Morning Report

02.12.2011

Progressing US manufacturers
NOK & 3m NIBOR 8.00 7.80 7.60 3.50 3.30 3.10

US manufacturers are progressing, while its European competitors are struggling. Today's US payrolls are expected to be strong . Meanwhile, speculation continues regarding the upcoming proposal which, according to Sarkozy, will "guarantee the future of Europe". Merkel's view will be outlined in Bundestag today. Stock markets worldwide edged slightly down during yesterday's session, after the sharp rise on Wednesday. Asian stock markets have risen during the night. Italian ten-year government bond yields have slid below 7 and are currently at 6.8 per cent. This reflects the hope of a solution to the critical situation in Europe. In a televised speech yesterday, Sarkozy said that he will meet Merkel in Paris on Monday, where they will prepare a proposal "to guarantee the future of Europe". Merkel will outline her view in Bundestag today. The recent central bank governor Mario Draghi hinted in a speech to the European Parliament yesterday that an agreement on fiscal policy might pave the way for more aggressive measures by the ECB. What do the euro leaders plan to do with the Treaty in order to improve budget discipline? Germany wants the European Commission to be able to reject national budgets before they go to the parliaments, and that countries that violate fiscal rules are reported to the European Court of Justice. France wants the elected political leaders in each country to continue to have the last word. Sarkozy said in his speech yesterday that the reforms do not represent a first step towards the nationality, but a step towards a closer cooperation between national states. At the same time he declared that ECB has a "determining role to play", and that he is convinced that ECB will act, although it is up to the central bank to determine when and in what way. We (as the market) expect ECB to cut its key policy rate to 1.0 per cent, the post-2008 level, next week. The central bank is also expected to provide long-term liquidity at a low price (and with less stringent requirements for mortgage) to stressed European banks. Monthly manufacturing surveys were released in many countries yesterday. Most European indices are below the 50-level, indicating that production is falling. PMI in the euro zone fell by 0.7 points to 46.4 in November, which is the lowest level since April 2010. Germany's and France's PMI fell by 1.3 and 1.2 points, respectively. UK's CIPS index fell by 0.2 points from (upwardly revised) 47.8 in October to 47.6 in November, pointing to a fall in industrial production by about 1 percent. The Swedish PMI fell by 2.2 points to 47.6 in November. This is nearly one standard deviation below the average of the last ten years. The Norwegian PMI fell by 3.6 points to 48.6 in November, the lowest level since December 2009. Several Norwegian manufacturing companies plan to reduce its workforce. The important and welcome exception to this gloomy picture is the US ISM index, which rose from 50.8 in October to 52.7 in November. This is the highest level in five months, indicating an annualized GDP growth in excess of 2 per cent. Today's US payrolls are expected to reveal that employment grew by 140' persons in November, following a rise of 80' last month. This is not strong enough to bring unemployment down from 9 per cent. The investment survey conducted among operators on the Norwegian continental shelf underlines the positive effects on the Norwegian economy of higher oil prices. Investments are expected to rise to NOK 184.6 billion in 2012, which is the highest amount registered since the start of the survey in 1985. Norges Bank's projections for growth in oil investments in 2011 (12 per cent) seems reasonable, while the 14 per cent projection next year might actually be to pessimistic. Meanwhile Norwegian house prices continue to rise, by 0.5 per cent m/m and 9.3 per cent y/y in November. kjersti.haugland@dnb.no Yesterday's key economic events (GMT) 0700 Norway PMI 08:28 UK CIPS (manufacturing) 14:00 USA ISM, manufacturing Todays key economic events (GMT) 08:00 Norway Registered unempl. 12:30 US Non-farm payrolls 12:30 US Unemployment As of Nov Nov Nov As of Nov Nov Nov Unit Index Index Index Unit % na 1000 % Prior 50.8 47.8r 50.8 Prior 2.4 80.0 9.0 Poll 50.2 47.0 51.5 Poll 2.4 140.0 9.0 Actual 48.6 47.6 52.7 DNB 2.4

2.90 7.40 24-Oct 11-Nov 1-Dec

3m ra. EURNOK

SEK & 3m STIBOR 9.5 9.3 9.1 8.9 24-Oct 11-Nov

3m ra.

