Morning report

Several important events this week

03-Oct-2011
This week is expected to be under the influence of the debt crisis in Europe and starts off with a meeting among euro zone finance ministers today. In addition, several important macro figures are published this week, with ISM and payrolls as the definite highlights. BoE and ECB announce their monetary policy decision on Thursday. Friday ended what was the worst quarter for stock markets since the financial crisis. And with negative news over the weekend, the tendency is likely to continue this week. During the night Asian equities have fallen sharply and the euro weakened on a broad basis. Behind these movements was a report released on Sunday revealing that Greece will fail to meet its budget goals for this year, despite new mass layoffs and tax increases. A few months after a massive bailout the Greeks are on their way to a budget deficit of 8.5 per cent of GDP, well above the target of 7.6 per cent. The situation in Greece seems increasingly unmanageable and will also affect the financial markets this week. Today EU finance ministers meet to discuss, among other things, the European Financial Stability Facility. It is also expected that they will add further pressure on already hard-pressed Greeks to implement structural reforms to promote economic growth. In addition to the debt crisis in Europe, there are several important key figures this week which will lead the way for financial markets. US macro figures may strengthen fears of a new downturn, or help calm nervous markets. First up is the important ISM index for manufacturing, released later today. The index is only slightly above the neutral level of 50, indicating zero growth in industrial production. The changes for the regional indices, often used as leading indicators, are pointing in direction of a possible improvement this month. The levels, however, indicate a risk for further decline. The conflicting signals may be a contributing factor to consensus expecting an unchanged index in September. Of the various sub-components the employment index will most likely get attention. The reason for this is the publication of the labour market report later this week. Developments in the labor market are very important for the US central bank, and will thus affect market expectations about possible new stimulus from Fed. Consensus now expects a job growth of 73', but this may change during the week. The ISM index may have an effect but perhaps more important is the ADP report published on Wednesday. On the other side of the Atlantic the monetary policy meeting of the European Central Bank on Thursday is this week's big event. Neither we nor Consensus are expecting changes in the policy rate, while markets are currently pricing in a large probability of a 25 basis points rate cut. According to Bloomberg 10 out of 43 analysts expect a rate cut at this meeting. We believe, however, that this probability was reduced after Friday's inflation figures. Flash estimate showed that inflation rose from 2.5 to 3.0 per cent in August, which was 0.5 percentage points higher than expected. Thursday is also the current Governor Trichets last press conference before the Italian Mario Draghi takes over. What he says about the current debt crisis in Europe will be closely monitored in anticipation of an imminent solution to the problems. There is also the monetary policy meeting in the UK on that same day. This time there is not expected any changes in monetary policy, but the probability of new stimulus from the Bank of England is steadily increasing. According to Reuters analysts now see a 75 per cent chance of further quantitative easing at the meeting in November, while there is a 40 per cent probability that the quantitative easing program is enhanced this week. The median analyst expects the central bank to increase the purchases of government bonds with 50 billion pounds. Here in Norway, the Government will present its proposal to the state budget for 2012 on Thursday. In the budget document, we expect that fiscal policy will be perceived as neutral after two expansive years. The use of oil revenues is expected to be lower than earlier anticipated, which will reduce the distance to the spending rule further. maren.romstad@dnbnor.no Friday's 07:00 09:00 12:30 12:30 Todays 06:30 07:00 09:00 14:00 key economic events (GMT) Norway Registered unemployment EMU CPI, flash US PCE, core US Private consumption key economic events (GMT) Sweden PMI Norway PMI Norway Housing prices US ISM, manufacturing As of Sep Sep Aug Aug As of Sep Sep Sep Sep Unit % na y/y % m/m % m/m % Unit Index Index m/m % Index Prior 2.7 2.5 0.2 0.8 Prior 48.7 55.5 0.6 50.6 Poll Actual 2.6 2.8 2.5 3.0 0.2 0.1 0.2 0.2 Poll DnB NOR 47.5 54.0 54.0 50.5

NOK & 3m NIBOR

8.00 7.80 7.60 7.40 23-Aug 12-Sep 3m ra. 3.20 3.10 3.00 2.90 30-Sep EURNOK

SEK & 3m STIBOR

9.5 9.3 9.1 8.9 8.7 23-Aug 12-Sep 2.50 2.45 30-Sep EURSEK 2.60 2.55

3m ra.
Headquarters 0021 Oslo Stranden 21 Offices Abroad New York London Shanghai Singapore Stockholm Sales Oslo (+47) Equity Fixed Income FX/IR Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund +47 03000

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850 22 94 89 40 22 01 78 20 22 01 76 50 55 75 69 61 52 61 38 22 51 77 73 33 73 21 55 39 05 72 27 07 01 84 62 58 37 84 95 87 41 14 09 32 28 76 04 96 74 13 60 80 60 50 69 06 27 62 50 30 80 89 00 09

Research Regional Sales (+47) Eirik Larsen 22 01 76 55 Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Maren Romstad Camilla Viland Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding se Haagensen Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen 22 22 22 22 22 22 22 22 22 22 22 22 22 01 01 01 01 01 01 01 01 01 01 01 01 01 76 78 78 76 76 77 76 78 77 76 76 77 78 56 03 24 63 64 41 67 37 62 93 77 36 15

03-Oct-2011

Morning report

Oil spot & NOK TWI

130 110 90 70 23-Aug 12-Sep NOK TWI ra. 100 98 96 94 30-Sep $/b

SPOT RATES AND FORECASTS (Source: Reuters and DnB NOR Markets)
FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK Prior 77.09 1.339 0.859 1.216 7.855 9.200 7.442 5.869 7.618 0.855 9.142 6.871 8.919 1.174 10.722 Last 77.09 1.334 0.860 1.214 7.872 9.229 7.441 5.902 7.656 0.855 9.155 6.923 8.978 1.174 10.742 % 0.0% -0.4% 0.1% -0.1% 0.2% 0.3% 0.0% 0.6% 0.5% -0.1% 0.1% 0.8% 0.7% 0.0% 0.2% In 1 m ...3 m 80 80 1.35 1.35 0.86 0.86 1.20 1.20 8.00 7.80 9.30 9.10 7.45 7.45 5.93 7.41 0.86 9.3 6.89 5.51 1.16 10.81 5.78 7.22 0.86 9.1 6.74 5.39 1.17 10.58 ...6 m ...12 m 80 90 1.30 1.25 0.84 0.82 1.20 1.25 7.70 7.70 9.00 9.00 7.45 7.45 5.92 6.16 7.40 6.84 0.86 0.86 9.2 9.4 6.92 7.20 5.54 6.48 1.17 1.17 10.71 10.98 FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB USD 0.9638 1.0501 0.9104 18.53 5.5801 1.5517 7.7901 119.13 0.2785 2.5888 0.5321 0.7623 3.3318 1.3109 32.1050 % -0.32% -0.01% 0.23% 0.29% 0.40% -0.45% 0.06% 0.62% 0.60% 0.34% 0.36% 0.09% 0.88% 0.23% -0.32%

EUR vs GBP & CHF

1.25 1.20 1.15 1.10 1.05 GBP r.a 0.89 0.87 0.85 0.83 0.81 CHF

23-Aug 12-Sep 30-Sep

Gov. Bonds, 10y

2.25 2.00 1.75 1.50 NOK, ra. 3.00 2.50 2.00 1.50 SEK

23-Aug 12-Sep 30-Sep

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

JPY and DowJones

14 12 10 8 23-Aug 12-Sep USDJPY ra. DowJones, 1000 78 77 76 75 30-Sep

SWAP AND MONE YM ARKET RATES (Source: Reuters) NIBOR STIBOR EURIBOR Prior Last Prior Last Prior Las t 2.73 2.74 2.32 2.32 1.30 1.30 3.00 3.03 2.51 2.51 1.49 1.50 3.27 3.26 2.54 2.54 1.70 1.71 3.36 3.35 2.58 2.58 1.86 1.87 2.84 2.86 2.02 2.04 1.64 1.59 3.18 3.17 2.23 2.26 2.00 2.01 3.40 3.40 2.40 2.41 2.27 2.27 3.61 3.62 2.49 2.50 2.54 2.54 GOVE RNMENT BONDS (Source: Reuters) NORWAY SWEDEN GERMANY Prior 115.75 2.40 0.50 Last 111.55 2.39 0.50

USD LIBOR P rior 0.24 0.37 0.55 0.70 0.73 1.24 1.69 2.11 US

Last 0.24 0.37 0.56 0.70 0.74 1.25 1.68 2.08

10y 10y yield vs bund

2000 1.49 1900 1.44 1800 1700 1.39 1600 1500 1.34 23-Aug 12-Sep 30-Sep EURUSD ra. Gold

USD and gold

In 3m 6m 12m

NORWAY 3m nibor 10y swap 3.05 4.25 3.20 4.50 3.50 4.50

Prior Last Prior Las t P rior Last 116.903 116.90 103.243 103.25 101.85938 101.98 1.73 1.75 1.90 1.89 1.92 1.91 -0.17 -0.14 0.02 0.03 INTEREST RATE FORECASTS SWEDEN GERMANY US 3m s tibor 10y swap 3m euribor 10y swap 3m libor 10y swap 2.50 3.00 1.50 3.00 0.35 3.00 2.75 3.25 1.50 3.25 0.35 3.25 2.90 3.25 1.50 3.25 0.35 3.25

EURSEK & OMXS

9.4 9.2 9.0 8.8 23-Aug 12-Sep OMXS ra. 450 430 410 390 370 350 30-Sep EURSEK

FRA NOK DEC MAR JUN SEP FRA SEK DEC MAR JUN SEP

3m 2.73 2.41 2.38 2.38 3m 2.13 1.84 1.78 1.76

Prior 2.72 2.41 2.37 2.36 Prior 2.14 1.84 1.77 1.76

chg 0.01 0.00 0.01 0.02 chg -0.01 0.00 0.01 0.00

TWI NOK SEK EUR USD GBP Comm. Brent spot Brent 1m Spot gold

Today 98.43 121.85 105.07 79.03 79.80 Today 107.7 101.8 1620.0

% 0.06 0.29 - 0.13 0.30 - 0.00 Last 107.7 102.8 1620.0

Stock ex. Today Dow Jones 10,913.4 Nasdaq 2,415.4 FTSE100 5,128.5 Eurostoxx50 2,179.7 Dax 5,502.0 Nikkei225 8,563.0 Oslo 348.28 Stockholm 414.57 456.87 Copenhagen

% -2.2% -2.6% -1.3% -1.5% -2.4% 0.0% -0.3% -2.2% -0.9%

Morning report
03-Oct-2011
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