Morning Report

01.03.2012

Even stronger NOK

NOK & 3m NIBOR 7.80 7.60 7.40
3m ra.

2.90 2.60 2.30

EURNOK

Norges Bank's regional network showed that the economy is developing stronger than expected before Christmas. The market responded by sending the crown to powerful new levels. Today, the figures for the Norwegian unemployment are released, in addition to the PMI indices in many countries. Market developments were a bit mixed yesterday. While long rates rose due to good macroeconomic figures from the US, most equity markets fell moderately. The US market seems to have reacted negatively to Bernanke's speech to the Congress, where he pointed out that the labor market remains unusually weak and did not come up with new measures to boost the economy. In the foreign exchange market the NOK strengthened further and has since yesterday been traded down towards 7.40 against the euro. The euro weakened against the dollar yesterday afternoon. ECB lent 529.5 billion euro in the second round the three year LTRO yesterday. This was more than expected, but did not give significant market reaction. Around 800 banks received loans this time vs. 523 in December. The increase in the number of banks can be explained by the adjustment of the collateral requirements, which Draghi announced the monetary policy meeting earlier in February. The net liquidity effect is estimated at around 310 billion euro, which is also significantly higher than in December. To the extent that banks buy government bonds, loans may also lead to further decline in state rates for countries such as Italy and Spain. New statistics show that both the Italian and Spanish banks increased their holdings of government bonds in their own countries after the previous LTRO. In this way, the loans the same effect as if the ECB itself bought bonds in the market. Not everyone is pleased with this: According to the FT Bundesbank chief Weidmann is out with strong criticism of Draghi and warns of increased risk and danger of loss of reputation for the ECB. He wants a quick change in the form of stricter collateral requirements for banks that borrow from the ECB. Norges Bank's new report from the regional network, which was conducted in January, was somewhat stronger than in November. Growth in the economy is sound (up to 3%), and is expected to remain at this level in the coming months. The sectoral breakdown shows that the dichotomy of the economy has been further reinforced. The oil service industries expects growth of more than 7%, the construction industry is waiting over 4%. On the other hand the retail trade industry expects 2% while the exports industry hardly expects any growth going forward. With the exception of retail trade, employment is expected to increase for all major industries. However, there is a tendency that the lack of skilled labor may reduce output. Overall, the report clearly indicates that the interest rate should not be lowered further. January data for credit growth, which also arrived yesterday, was not likely to influence the central bank. Total credit growth increased to 6.9%, lifted by increased borrowing from enterprises. Today, a number of data for the Norwegian economy will be released: Registered unemployment from NAV, oil investments from SSB, house prices, car sales and PMI. US GDP growth in the fourth quarter was revised up from 2.8% to 3.0%. This was mainly due to stronger growth of private investment. Growth in the fourth quarter was largely raised by restocking, and it appears that growth is slowing somewhat in the first quarter. Beige Book points out that the development has been relatively positive in the new year. Chinese PMI rose for both the government and the private (HSBC) index. The increase may indicate that the Chinese industry is not slowing as much as expected. Today PMI indices for several countries will be issued. Most importantly, the US ISM index is expected to rise. Swedish GDP fell by 1.1% from the third to the fourth quarter. There was a greater decline than expected decline is mainly due to the current account, and represents a reversal of the strong upturn in the third quarter. However, it was encouraging that both private consumption and investment increased after the decline in the previous quarter. The minutes from the central bank's monetary policy meeting on February 15 gave little new information. The minority on the committee still consists only of Ekholm and Svensson, while the two new representatives, Jocknick and Jansson, seem to share the majority's view. knut.magnussen@dnb.no

20-Jan 9-Feb 29-Feb

SEK & 3m STIBOR 9.0 8.9 8.8 8.7 20-Jan 9-Feb

3m ra.

2.70 2.60 2.50 2.40 2.30 29-Feb

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 52 9910 69 39 41 50 62 54 14 82 52 72 09 06 61 24 79 56 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 Camilla Viland Kyrre Aamdal

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 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) 08:30 Sweden GDP 14:45 US Chicago PMI 01:00 China PMI manufacturing (NBS) Todays key economic events (GMT) 08:00 Norway PMI 09:00 Norway Gross unemployment 15:00 US ISM, manufacturing

As of Q4 Feb Feb As of Feb Feb Feb

Unit q/q % Index Index Unit Index 1000 Index

Prior 1.6 60.2 50.5 Prior 54.9 81.6 54.1

Poll 62.0 Poll 53.8 54.5

Actual -1.1 64.0 51.0 DNB 54.0 55.0

Morning Report
01.03.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 130 120 110 100 20-Jan 9-Feb 102 100 98 96 94 92 29-Feb
$/b

NOK TWI ra.

