Morning Report

11.03.2013

Improving U.S. Labour Market

NOK & 3m NIBOR 7.60 2.00 1.95 7.50 1.90 7.40 1.85 7.30 1.80 7.20 1.75 11-Feb 25-Feb 11-Mar

Stronger than expected U.S. employment figures contributed to market optimism Friday.

2.8 2.6 2.4 2.2 2.0 1.8

In the U.S. the S&P500 rose 0.5 per cent Friday. An important contributor to the improvement was the employment report for February, which is discussed below. The U.S. 10-year Treasury yields rose 5 basis points to 2.06 per cent. In the currency markets, the euro has depreciated 0.7 per cent against the dollar since Friday morning. During the weekend, China has released a number of slightly disappointing key figures. Inflation in February was 3.2 per cent against the expected 3.0 per cent. Growth in industrial production was slightly lower than expected, and this was also the case for retail EURNOK 3m(rha) sales and credit growth as well. China's industrial production has so far been the weakest start of the year since the start of 2009. In Japan machinery orders showed a marked decline. Still Japanese stock markets rose 0.5 per cent from Friday. The Japanese yen has weakened 0.7 per cent against the dollar Norsk 10y sov. since Friday morning. The Norwegian krone has weakened slightly against the euro since Friday, 150 but less than the SEK.
100 50
0 11-Mar
Diff(bp,rha)

11-Feb
rente

25-Feb

Headquarter Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen Bod Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Martin Brter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen Kristina Solbakken Magnus Vie Sundal

+47 03000

+ 1 212 681 2550 +44 207 283 0050 +65 6220 6144 +46 84 73 48 50

22 94 89 40 24 16 90 30

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 24 16 90 80 51 84 04 30 77 62 96 80 73 87 49 73 33 01 73 80 70 11 69 85 24 16 90 90

Norwegian companies report lower growth according to Friday's publication of Norges Bank's regional network. The slowdown is in line with companies expectations in the previous report by November. The production index points to an annualized growth of just over 2 per cent. Growth is expected to pick up slightly again during the next six months. There are still among oil suppliers and construction growth has been strongest (respectively 6 and 3 per cent annualized). But in both these sectors output growth are expected to slow over the next six months. Several oil suppliers report decline in orders. Manufacturers oriented at domestic markets reported the lowest growth, and here the companies expected a flat trend in the next six months. Export oriented manufacturers are doing better, but there were particular companies that supply petroleum operations outside the Norwegian continental shelf that contributed to this. Traditional exporters reported a weak performance. A slightly smaller percentage of firms reported capacity problems, but the percentage is still higher than normal. According to the companies surveyed, employment growth has slowed down over the past three months, and is expected to remain at about the same level over the next three months. It is also in line with figures from Statistics Norway's labor surveys. The report contained no major surprises, but confirmed the impression from other key figures: Growth in the Norwegian economy has slowed, and economic pressures likewise. It gives Norges Bank room to postpone interest rate hikes further out in time. Thursday, Norges Bank presented a new report on monetary policy and financial stability. We believe it will include lower growth estimates for 2013 and revised estimates of unemployment - and a path where policy interest rates are lowered. U.S. non-farm payrolls rose more than expected in February: 236' against expectations of a rise of 165'. We estimated an increase of 200', and considering downward revisions of growth in the previous two months on a total of 15' we were pretty happy with it. The private sector accounted for the job growth, with an increase of 246'. The monthly increase for the last five months is 196. Annualized, this represents a job growth of hefty 1.7 per cent, and the last 30 years this has coincided with a GDP growth of around 3 per cent. Unemployment fell to from 7.9 per cent to 7.7 per cent. The figures support our view that many years of pent-up demand will provide a healthy demand growth in the private sector, and obviously budget angst from last fall has now been replaced by a more sober view of the effect of "sequestration"/budget cuts and the debt ceiling. EURUSD fell almost a cent on the figures, and 10-year U.S. Treasury yields rose rapidly by 6 basis points. European shares rose momentarily 0.4 per cent. In Germany industrial production was unchanged from December to January. It was weaker than expected and dampened hopes for a good start to the year with respect to production. On the other hand it did not signal a further decline in GDP. The increase in December still means that the level in January is 0.3 per cent above average for Q4 of last year. Also Sweden released industrial production figure, and those were not something to cheer for. Production in January was 2.0 per cent lower than in December and industrial orders fell 3.1 per cent. Today the Statistics Norway release February inflation figures. We expect core inflation of 1.1 percent, against 1.2 percent in January. It is in this case slightly lower than Norges Bank projected in October. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 11:00 Germany Goods production, prelim. 13:30 US Employment 13:30 US Unemployment Todays key economic events (GMT) 09:00 Norway CPI-JAE 09:00 Norway CPI 11:00 OECD Leading indicator As of Jan Feb Feb As of Feb Feb Jan Unit m/m % 1000 % Unit y/y % y/y % index Prior 0.3 140 7.9 Prior 1.2 1.3 Poll 0.4 165 7.9 Poll 1.2 1.0 Actual 0.0 236 7.7 DNB 1.1 1.1

24 16 90 77

24 16 90 08 24 16 90 03 24 16 90 07 24 16 90 04 24 16 90 01 24 16 90 06 24 16 90 02

24 16 90 48 24 16 90 46 24 16 90 47 24 16 90 49 24 16 90 44 24 16 90 45 24 16 90 51 24 16 91 23

Morning Report
11.03.2013

3m LIBOR
0.20 0.15 0.10 0.05 0.00 11-Feb
EUR

25-Feb

0.30 0.29 0.29 0.28 0.28 0.27 11-Mar

USD(rha)

NOK & 3m NIBOR 7.60 2.00 1.95 7.50 1.90 7.40 1.85 7.30 1.80 7.20 1.75 11-Feb 25-Feb 11-Mar
EURNOK 3m(rha)

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 95.38 1.3094 0.8740 7.4545 8.3007 1.2368 7.4357 5.6780 5.96 89.63 99.77 8.509 6.013

Today 96.07 1.3009 0.8714 7.4576 8.3311 1.2375 7.4460 5.7201 5.96 89.41 99.83 8.545 6.017

Spot rates and forecasts In 1m Jun-13 Sep-13 Mar-14 FX 0700 0.7 95 92 94 97 AUD -0.6 1.30 1.32 1.34 1.37 CAD -0.3 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.4 8.40 8.45 8.45 8.60 RUB 0.1 1.22 1.22 1.25 1.27 GBP 0.1 7.40 7.30 7.35 7.40 HKD 0.7 5.69 5.53 5.49 5.40 KWD 0.0 5.99 6.01 5.84 5.57 LTL -0.2 88.1 86.4 87.0 86.0 LVL 0.1 99.3 98.0 98.7 99.3 NZD 0.4 8.71 8.59 8.55 8.51 SEK 0.1 606.56 598.36 588.00 582.68 SGD

USD NOK 1.023 5.854 1.028 5.567 0.951 601.531 19.589 29.210 30.750 18.608 1.493 8.543 7.757 0.738 0.284 20.117 2.654 2.156 0.539 10.619 0.821 4.697 6.404 89.351 1.248 4.585

US dollar

5.8 5.6 5.4 5.2 11-Feb

1.35 1.30
25-Feb

1.25 11-Mar
EURUSD(rha)

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

Prior 1.76 1.85 1.98 2.23 2.23 2.59 2.93 3.27

Last 1.74 1.85 1.95 2.20 2.25 2.60 2.95 3.29

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

Prior 1.19 1.26 1.34 #N/A 1.64 1.93 2.20 2.45

Interest rates Last USD 1.19 1m 1.26 3m 1.34 6m #N/A 12m 1.64 3y 1.94 5y 2.20 7y 2.45 10y

Prior 0.20 0.28 0.45 0.74 0.53 0.97 1.47 2.05

Last 0.20 0.28 0.45 0.73 0.53 0.97 1.47 2.05

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

Prior 0.06 0.12 0.22 0.43 0.60 0.95 1.32 1.76

Last 0.06 0.13 0.23 0.43 0.59 0.94 1.31 1.77 Last 99.94 1.51 -0.55 10y sw ap 1.75 1.75 2.00

USDNOK

Japanese yen

100.0 95.0
90.0

7.0 6.0
25-Feb

Norw ay Prior NST475 96.90 10y yld 2.34 - US spread 0.34 3m nibor 1.85 1.85 1.85

85.0 11-Feb
USDJ PY

5.0 11-Mar
JPYNOK(rha)

Norw ay Jun-13 Sep-13 Mar-14

Governm ent bonds Last SEK Prior Last US Prior 96.80 10y 112.44 112.50 10y 99.94 2.36 10y yld 2.01 2.00 10y yld 2.01 0.30 - US spread 0.00 -0.06 30y yld 3.21 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jun-13 Sep-13 Mar-14 1.20 1.20 1.20 2.25 2.25 2.50 Jun-13 Sep-13 Mar-14 0.35 0.35 0.35

Last Germany Prior 99.47 10y 100.11 2.06 10y yld 1.49 3.26 - US spread -0.52 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany Jun-13 Sep-13 Mar-14

SEKNOK & CHFNOK 90 89 88 87 86 85 84 83 11-Feb 25-Feb

SEKNOK CHFNOK(rha)

6.2 6.1 6.0 5.9 11-Mar

Equities 14700 14200 13700 13200 12700 12200 11-Feb 25-Feb

Dow J.I.

480 475 470 465 460 11-Mar

Os lo(rha)

NOK sov. NST19 NST20 NST21 NST471 NST472 NST473 NST475 NST475 NOK FRA MAR JUN SEP DEC

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 2.18 2.20 2 19.06.2013 0.27 Last 91.40 91.30 2.36 2.38 1 18.09.2013 0.52 Oil price: (Ldn,cl) 1m 1.70 1.71 1 18.12.2013 0.77 SPOT 109.57 110.62 1.45 1.41 -3 15.05.2015 2.18 Gold price 08.03.2013 PM 1.59 1.61 2 19.05.2017 4.19 AM: 1579.5 1581.8 1.85 1.86 1 22.05.2019 6.20 Equities Today 0700 % last 2.32 2.36 4 24.05.2023 10.21 Dow Jones 14397.07 0.5% 2.34 2.36 1 24.05.2023 10.21 Nasdaq C. 3244.37 0.4% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6483.58 0.7% 1.88 1.98 1m 1.80 1.74 Eurostoxx50 2728.78 1.4% 1.89 2.00 3m 1.93 1.85 DAX 7986.47 0.6% 1.89 2.01 6m 2.05 1.95 Nikkei 225 12349.05 0.5% 1.91 2.05 12m 2.28 2.20 OSEBX 478.94 -0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
11.03.2013
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