Morning Report

07.05.2012

Hollande new president, chaotic in Greece

NOK & 3m NIBOR 7.70 7.60 7.50 7.40 7.30
3m ra.

2.40 2.35 2.30 2.25 2.20

EURNOK

Hollande will be the next president of France, while Greek elections led to an unsettled parliamentary situation without any majority for the bail-out package. The news was poorly received by markets that were already gloomy after Fridays disappointing US payrolls. Weak macro data, particularly US payrolls, led to falling stock markets on Friday. Long US government bond yields fell by ten points. In the wake of yesterdays elections in Greece and France Asian markets have continued the fall today. FX developments are characterized by flight to safe havens. The euro has depreciated and EURUSD dipped below 1.30 during the night. The yen has strengthened against most currencies, and scandies have weakened. The NOK depreciation is probably also due to a steep fall in the oil price. The EURNOK is currently trading at 7.58. US non-farm payrolls rose by 115' in April, well below expectations of 170'. Markets found limited comfort in the fact that February and March payrolls were revised up by a total of 53'. Unemployment fell from 8.2 to 8.1 percent, the lowest level in three years. Unfortunately the drop was due to a discouraging drop in the workforce. The pace of progress in the US labour market has slowed down during the spring. In our view, the pace is not yet low enough for Fed to consider another round of quantitative easing, especially since other indicators (like ISM) remain solid. Francois Hollande will be sworn in as the new President of France 15 May, after receiving 51.7 percent of the votes in yesterday's election. He will be the first Socialist president since Mitterrand left office in 1995. According to polls Socialists may win majority in the parliamentary elections on 10 and 17 June. This would give a strong capacity to implement a new policy. Hollande won with his message that the way out of the crisis is more growth-enhancing measures and less fiscal tightening. He will aim for a balanced budget in 2017 (one year later than Sarkozy), raise taxes for the richest, give subsidies to companies that hire young and elderly, increase the minimum wage, and partially reverse the raising of the retirement age to 62. He will not sign the fiscal treaty in its present form. This has worried Merkel, who has openly supported Sarkozy in the election campaign. Hollande's victory was more or less priced into markets, but the outcome of the Greek elections has led to renewed worries regarding a possible Greek euro-exit. The parliamentary situation is highly unclear. Socialist PASOK and conservative New Democracy, current coalition partners, experienced an even worse election than expected. At present (96 percent of the votes are counted) they possess 150 of 300 seats in parliament. The radical-left anti-EU party Syriza, won 16.2 percent of the votes, which makes them the second largest party after New Democracy, with PASOK in third place. The neo-Nazi party Golden Dawn has for the first time gained seats in parliament, with 7 percent of the votes. This week will be dominated by attempts to form a government. If these do not succeed, there will be new elections. To receive the next tranche of the bail-out package Greece must approve new austerity measures before the end of June. The most important macro events this week are the monetary policy meeting in UK and Swedish and Norwegian inflation figures on Thursday, as well as Chinese inflation and US consumer confidence (Michigan) on Friday. Norges Banks meeting is due on Thursday. It is widely expected that the central bank will keep its key policy rate unchanged at 1.5 percent, but the wording of the press release will be carefully interpreted, to track any changes in the assessment of the strength of the upturn in the Norwegian economy. Friday's labour market data showed that Norwegian employment increased by 23' persons from Q4 to Q1. This represents an annualized growth rate of nearly 4 percent, well above Norges Bank's projections for 2012 employment growth (1 percent). The labour force is also growing more strongly than expected, and hence the development in the unemployment rate (from 3.4 percent in Q4 to 3.2 percent in Q1) corresponds well with the central bank's 2012 estimate (3). Nevertheless: Stronger-than-expected job growth strengthens our belief that the central bank will reverse its March cut already in August. Today Norges Bank releases the conclusions from a survey by phone of a sample of contact enterprises in its regional network. We expect that companies - particularly retailers - express greater optimism than in January. kjersti.haugland@dnb.no Fridays key economic events (GMT) 08:00 Norway LFS unemployment 12:30 US Non-farm payrolls 12:30 US Unemployment rate Todays key economic events (GMT) 08:00 Norway Regional Network update 10:00 Germany Industrial orders UK Bank Holiday - Early May As of Feb Apr Apr As of Apr Mar Unit % 1000 % Unit m/m % Prior 3.3 154r 8.2 Prior 0.3 Poll 3.2 170 8.2 Poll 0.5 Actual 3.2 115 8.1 DNB

27-Mar 16-Apr 4-May

SEK & 3m STIBOR 9.0 8.9 8.8 8.7 27-Mar 16-Apr

3m ra.

