Morning Report

01.08.2013

LFS data confirm Norwegian slowing

NOK & 3m NIBOR
8.10

7.90
7.70

7.50 04-Jul 18-Jul

EURNOK

1.90 1.80 1.70 1.60 1.50 01-Aug

3m (rha)

Norw ay: 10y Gov't Bond

2.8 2.6 2.4 2.2 2.0 04-Jul
Rate

125

105
85 18-Jul

65 01-Aug
Diff (bp, rha)

According to Statistics Norway's labour force survey (LFS) there was 93,000 job seekers in May (average from April to June), equal to 3.4% of the workforce. The consensus expectation was 3.4%, our estimate was 3.6%. Unemployment is now at its lowest since October. That should not be interpreted as an indication of the slowing having come to an end, however. The LFS data are based on a sample survey, and are uncertain. Therefore, one should study the trend in the numbers, rather than the monthly changes. We have for a long time underlined that the LFS unemployment has risen much more than the register-based data, indicating possible errors in the LFS figures. But despite this, the trend is clear: Over the past year unemployment has risen, suggesting growth being below trend and lower than in 2011-12. This is in line with our expectations. Other LFS data supports this, as the data in practice show zero jobs growth over the last year. In manufacturing, retail trade, hotels and restaurants, and health and social services the number of jobs has declined over the past year. For manufacturing, this corresponds well with data from Norges Bank's regional network, NHO's business barometer, and Staistics Norways own business sentiment survey. The latter was published yesterday and shows lower new orders and production in the second quarter, and overall a weaker picture than 1-2 years ago. When unemployment is declining even with stagnating employment, this reflects that labour force participation ratios are declining, in particular for younger age groups. This can eg. indicate that young job seekers, without rights to unemployment insurance, do not actively seek jobs as weak retail sales holds down the number of jobs in shops. While there is no crisis - activity in the Norwegian economy is high and unemployment is low - there is thus little doubt that growth is slowing. According to Eurostat, euro zone unemployment fell by 24,000 from May to June, the first monthly decline in more than two years. The unemployment rate decreased from 12.2% to 12.1%, a tenth lower than expected. Consumer price inflation was stable at 1.6% in July, as expected, but core inflation slowed a tenth to 1.1%. Thus, overall inflation may deviate further from the ECB's goal going forward. This forms part of the backdrop when the ECB's 23-strong Council meets today. At 1145 GMT, the decision is published. We expect - like most everybody else - no policy changes now. Slow growth, low pressure and low inflation favour further rate cuts, although it is uncertain whether it will have much effect. Rather, it now seems that the ECB is trying to play more on market expectations through forward guidance. In addition, the ECB has stated that it is working on other measures to improve access to credit in the euro zone. The ECB's latest lending survey suggests that banks are now loosening credit to some extent. Also, financial market stress has eased somewhat over the past month. Thus, there is less need for urgent action. We continue to expect a rate cut in the autumn, however. The Bank of England's monetary policy committee is also meeting today. No policy changes are expected. US GDP data surprised positively. GDP rose by an annualized 1.7% from Q1 to Q2, vs. an expected 1.0%. The surprise corresponded almost exactly to the downward revision of Q1, from 1.8% to 1.1%. Also, 2012 GDP was revised from a growth rate of 2.2% up to 2.8%. Private consumption increased by 1.8% in Q2, after growth of 2.3% in Q1, suggesting that households have weathered the tax increases from the start of the year pretty well. The ADP report was also better than expected, with a private jobs growth of 200,000 in July, against an expected 180,000). This indicates that overall job growth was high in July. The important labour market report is released tomorrow. As expected, the Fed left policy unchanged yesterday. The statement contained little new. Recent growth was now seen as modest, whereas it in June had been characterized as moderate. Growth is still expected to pick up, however. In addition, the statement contained a new passage stating that inflation persistently below 2% could pose risks to economic performance. In June, James Bullard had a dissenting remark about the dangers of too low inflation. This dissent is now longer necessary. At the next Fed meeting, 17/18 September, FOMC members will provide new growth estimates and Bernanke will hold a press conference. In our view, this will provide a good opportunity to start, and at the same time justify, a gradual reduction of asset purchases. The market impact of the Fed decision was muted. The yield on ten-year government bonds fell by 8-9 basis points. The USD weakened % against the EUR and JPY, but recouped it afterwards. S&P500 gained 0.5%, but later fell back and ended the day almost zero. In Europe, stock markets ended marginally in the black, while Asia has opened the day in positive territory. oystein.dorum@dnb.no Yesterdays key economic events (GMT) 08:00 Norway LFS unemployment 12:30 US GDP 18:00 US FOMC meeting Todays key economic events (GMT) 11:00 UK BoE QE 11:45 EZ ECB rate decision 14:00 US ISM, manufacturing As of May Q2 As of Unit % q/q % % Unit Bn % Index Prior 3.5 1.1r 0.25 Prior 375 0.5 50.9 Poll 3.5 1.4 Poll 375 0.5 52.0 Actual 3.4 1.7 0.25 DNB 375 0.5

