments are far better. In the first quarter the economy grew by 0.9 per cent q/q, versus expectations of 0.7 per cent growth. In addition Q4 figures were revised up, from 0.0 to 0.3 per cent q/q. As a result the Japanese economy has now grown two consecutive quarters and the development in the first quarter was the strongest among the G7 countries. Solid increases in consumer spending and export pull growth up, indicating that Abes expansionary policies are working. And growth is expected to be as strong or stronger in Q2. Today Norwegian GDP-data are released. We expect mainland GDP to have risen by 1.1 per cent q/q, more than consensus and Norges Banks estimate (0.8 per cent). The most important contribution will come from private consumption, as goods consumption has risen by 1.7 per cent in Q1. Mainland enterprises investments fell in Q4, and we expect a rebound in Q1. Oil investments have probably risen further. Electricity production has risen by 3.0 per cent in Q1, and will lift Q1 GDP. Monthly trade statistics points to a solid rise in non-oil exports, but even stronger for imports, and hence we expect a slightly negative contribution from foreign trade. On the international agenda, inflation data from the US and euro area seem to be the most important figures today. The weekly employment data from the US is also likely to gain some attention. Initial claims have been on a positive trend and the figures released last week show that the number people applying for job benefits for the first time, was the lowest since 2008. This week a small increase is expected, from 323 to 330. camilla.viland@dnb.no Yesterdays key economic events (GMT) 10:00 EZ GDP 14:15 US Industrial production 00:50 Japan GDP Todays key economic events (GMT) 09:00 Norway GDP, mainland 13:30 US Core CPI 13:30 US Initial claims As of Q1 April Q1 As of Q1 Apr W19 Unit q/q, % m/m % q/q% Unit q/q% m/m% 1000 Prior -0.6 0.3r 0.0 Prior 0.3 0.1 323 Poll -0.1 -0.2 0.7 Poll 0.8 0.2 330 Actual -0.2 -0.5 0.9 DNB 1.1

15-Apr

30-Apr

1.60 16-May
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond

2.2 2.2 2.1 2.1 2.0 15-Apr
Rate

95

85
75 30-Apr

65 16-May
Diff (bp, rha)

Headquarter 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 Magnus Vie Sundal

+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 64 76 30 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 24 16 91 23

Morning Report
16.05.2013

3m LIBOR
0.135 0.130 0.125 0.120 0.115 0.28 0.28 0.27 0.27 0.27 16-May
USD (rha)

15-Apr
EUR

30-Apr

Oil price & NOK TWI

95 94 93 92 91 90 110

105
100

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 102.30 1.2914 0.8479 7.4538 8.6314 1.2473 7.5488 5.8446 5.72 87.52 101.29 8.902 6.053

Today 102.20 1.2877 0.8455 7.4536 8.5897 1.2433 7.5328 5.8516 5.73 87.73 101.10 8.912 6.061

Spot rates and forecasts In 1m Jul-13 Oct-13 Apr-14 FX 0700 -0.1 100 100 105 110 AUD -0.3 1.30 1.32 1.33 1.34 CAD -0.3 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.5 8.50 8.45 8.50 8.60 RUB -0.3 1.22 1.22 1.25 1.27 GBP -0.2 7.55 7.50 7.45 7.40 HKD 0.1 5.81 5.68 5.60 5.52 KWD 0.2 5.93 5.68 5.33 5.02 LTL 0.2 88.8 88.8 87.6 86.0 LVL -0.2 101.3 100.7 100.0 99.3 NZD 0.1 8.88 8.82 8.66 8.51 SEK 0.1 618.85 614.75 596.00 582.68 SGD

USD NOK 0.988 5.779 1.016 5.758 0.966 605.775 20.212 28.939 31.478 18.582 1.523 8.909 7.762 0.754 0.286 20.433 2.681 2.181 0.543 10.766 0.825 4.826 6.670 87.694 1.247 4.690

15-Apr

30-Apr

95 16-May
USD/b (rha)

NOK TWI

US dollar 6.0 5.9 5.8 5.7 5.6 5.5

15-Apr 30-Apr
USDNOK

1.33 1.31 1.29 1.27 1.25 16-May

EURUSD(rha)

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

Prior 1.71 1.78 1.87 2.04 2.03 2.34 2.66 3.02

Last 1.71 1.78 1.86 2.03 2.02 2.31 2.65 3.01

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

Prior 1.13 1.20 1.25 1.34 1.62 1.90 2.19

Interest rates Last USD 1.13 1m 1.20 3m 1.25 6m #N/A 12m 1.33 3y 1.63 5y 1.92 7y 2.20 10y

Prior 0.20 0.27 0.42 0.70 0.51 0.98 1.49 2.06

Last 0.20 0.27 0.42 0.69 0.50 0.98 1.46 2.06

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

Prior 0.06 0.12 0.20 0.39 0.50 0.82 1.17 1.62

Last 0.06 0.12 0.20 0.39 0.49 0.81 1.16 1.62

104.0 102.0 100.0 98.0 96.0 94.0

Japanese yen

15-Apr
USDJ PY

30-Apr

7.0 6.5 6.0 5.5 5.0 16-May

Norw ay Prior NST475 99.32 10y yld 2.08 - US spread 0.12 3m nibor 1.80 1.80 1.80

Norw ay Jul-13 Oct-13 Apr-14

Governm ent bonds Last SEK Prior Last US Prior 99.10 10y 97.38 97.38 10y 98.06 2.10 10y yld 1.78 1.78 10y yld 1.96 0.17 - US spread -0.18 -0.16 30y yld 3.17 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jul-13 Oct-13 Apr-14 1.20 1.20 1.20 2.25 2.25 2.50 Jul-13 Oct-13 Apr-14 0.35 0.35 0.35

Last Germany Prior Last 98.33 10y 100.97 101.08 1.93 10y yld 1.39 1.38 3.15 - US spread -0.57 -0.55 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

Germany Jul-13 Oct-13 Apr-14

JPYNOK(rha)

SEKNOK & CHFNOK

91 90 89 88 87 6.3 6.2 6.1 6.0 5.9 16-May
CHFNOK (rha)

15-Apr
SEKNOK

30-Apr

Equities
15700 15200 14700 14200 13700 15-Apr 500

480 460
440 30-Apr 16May
Os lo (rha)

NOK sov. NST20 NST21 NST22 NST471 NST472 NST475 NST475 NST475 NOK FRA JUN SEP DEC MAR

Dow Jones

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.50 1.46 -5 18.09.2013 0.34 Last 92.09 92.11 1.49 1.38 -11 18.12.2013 0.59 Oil price: (Ldn,cl) 1m 1.52 1.45 -7 19.03.2014 0.84 SPOT 103.43 103.33 1.25 1.17 -8 15.05.2015 2.00 Gold price 15.05.2013 PM 1.39 1.38 -1 19.05.2017 4.01 AM: 1433.8 1410.0 0.00 0.00 0 24.05.2023 10.03 Equities Today 0700 % last 2.06 2.08 2 24.05.2023 10.03 Dow Jones 15275.69 0.4% 2.08 2.10 2 24.05.2023 10.03 Nasdaq C. 3471.62 0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6693.55 0.1% 1.79 1.88 1m 1.80 1.71 Eurostoxx50 2809.58 0.5% 1.75 1.86 3m 1.87 1.78 DAX 8362.42 0.3% 1.75 1.87 6m 1.93 1.86 Nikkei 225 14934.25 -1.1% 1.77 1.90 12m 2.07 2.03 OSEBX 488.50 -0.1% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
16.05.2013
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