2.70 2.60 2.50 2.40 1-Dec

EURSEK

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

Morning Report
02.12.2011

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 118 112 106 100 24-Oct 11-Nov
NOK TWI ra.

100 98 96 94 1-Dec
$/b

EUR vs GBP & CHF 1.25 1.20 1.15 0.89 0.87 0.85

1.10 0.83 24-Oct 11-Nov 1-Dec

GBP r.a CHF

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

Prior 77.77 1.347 0.858 1.233 7.821 9.118 7.435 5.810 7.477 0.859 9.117 6.777 8.724 1.167 10.634

Last 77.78 1.348 0.859 1.235 7.807 9.108 7.435 5.792 7.452 0.858 9.089 6.762 8.699 1.167 10.613

% 0.0% 0.1% 0.1% 0.2% -0.2% -0.1% 0.0% -0.3% -0.3% -0.1% -0.3% -0.2% -0.3% 0.0% -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 1.0246 1.0135 0.9165 18.77 5.5188 1.5694 7.7724 118.70 0.2770 2.5632 0.5185 0.7819 3.3304 1.2849 30.7980

% 0.11% -0.09% 0.08% 0.04% -0.09% -0.01% 0.05% -0.09% -0.01% -0.10% -0.12% 0.35% -0.02% 0.16% 0.10%

EURSEK & OMXS 9.4 9.2 9.0 8.8 24-Oct 11-Nov 500 450 400 350 1-Dec

O MXS ra. EURSEK

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

NIBOR Prior 3.01 3.30 3.35 3.37 2.92 3.27 3.54 3.76

SWAP AND M ONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 3.05 2.38 2.39 1.14 3.21 2.67 2.68 1.41 3.30 2.69 2.70 1.65 3.40 2.76 2.76 1.84 2.91 1.88 1.85 1.57 3.27 2.10 2.07 2.01 3.54 2.32 2.27 2.33 3.75 2.45 2.40 2.65

Las t 1.13 1.40 1.65 1.83 1.56 1.98 2.35 2.68

USD LIBOR P rior 0.27 0.53 0.75 0.91 0.83 1.35 1.82 2.26

Last 0.27 0.53 0.75 0.90 0.84 1.37 1.84 2.28

Gov. Bonds, 10y 2.25 2.00 1.75 3.00 2.50 2.00

1.50 1.50 24-Oct 11-Nov 1-Dec

NOK , ra. S EK

10y 10y yield vs bund

NORWAY Prior Last 115.3 110.50 2.49 2.49 0.27 0.29

GOVERNM ENT BONDS SWEDEN GERMANY US Prior Last Prior Las t P rior 116.106 116.11 98.439 98.21 99.234375 1.80 1.80 2.23 2.20 2.09 -0.42 -0.40 -0.14

Last 99.05 2.12 -0.08

13 12 11

JPY and DowJones

10 24-Oct

11-Nov

79 78 77 76 75 1-Dec

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 1900 1.46 1800 1.42 1700 1.38 1600 1.34 1500 1.30 24-Oct 11-Nov 1-Dec
EURUSD ra. Gold

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

3m 3.06 2.62 2.33 2.30 3m 2.72 2.17 1.76 1.54

Prior 3.06 2.63 2.33 2.31 Prior 2.72 2.15 1.74 1.55

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

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 97.61 - 0.19 Dow Jones 12,020.0 -0.2% SEK 120.31 - 0.06 Nasdaq 2,626.2 0.2% EUR 105.82 0.03 FTSE100 5,489.3 -0.3% USD 78.26 - 0.04 Eurostoxx50 2,313.8 -0.7% GBP 80.10 - 0.0 Dax 6,035.9 -0.9% Comm. Today Last Nikkei225 8,643.8 0.0% Brent spot 109.8 109.8 Oslo 378.59 -0.6% Brent 1m 109.7 109.0 Stockholm 442.41 -1.1% Spot gold 1752.0 1752.0 Copenhagen 490.27 -1.9% Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
02.12.2011
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