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

Jul

Morning Report
01.08.2013

3m LIBOR
0.155 0.150 0.145 0.140 0.135 0.130 0.28 0.27 0.27 0.26 0.26 01-Aug
USD (rha)

04-Jul
EUR

18-Jul

Oil price & NOK TWI

98 97 96 95 94 93 110

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 97.92 1.3266 0.8723 7.4546 8.7141 1.2321 7.8899 5.9488 6.08 90.64 105.90 9.052 6.408

Today 98.68 1.3252 0.8748 7.4549 8.6819 1.2328 7.8710 5.9385 6.02 90.70 105.61 9.000 6.388

Spot rates and forecasts In 1m Oct-13 Jan-14 0.8 98 102 107 -0.1 1.30 1.26 1.30 0.3 0.85 0.85 0.86 0.0 7.45 7.45 7.45 -0.4 8.55 8.45 8.50 0.1 1.24 1.25 1.27 -0.2 7.80 7.70 7.70 -0.2 6.00 6.11 5.92 -0.9 6.12 5.99 5.54 0.1 91.2 91.1 90.6 -0.3 104.7 103.4 103.4 -0.6 9.18 9.06 8.95 -0.3 6.29 6.16 6.06

Jul-14 FX 0700 110 AUD 1.32 CAD 0.87 CHF 7.45 CZK 8.60 RUB 1.30 GBP 7.70 HKD 5.83 KWD 5.30 LTL 89.5 LVL 103.4 NZD 8.85 SEK 5.92 SGD

USD 0.897 1.029 0.931 19.596 33.005 1.515 7.756 0.285 2.606 0.531 0.797 6.558 1.274

NOK 5.327 5.771 6.388 30.310 17.996 9.000 0.766 20.813 2.279 11.185 4.734 90.700 4.663

04-Jul

18-Jul

95 01-Aug
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6

04-Jul 18-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 01-Aug

EURUSD(rha)

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

Prior 1.63 1.72 1.77 1.93 2.12 2.55 2.93 3.28

Last 1.64 1.72 1.78 1.92 2.14 2.57 2.96 3.30

Interest rates SEK Prior Last USD 1m 1.10 1.10 1m 3m 1.19 1.19 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.65 1.65 3y 5y 2.08 2.08 5y 7y 2.38 2.38 7y 10y 2.65 2.65 10y

Prior 0.19 0.27 0.40 0.67 0.74 1.54 2.17 2.76

Last 0.19 0.27 0.40 0.67 0.76 1.54 2.19 2.79

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

Prior 0.08 0.15 0.26 0.47 0.73 1.19 1.57 1.99

Last 0.08 0.15 0.26 0.47 0.73 1.18 1.55 1.98 Last 99.06 1.61 -0.99 10y sw ap 1.75 1.75 2.00

102.0 100.0
98.0

Japanese yen

96.0 04-Jul
USDJ PY

18-Jul

7.0 6.5 6.0 5.5 5.0 01-Aug

Norw ay Prior NST475 94.25 10y yld 2.67 - US spread 0.05 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.01 10y 93.71 94.29 10y 92.50 2.70 10y yld 2.19 2.13 10y yld 2.62 0.11 - US spread -0.43 -0.47 30y yld 3.68 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 92.72 10y 98.24 2.60 10y yld 1.70 3.66 - US spread -0.92 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

93 6.6

91
89

6.4
6.2

87 04-Jul
SEKNOK

18-Jul

6.0 01-Aug
CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 04-Jul 18-Jul 01Aug
Os lo (rha) Dow Jones

510 500 490 480 470 460 450

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.63 1.49 -14 18.12.2013 0.38 Last 95.33 95.58 1.41 1.42 1 19.03.2014 0.63 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.88 SPOT 109.08 107.84 1.46 1.49 2 15.05.2015 1.79 Gold price 31.07.2013 PM 1.75 1.75 0 19.05.2017 3.80 AM: 1324.2 1314.5 2.65 2.69 3 24.05.2023 9.82 Equities Today 0700 % last 2.65 2.69 3 24.05.2023 9.82 Dow Jones 15499.54 -0.1% 2.67 2.70 3 24.05.2023 9.82 Nasdaq C. 3626.37 0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6621.06 0.8% 1.71 1.80 1m 1.75 1.64 Eurostoxx50 2768.15 0.3% 1.70 1.81 3m 1.82 1.72 DAX 8275.97 0.1% 1.72 1.85 6m 1.87 1.78 Nikkei 225 14005.77 2.5% 1.76 1.92 12m 2.00 1.92 OSEBX 495.36 0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
01.08.2013
IMPORTANT/DISCLAIMER
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Morning Report
01.08.2013

