Morning Report

14.05.2012

China Ease Monetary Policy

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

3-Apr 23-Apr 11-May

SEK & 3m STIBOR 9.1 9.0 8.9 8.8 8.7 3-Apr

3m ra.

The situation in Greece weigh on the markets, but the easing of Chinese monetary policy contributed positively. In the U.S., stock market indices DJIA and S&P 500 both fell by 0.3 per cent on Friday. JP Morgan's big losses announced Thursday weighed down the markets. Long U.S. government bond yields pulled further down: 10y Treasury yield fell five basis points to 1.84 per cent. The turmoil surrounding developments in Europe, with Greece in front, has contributed to long rates in the United States last week reached its lowest level in three months. In the Asian markets concern over Greece contributed to weakening markets but easing in the Chinese monetary policy has probably been the main reason that the stock exchanges in Tokyo and Hong Kong when typing has gained since Friday. In currency markets the movements in general have been moderate. The dollar has strengthened 0.2 per cent against the euro and Japanese yen since Friday morning. The Norwegian krone has remained virtually unchanged against the euro since Friday morning. In Greece, it has this weekend been made new attempts to form a new government. The talks between the major parties, New Democracy, PASOK and Syriza have not led Greece closer to any new government. On the contrary, the disagreement between Syrzia and the two other parties become even more visible. The Greek President, Karolos Papoulias, will continue the talks and mediation with the small parties today. With support from one of the smaller parties, it is possible for the New Democracy and PASOK to win a majority in parliament. Many have pointed out, however, that the party leaders want a broad support in parliament for the government. If so, we go towards new elections and rising tensions about whether Greece will continue to participate in the euro area or not. This weekend members of the ECB's Executive Board for the first time commented a possible breakdown of the euro zone. The Belgian central bank chief told the Financial Times that "Divorce is never smooth I guess an amicable divorce - if that was ever needed - would be possible, but I would still regret it." The Irish central bank governor said at a conference Saturday that "Things can happen that are not imagined in the treaties Technically, it can be managed. It is not necessarily fatal, but it is not attractive." The head of the Bundesbank, Jens Weidmann, repeated that "The consequences for Greece would be more serious than for the rest of the euro zone." In Germany, there were elections in the state of North Hein-Westphalia and Merkel's CDU fell to its lowest level since World War II by 26 percent. There are 9 percentage points down since the election in May 2010 according to the ZDF television. People's Bank of China eased monetary policy Saturday when it the reduced banks' reserve requirements by 50 basis points effective from 18. May. This is the third time in six months where the central bank reduces the reserve requirements. It was expected that the central bank would make such a move after almost all Chinese figures in the past month have come in weaker than expected. Last night we had retail sales figures for April. They certainly showed a growth of 14.1 per cent y/y, but it was more than one percentage point weaker than expected and a half percentage points lower than the growth in the first quarter. Also, industrial production disappointed with an annual rate of 9.33 per cent, almost three percentage points lower than expected. Moreover, investment growth slowed and housing starts fell further. The key figures have increased fears that the state of the Chinese economy is about to be severely impaired. Lower reserve requirements for banks increase lending capacity and reduce the effective interest rates. It contributes positively to the activity, but is hardly enough to have any material effect on the economy. The cut, however, is a signal that the government wants to stimulate and we can expect further measures in the future. Today Italy offers up to 5.25 billion euros in bonds, including its March 2015 three-year benchmark for up to 3.5 billion euros with the rest split over three lines due in 2020, 2022 and 2025. This is the first bond sale by a peripheral euro zone issuer after the parliamentary elections in Greece and the presidential elections in France. It is expected relatively good demand from domestic lenders, at least for three-year loan. For other maturities, the situation is more uncertain and it is exciting to see interest from foreign lenders. The last thing we hardly know anything specific about for a while. Other important figures today should include Norges Bank's Financial Stability report, figures for credit growth in Norway and the figures for industrial production in the euro zone. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 12:30 USA PPI ex. food&energy 13:55 USA Michigan As of Apr May Unit m/m % index Unit y/y % m/m % Prior 0.3 76.4 Prior 7.0 0.5 Poll 0.2 76.2 Poll 7.0 0.5 Actual 0.2 77.8 DNB 7.0

2.40 2.20 2.00 23-Apr 11-May

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

56 13 27 20 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 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

As of Todays key economic events (GMT) 08:00 Norway Financial stability Report 1/12 08:00 Norway Credit indicator, C2 Mar 09:00 EMU Industrial production Mar

Morning Report
14.05.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 135 125 115 105 3-Apr 23-Apr 96 94 92 90 11-May
$/b

NOK TWI ra.