1.25 1.20 1.15

EUR vs GBP & CHF 0.87 0.85 0.83

1.10 0.81 20-Jan 9-Feb 29-Feb

GBP r.a CHF

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

Prior 81.23 1.333 0.838 1.205 7.450 8.820 7.435 5.591 6.891 0.846 8.897 6.622 8.165 1.185 10.534

Last 81.00 1.335 0.838 1.205 7.446 8.821 7.435 5.579 6.891 0.845 8.888 6.613 8.164 1.185 10.529

% -0.3% 0.1% 0.1% 0.0% -0.1% 0.0% 0.0% -0.2% 0.0% -0.1% -0.1% -0.1% 0.0% 0.0% 0.0%

In 1 m ...3 m 77 77 1.30 1.30 0.83 0.83 1.23 1.23 7.60 7.75 8.90 9.20 7.45 7.45 5.85 5.96 7.59 7.74 0.85 0.84 9.2 9.3 6.85 7.08 5.27 5.45 1.17 1.19 10.72 11.08

...6 m ...12 m 80 85 1.35 1.40 0.85 0.87 1.23 1.30 7.65 7.65 9.00 9.00 7.45 7.45 5.67 5.46 7.08 6.43 0.85 0.85 9.0 8.8 6.67 6.43 5.33 5.46 1.18 1.18 10.59 10.34

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0746 0.9892 0.9033 18.67 5.5729 1.5925 7.7561 125.35 0.2782 2.5881 0.5238 0.8348 3.0975 1.2501 29.2980

% 0.11% -0.05% -0.12% -0.27% -0.14% 0.04% -0.01% -0.10% 0.03% -0.12% -0.17% 0.04% -0.07% -0.06% 0.72%

EURSEK & OMXS 9.0 8.9 8.8 8.7 20-Jan 9-Feb 550 500 450 400 350 29-Feb

OMXS ra. EURSEK

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

N IBOR Prior 2.22 2.63 2.98 3.17 2.89 3.15 3.37 3.59

SWAP AN D MON EYM ARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.21 2.04 2.04 0.50 2.60 2.36 2.35 0.91 2.93 2.54 2.53 1.25 3.13 2.65 2.65 1.44 2.90 2.01 2.02 1.21 3.14 2.20 2.20 1.55 3.37 2.40 2.40 1.91 3.58 2.59 2.59 2.27

Last 0.49 0.90 1.24 1.43 1.21 1.57 1.92 2.28

USD LIBOR Prior 0.24 0.49 0.75 0.90 0.67 1.11 1.59 2.05

Last 0.24 0.48 0.75 0.89 0.70 1.15 1.62 2.08

Gov. Bonds, 10y 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

20-Jan 9-Feb 29-Feb

10y 10y yield vs bund

N ORWAY Prior Last 115.3 111.67 2.32 2.33 0.51 0.51

GOVERNM ENT BON DS SWEDEN GERMANY US Prior Last Prior Last Prior 114.725 114.74 101.679 101.65 100.23438 1.91 1.90 1.81 1.82 1.97 0.10 0.09 0.16

Last 100.11 2.00 0.18

JPY and DowJones 14 82 81 13 80 79 12 78 77 11 76 10 75 20-Jan 9-Feb 29-Feb

USDJPY ra. DowJones, 1000

In 3m 6m 12m

INTEREST RATE FORECASTS N ORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.65 3.50 2.15 2.25 1.05 2.50 2.55 3.75 2.10 2.50 1.05 2.75 2.60 4.25 2.00 3.00 1.05 3.25

US 3m libor 10y 0.50 0.50 0.50

swap 2.25 2.50 3.00

USD and gold 1900 1.42 1800 1.38 1700 1.34 1600 1.30 1500 1.26 20-Jan 9-Feb 29-Feb
EURUSD ra. Gold

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

3m 2.58 2.41 2.40 2.42 3m 2.30 2.00 1.81 1.78

Prior 2.58 2.41 2.40 2.42 Prior 2.30 2.00 1.80 1.78

chg 0.00 0.00 0.00 0.00 chg 0.00 0.00 0.02 0.00

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 93.11 - 0.06 Dow Jones 12,952.1 -0.4% SEK 116.82 0.15 Nasdaq 2,966.9 -0.7% EUR 104.78 0.02 FTSE100 5,871.5 -1.0% USD 78.70 - 0.13 Eurostoxx50 2,512.1 -0.3% GBP 81.30 - 0.0 Dax 6,856.1 -0.5% Comm. Today Last Nikkei225 9,707.4 0.0% Brent spot 123.8 123.8 Oslo 429.85 -0.2% Brent 1m 122.7 122.7 Stockholm 504.12 0.0% -0.1% Spot gold 0.0 1770.0 Copenhagen 586.88 Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
01.03.2012
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