3m LIBOR
0.155 0.150 0.145 0.140 0.135 0.130 0.28 0.27 0.27 0.26 0.26 01-Aug
USD (rha)

04-Jul
EUR

18-Jul

Oil price & NOK TWI

98 97 96 95 94 93 110

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 97.92 1.3266 0.8723 7.4546 8.7141 1.2321 7.8899 5.9488 6.08 90.64 105.90 9.052 6.408

Today 98.68 1.3252 0.8748 7.4549 8.6819 1.2328 7.8710 5.9385 6.02 90.70 105.61 9.000 6.388

Spot rates and forecasts In 1m Oct-13 Jan-14 0.8 98 102 107 -0.1 1.30 1.26 1.30 0.3 0.85 0.85 0.86 0.0 7.45 7.45 7.45 -0.4 8.55 8.45 8.50 0.1 1.24 1.25 1.27 -0.2 7.80 7.70 7.70 -0.2 6.00 6.11 5.92 -0.9 6.12 5.99 5.54 0.1 91.2 91.1 90.6 -0.3 104.7 103.4 103.4 -0.6 9.18 9.06 8.95 -0.3 6.29 6.16 6.06

Jul-14 FX 0700 110 AUD 1.32 CAD 0.87 CHF 7.45 CZK 8.60 RUB 1.30 GBP 7.70 HKD 5.83 KWD 5.30 LTL 89.5 LVL 103.4 NZD 8.85 SEK 5.92 SGD

USD 0.897 1.029 0.931 19.596 33.005 1.515 7.756 0.285 2.606 0.531 0.797 6.558 1.274

NOK 5.327 5.771 6.388 30.310 17.996 9.000 0.766 20.813 2.279 11.185 4.734 90.700 4.663

04-Jul

18-Jul

95 01-Aug
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6

04-Jul 18-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 01-Aug

EURUSD(rha)

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

Prior 1.63 1.72 1.77 1.93 2.12 2.55 2.93 3.28

Last 1.64 1.72 1.78 1.92 2.14 2.57 2.96 3.30

Interest rates SEK Prior Last USD 1m 1.10 1.10 1m 3m 1.19 1.19 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.65 1.65 3y 5y 2.08 2.08 5y 7y 2.38 2.38 7y 10y 2.65 2.65 10y

Prior 0.19 0.27 0.40 0.67 0.74 1.54 2.17 2.76

Last 0.19 0.27 0.40 0.67 0.76 1.54 2.19 2.79

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

Prior 0.08 0.15 0.26 0.47 0.73 1.19 1.57 1.99

Last 0.08 0.15 0.26 0.47 0.73 1.18 1.55 1.98 Last 99.06 1.61 -0.99 10y sw ap 1.75 1.75 2.00

102.0 100.0
98.0

Japanese yen

96.0 04-Jul
USDJ PY

18-Jul

7.0 6.5 6.0 5.5 5.0 01-Aug

Norw ay Prior NST475 94.25 10y yld 2.67 - US spread 0.05 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.01 10y 93.71 94.29 10y 92.50 2.70 10y yld 2.19 2.13 10y yld 2.62 0.11 - US spread -0.43 -0.47 30y yld 3.68 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 92.72 10y 98.24 2.60 10y yld 1.70 3.66 - US spread -0.92 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

93 6.6

91
89

6.4
6.2

87 04-Jul
SEKNOK

18-Jul

6.0 01-Aug
CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 04-Jul 18-Jul 01Aug
Os lo (rha) Dow Jones

510 500 490 480 470 460 450

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.63 1.49 -14 18.12.2013 0.38 Last 95.33 95.58 1.41 1.42 1 19.03.2014 0.63 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.88 SPOT 109.08 107.84 1.46 1.49 2 15.05.2015 1.79 Gold price 31.07.2013 PM 1.75 1.75 0 19.05.2017 3.80 AM: 1324.2 1314.5 2.65 2.69 3 24.05.2023 9.82 Equities Today 0700 % last 2.65 2.69 3 24.05.2023 9.82 Dow Jones 15499.54 -0.1% 2.67 2.70 3 24.05.2023 9.82 Nasdaq C. 3626.37 0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6621.06 0.8% 1.71 1.80 1m 1.75 1.64 Eurostoxx50 2768.15 0.3% 1.70 1.81 3m 1.82 1.72 DAX 8275.97 0.1% 1.72 1.85 6m 1.87 1.78 Nikkei 225 14005.77 2.5% 1.76 1.92 12m 2.00 1.92 OSEBX 495.36 0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets