Morning Report

30.11.2011

Large international banks downgraded

NOK & 3m NIBOR 8.00 7.80 7.60 3.50 3.30 3.10

And European financial ministers admit that the potential firepower of EFSF is highly uncertain. Market risk appetite held up Tuesday, causing a further rise in equity markets. Asian stocks have fallen during the night after the downgrading of 15 major international banks by Standard & Poor's, most of them European and American. The agency has changed its model, and the new model places greater weight on the economic and systemic financial risks in the countries in which the banks operate. Finance ministers of the euro zone have agreed on details regarding the expansion of EFSF fund, which is supposed to be operational from January next year. The remaining amount in the fund of 250 billion euros will act as a guarantee of between 20 and 30 percent of face value of newly issued government bonds to high-risk countries (read: Spain and Italy). Euro leaders have previously said that such an arrangement may increase the fund's capacity to 1 000 billion euros, which is the same amount as Spain's and Italy's funding needs over the next three years. Eurogroup Chairman Juncker admitted yesterday that this is an overly optimistic estimate. EFSF will issue commercial paper (debt with maturity of less than one year) in addition to bonds. The interest rate on EFSF-bonds has risen in parallel with growing turmoil in financial markets, and is currently about 150 basis points above German bonds. Despite high and rising interest costs Italy fortunately has not yet met closed doors. Italy managed to raise 7.5 billion euros in yesterday's auction, but it was expensive. The average interest rate on the 10-year bonds was 7.56 percent, and 7.89 percent for the 3-year bond. ECB yesterday failed to sterilize the entire increase in money supply associated with the central bank's purchase of distress government bonds. Sterilization is done by offering weekly bank deposits in ECB. These totaled 194 billion euros this week, less than the 203.5 billion was needed to achieve full sterilization. Yesterday's sentiment index from the euro zone indicates that the currency area is entering an economic downturn. The European Sentiment Indicator (ESI) fell for the ninth consecutive month, from 94.8 to 93.7, the lowest level in two years. There was a decline in most sectors, but the fall in the service sector and retail trade was the greatest. Sentiment is (not surprisingly) weakest in the small and heavily indebted euro member countries, but pessimism is also increasing in Germany and France. US macro data continue to surprise on the positive side. Consumer confidence, which last month fell to its lowest level in 2 years, took a sudden jump in November. The jump of 15 points, to 56.0, was the largest since 2003. Still, the index remains at a very low level (56.0), but Americans have become less concerned about the prospects for future employment and income. The sub-index showing the confidence in the future outlook, which is the one that has the closest correlation with actual consumption, increased the most. Both the Norwegian and the Swedish krona have strengthened due to the decent risk appetite. Swedish crown had an extra boost after the Swedes surpassed the expectations of GDP growth in the 3rd quarter by a wide margin. The outcome of 1.6 percent q / q was almost entirely driven by a surprisingly strong surplus in foreign trade. This was due to a combination of strong export growth (3.0 percent q / q) and weak import growth (0.2 percent). Private consumption fell by 0.9 percent, while gross investments increased by 0.8 percent. Although national figures quickly become "history" in today's dramatic macro setting, the strong numbers make us a bit more uncertain about the outcome of the monetary policy meeting on 15 December. We still expect that the Riksbank will cut by 25 basis points. Today's most important key macro data are US employment in the private sector (ADP) in November, which may give an indication of the outcome of Friday's payrolls, US pending home sales and Chicago PMI. From the euro zone, we get the flash estimate of inflation in November. Norwegian retail sales is expected to recover slightly after a fall last month. kjersti.haugland@dnb.no

2.90 7.40 20-Oct 9-Nov 29-Nov

3m ra. EURNOK

SEK & 3m STIBOR 9.5 9.3 9.1 8.9 20-Oct 9-Nov 2.70 2.65 2.60 2.55 2.50 2.45 29-Nov
EURSEK

3m ra.

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850

Sales Oslo (+47) Equity Fixed Income FX/IR

22 94 89 40 22 01 78 20 22 01 76 50

Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

55 21 95 80 75 55 87 60 69 39 41 50 61 05 14 69 52 72 09 06 61 27 32 27 38 07 28 62 22 01 76 50 51 84 04 30 77 62 96 80 73 58 74 89 33 01 73 80 70 11 69 85

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

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 22 01 76 64 22 01 77 41 22 01 76 67

Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding se Haagensen Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

22 01 78 37 22 01 77 62 22 01 76 93 22 01 76 77 22 01 77 36 22 01 78 15

Yesterday's key economic events (GMT) 07:30 Sweden GDP 04:00 US Consumer confidence Todays key economic events (GMT) 08:00 Norway Retail sales 09:00 EMU CPI, flash 12:15 US ADP employment

As of Q3 Nov As of Oct Nov Nov

Unit q/q % Index Unit m/m % y/y % 1000

Prior 0.9 40.9r Prior -0.5 3.0 110

Poll 0.3 44.0 Poll 0.3 3.0 130

Actual 1.6 56.0 DNB 0.3

Morning Report
30.11.2011

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 120 115 110 105 100 20-Oct 100 98 96 9-Nov 94 29-Nov
$/b

NOK TWI ra.

EUR vs GBP & CHF 0.89 0.88 0.87 1.15 0.86 0.85 1.10 20-Oct 9-Nov 29-Nov 1.25 1.20
GBP r.a CHF

FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK

Prior 77.87 1.333 0.854 1.227 7.793 9.180 7.436 5.850 7.509 0.850 9.130 6.891 8.849 1.178 10.756

Last 78.02 1.329 0.854 1.226 7.792 9.196 7.437 5.864 7.522 0.848 9.128 6.922 8.881 1.182 10.774

% 0.2% -0.4% 0.0% 0.0% 0.0% 0.2% 0.0% 0.3% 0.2% -0.2% 0.0% 0.5% 0.4% 0.3% 0.2%

In 1 m ...3 m 80 80 1.35 1.35 0.86 0.86 1.23 1.23 7.80 7.80 9.20 9.10 7.45 7.45 5.78 5.78 7.22 7.22 0.85 0.86 9.1 9.1 6.81 6.74 5.45 5.39 1.18 1.17 10.70 10.58

...6 m ...12 m 80 90 1.30 1.25 0.84 0.82 1.23 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 0.9986 1.0340 0.9232 19.32 5.5996 1.5559 7.7871 120.17 0.2774 2.5995 0.5260 0.7601 3.4266 1.2980 31.4070

% -0.50% 0.35% 0.33% 0.59% 0.32% -0.36% -0.02% 0.23% 0.01% 0.29% 0.27% -0.35% 0.59% 0.06% 0.35%

EURSEK & OMXS 9.4 9.2 9.0 8.8 20-Oct 9-Nov 500 450 400 350 29-Nov

O MXS ra. EURSEK

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

NIBOR Prior 2.78 3.25 3.34 3.36 3.04 3.40 3.64 3.85

SWAP AND M ONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.96 2.38 2.38 1.13 3.29 2.66 2.66 1.42 3.35 2.68 2.69 1.66 3.36 2.75 2.75 1.84 3.03 1.88 1.86 1.70 3.39 2.13 2.11 2.17 3.63 2.35 2.32 2.48 3.85 2.47 2.43 2.78

Las t 1.14 1.41 1.66 1.84 1.69 2.15 2.48 2.79

USD LIBOR P rior 0.26 0.52 0.74 0.90 0.88 1.36 1.77 2.17

Last 0.27 0.53 0.75 0.91 0.90 1.36 1.79 2.16

Gov. Bonds, 10y 2.80 2.60 2.40 1.75 2.20 1.50 2.00 20-Oct 9-Nov 29-Nov 2.25 2.00
NOK , ra. S EK

10y 10y yield vs bund

NORWAY Prior Last 114.8 110.20 2.49 2.52 0.19 0.21

GOVERNM ENT BONDS SWEDEN GERMANY US Prior Last Prior Las t P rior 116.423 116.42 97.013 97.17 100.10938 1.72 1.77 2.30 2.32 1.99 -0.58 -0.55 -0.31

Last 100.03 2.01 -0.31

JPY and DowJones 13 12 11 10 20-Oct 79 77 9-Nov 75 29-Nov

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m s tibor 10y swap 3m euribor 10y swap 3.00 4.25 2.20 3.00 1.30 3.00 2.80 4.50 2.10 3.25 1.10 3.25 3.10 4.50 2.00 3.25 1.05 3.25

US 3m libor 10y swap 0.55 2.75 0.55 3.00 0.50 3.25

USDJPY ra. DowJones, 1000

USD and gold 2000 1.47 1900 1.42 1800 1700 1.37 1600 1500 1.32 20-Oct 9-Nov 29-Nov
EURUSD ra. Gold

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

3m 3.11 2.70 2.45 2.41 3m 2.70 2.12 1.73 1.53

Prior 3.12 2.70 2.46 2.43 Prior 2.69 2.11 1.74 1.54

chg -0.01 0.00 -0.01 -0.02 chg 0.01 0.01 -0.01 -0.01

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 97.47 0.01 Dow Jones 11,555.6 0.3% SEK 121.65 0.22 Nasdaq 2,515.5 -0.5% EUR 104.94 - 0.15 FTSE100 5,337.0 0.5% USD 79.25 0.23 Eurostoxx50 2,234.2 0.6% GBP 80.30 - 0.1 Dax 5,799.9 0.9% Comm. Today Last Nikkei225 8,434.6 0.0% Brent spot 111.9 111.9 Oslo 365.91 -0.1% Brent 1m 110.1 110.8 Stockholm 426.16 0.7% Spot gold 1717.0 1717.0 Copenhagen 482.04 0.6% Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
30.11.2011
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