2.40 2.20 2.00 4-May

EURSEK

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

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

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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 Magne stnor 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 57 22 01 76 67

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

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

Morning Report
07.05.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 135 125 115 105 27-Mar 16-Apr
NOK TWI ra.

96 94 92 90 4-May
$/b

EUR vs GBP & CHF 1.21 1.21 1.20 1.20 1.20

GBP r.a

0.86 0.84 0.82 0.80

CHF

27-Mar 16-Apr 4-May

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

Prior 79.88 1.309 0.810 1.201 7.590 8.926 7.438 5.802 7.269 0.851 9.372 6.826 8.552 1.177 11.019

Last 79.85 1.301 0.806 1.201 7.577 8.920 7.437 5.825 7.297 0.851 9.402 6.856 8.595 1.178 11.065

% 0.0% -0.6% -0.5% 0.0% -0.2% -0.1% 0.0% 0.4% 0.4% -0.1% 0.3% 0.4% 0.5% 0.1% 0.4%

In 1 m ...3 m 81 84 1.30 1.30 0.83 0.83 1.20 1.20 7.50 7.50 8.90 9.00 7.45 7.45 5.77 5.77 7.12 6.87 0.84 0.83 9.0 9.0 6.85 6.92 5.55 5.82 1.19 1.20 10.72 10.84

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.20 1.30 7.50 7.60 9.00 9.00 7.45 7.45 5.56 5.43 6.54 6.39 0.83 0.84 8.8 8.7 6.67 6.43 5.67 5.46 1.20 1.18 10.59 10.34

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

USD 1.0162 0.9975 0.9231 19.36 5.7163 1.6143 7.7626 125.86 0.2787 2.6538 0.5377 0.7936 3.2280 1.2491 29.8028

% -0.19% 0.18% 0.52% 0.46% 0.49% -0.09% 0.02% 0.94% 0.06% 0.53% 0.52% -0.30% 0.62% 0.32% 0.08%

EURSEK & OMXS 9.0 8.9 8.8 8.7 27-Mar 16-Apr

OMXS ra. EURSEK

550 500 450 400 350 4-May

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

NIBOR Prior 1.93 2.31 2.70 2.94 2.88 3.10 3.31 3.53

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.93 1.89 1.89 0.34 2.30 2.16 2.16 0.62 2.68 2.41 2.41 0.94 2.93 2.53 2.53 1.11 2.87 1.94 1.95 1.00 3.10 2.07 2.06 1.33 3.31 2.25 2.23 1.69 3.52 2.42 2.40 2.07

Last 0.34 0.62 0.94 1.11 0.98 1.32 1.68 2.05

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.73 0.73 0.89 0.89 0.66 0.67 1.08 1.07 1.53 1.51 2.01 1.99

Gov. Bonds, 10y 2.25 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

27-Mar 16-Apr 4-May

10y 10y yield vs bund

NORWAY Prior Last 116.8 113.40 2.11 2.11 0.51 0.54

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 116.526 116.51 101.55 101.73 101.07813 1.70 1.70 1.60 1.56 1.88 0.10 0.14 0.28

Last 101.50 1.84 0.28

13.5 13.0 12.5

JPY and DowJones

85 80

12.0 27-Mar 16-Apr

75 4-May

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.40 3.50 2.15 2.75 0.70 2.50 2.45 3.75 2.10 2.75 0.70 2.75 2.70 4.25 2.00 3.00 0.70 3.25

US 3m libor 10y swap 0.50 2.50 0.50 2.50 0.50 3.00

% -1.3% -2.2% -1.9% -1.7% -2.0% : -2.3% -1.9% :

USDJPY ra. DowJones, 1000

USD and gold 1700 1.34 1.33 1.32 1650 1.31 1.30 1600 27-Mar 16-Apr 4-May
EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.28 2.28 0.00 NOK 94.78 SEP 2.28 2.30 -0.02 SEK 118.61 0.00 EUR 102.01 DEC 2.33 2.33 MAR 2.38 2.39 -0.01 USD 79.81 FRA SEK 3m Prior chg GBP 83.50 JUN 2.09 2.10 -0.01 Comm. Today SEP 1.89 1.90 -0.01 Brent spot 112.2 DEC 1.80 1.80 0.00 Brent 1m 112.5 MAR 1.78 1.79 -0.01 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% Stock ex. Today - 0.17 Dow Jones 13,038.3 - 0.03 Nasdaq 2,956.3 - 0.44 FTSE100 5,655.1 0.37 Eurostoxx50 2,248.3 Dax 6,561.5 Last Nikkei225 9,119.1 112.2 Oslo 412.55 113.2 Stockholm 488.71 1643.8 Copenhagen #N/A ND

Morning Report
07.05.2012
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