EUR vs GBP & CHF 0.84 0.83 1.20 0.82 1.20 0.81 1.20 0.80 3-Apr 23-Apr 11-May 1.21
GBP r.a CHF

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

Prior 80.00 1.292 0.804 1.201 7.570 8.991 7.435 5.862 7.335 0.843 9.432 6.961 8.710 1.189 11.190

Last 80.06 1.289 0.802 1.201 7.585 8.999 7.433 5.887 7.357 0.844 9.461 6.984 8.729 1.188 11.226

% 0.1% -0.2% -0.3% 0.0% 0.2% 0.1% 0.0% 0.4% 0.3% 0.0% 0.3% 0.3% 0.2% 0.0% 0.3%

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 1.0007 1.0025 0.9324 19.68 5.7694 1.6075 7.7647 126.69 0.2788 2.6791 0.5418 0.7810 3.3254 1.2544 30.3010

% -0.16% 0.15% 0.23% 0.40% 0.20% 0.00% -0.01% 0.17% -0.09% 0.19% 0.04% -0.23% 0.82% 0.11% 0.39%

EURSEK & OMXS 9.1 9.0 8.9 8.8 8.7 3-Apr 550 500 450 400 350 23-Apr 11-May
OMXS ra. EURSEK

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

NIBOR Prior 1.91 2.30 2.69 2.92 2.84 3.05 3.25 3.46

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.91 1.89 1.89 0.34 2.31 2.15 2.15 0.62 2.68 2.41 2.41 0.93 2.92 2.53 2.53 1.10 2.85 1.86 1.84 1.08 3.04 1.97 1.94 1.37 3.23 2.12 2.09 1.69 3.44 2.28 2.24 2.01

Last 0.34 0.62 0.93 1.10 1.10 1.37 1.68 2.01

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.73 0.73 0.89 0.90 0.71 0.72 1.09 1.09 1.52 1.50 1.98 1.96

Gov. Bonds, 10y 2.25 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

3-Apr 23-Apr 11-May

10y 10y yield vs bund

NORWAY Prior Last 117.55 114.52 2.00 1.98 0.48 0.50

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 118.402 118.40 102.17 102.53 99.171875 1.52 1.51 1.52 1.48 1.84 0.00 0.03 0.32

Last 99.44 1.82 0.34

13.5 13.0 12.5

JPY and DowJones

85 80

12.0 3-Apr

75 23-Apr 11-May
USDJPY ra. DowJones, 1000

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
% 0.16 0.20 - 0.15 0.18 - 100.0 Last 112.9 112.3 1583.0

US 3m libor 10y 0.50 0.50 0.50

swap 2.50 2.50 3.00

% -0.3% 0.0% 0.6% 0.3% 1.0% 0.0% 0.1% 0.5% 0.4%

USD and gold 1720 1670 1620 1570

EURUSD ra.

1.34 1.32 1.30 1.28

Gold

3-Apr 23-Apr 11-May

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.31 2.30 0.01 NOK 94.86 SEP 2.32 2.31 0.01 SEK 119.76 DEC 2.34 2.34 0.00 EUR 101.48 MAR 2.40 2.39 0.01 USD 80.45 FRA SEK 3m Prior chg GBP 0.00 JUN 2.12 2.11 0.01 Comm. Today SEP 1.85 1.84 0.01 Brent spot 112.9 DEC 1.72 1.71 0.01 Brent 1m 111.7 MAR 1.67 1.68 -0.01 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 12,820.6 Nasdaq 2,933.8 FTSE100 5,575.5 Eurostoxx50 2,254.5 Dax 6,579.9 Nikkei225 8,973.8 Oslo 408.92 Stockholm 489.35 Copenhagen 593.47

Morning Report
14.05.2012
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