Morning Report

13.02.2013

G7 adds confusion in front of G20

NOK & 3m NIBOR
7.60 7.50 7.40 7.30 7.20 16-Jan 2.00 1.95 1.90 1.85 1.80 1.75 13-Feb
3m(rha)

G7 countries contributed to confusion about their collective stance on FX policy. Obama placed special emphasis to pave the way for the middle class in his speech. Despite the public statement from the G7 countries in which they repeat their support of marketdetermined exchange rates and that fiscal and monetary policy has been and will be aimed at achieving domestic goals, statements from individual representatives of the same countries contributed to uncertainty about whether or not the countries actually agreed. This casted doubt on what initially was interpreted as a green light to Japan and its policies, and contributed to a strengthening of the Japanese yen. European stock markets saw a rise yesterday, while the U.S. stock exchanges ended mixed ahead of the Obama speech. In Asia, the Japanese stock market opens down in the morning hours, while a stronger yen have contributed to the increase of the other Asian bourses. Obama emphasized on improving opportunities for the middle class in his "State of the Union"

30-Jan

EURNOK

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 16-Jan
rente

150 speech. Higher minimum wage, indexing it to the cost of living and public investments in infrastructure 100 will help create jobs for the middle class, which he described as the real engine of the U.S. economy. In

50
30-Jan 0 13-Feb
Diff(bp,rha)

addition to repeating some of the main issues from his inauguration speech on climate and weapons law, Obama used the opportunity to warn against the adverse effects of automatic spending cuts, and argue for sealing tax holes and a reform of Medicare. Inflation in the UK in January was 2.7 percent y/y (CPI), unchanged over the past four months and marginally lower than expected (Reuters 2.8 percent). Inflation has declined through 2012, but household income adjusted for inflation is still low. Combined with high levels of debt in the household sector, it contributes to weak consumption. Inflation is expected to remain high in the coming year so that the contribution of private consumption to growth in the economy seems to stay subdued. While low growth and rising unemployment suggests subdued inflation in the future, increasing food prices and taxes will keep inflation high. Bank of England will most likely point this out when they later today publish their Inflation Report. There are several key figures on the agenda today, two of which are Nordic. First is the interest rate decision from Riksbanken. While the market is not pricing in any chance of a cut, many analysts expect a cut of 25 bp (7 of 15 analysts questioned according to sme.direkt and 11 of 17 analysts said according to Reuters). Despite the fact that several indicators have recently pointed in the direction of a recovery in the Swedish economy, we believe that low inflation, low economic growth, moderate wage growth and a strong Swedish crown suggests that the central bank cut the repo rate from 1.0 percent to 0.75 percent in the morning. Later, Statsitics Norway publish GDP. In the third quarter, the GDP in Mainland Norway increased by 0.7 percent. Production of electricity pulled down slightly, making underlying growth slightly stronger. Consumption was pulled up by the relatively strong growth in the consumption of service and household purchases abroad. In the fourth quarter, we believe consumption will help to sustain the economy. While we expect growth in petroleum investment and a certain reversal of mainland investment, a decline in new building permits suggests lower housing investment. The production of electricity fell sharply in the fourth quarter and will curb growth. With continued negative contribution from net exports, excluding oil and gas, we expect growth in mainland Norway at 0.5 percent q/q. This is marginally lower than Norges Bank (0.6 percent) and marginally higher than consensus (Reuters 0.4 percent). Two other key figures will be published today. Industrial production from EMU in December is expected to rise 0.2 percent from November. The trend in production has been negative for a while and has probably contributed negatively to GDP in the fourth quarter. But the rise in PMIs suggests that development may improve going forward. Last but not least, the U.S. retail sales for January, referred to as the "moment of truth" or "the most important figure of the year." Retail sales are expected to rise 0.1 percent from December to January, down from 0.5 percent in December. Tax increases that took effect in January will dampen consumption, but a recovery in stock markets and a steady (albeit gradually) improving labor market helps to counteract this. magne.ostnor@dnb.no

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+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

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

Yesterdays key economic events (GMT) 09:30 12:30

As of

Unit y/y % index Unit % q/q % m/m %

Prior 2.7 88.0 Prior 1.0 0.7 0.5

Poll 2.8

Actual 2.7 88.9 DNB 0.75 0.5

UK CPI Jan USA NFIB Jan USA Obamas State of the union address As of Todays key economic events (GMT) 08:30 Sweden Riksbanken interest rate Sweden Norway 09:00 GDP, Mainland Norway Q4 Rikbsnk USA 14:30 Retail sales Jan a330

Poll 0.75 0.4 0.3

Morning Report
13.02.2013

3m LIBOR
0.16 0.15 0.14 0.13 0.12 16-Jan
EUR

30-Jan

0.31 0.30 0.30 0.29 0.29 13-Feb

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 16-Jan 30-Jan 13-Feb
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 94.14 1.3390 0.8552 7.4625 8.5755 1.2329 7.3786 5.5101 5.86 86.19 98.88 8.631 5.989

Today 93.10 1.3446 0.8575 7.4618 8.5585 1.2339 7.3793 5.4891 5.90 86.28 98.95 8.610 5.984

Spot rates and forecasts In 1m May-13 Aug-13 Feb-14 FX 0700 -1.1 92 90 91 93 AUD 0.4 1.34 1.32 1.36 1.37 CAD 0.3 0.84 0.81 0.85 0.86 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.2 8.65 8.65 8.60 8.70 RUB 0.1 1.20 1.20 1.20 1.20 GBP 0.0 7.35 7.25 7.25 7.40 HKD -0.4 5.49 5.49 5.33 5.40 KWD 0.7 5.96 6.10 5.86 5.81 LTL 0.1 85.0 83.8 84.3 85.1 LVL 0.1 98.7 97.3 97.3 99.3 NZD -0.2 8.75 8.95 8.53 8.60 SEK -0.1 612.50 604.17 604.17 592.00 SGD

USD NOK 1.034 5.674 1.002 5.477 0.918 597.960 18.836 29.128 30.045 18.261 1.568 8.604 7.756 0.707 0.282 19.465 2.568 2.137 0.521 10.541 0.842 4.618 6.364 86.217 1.238 4.432

US dollar

5.7 5.6 5.5 5.4 5.3

16-Jan 30-Jan
USDNOK

1.40 1.35 1.30 1.25 13-Feb

EURUSD(rha)

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

Prior 1.85 1.95 2.09 2.33 2.42 2.78 3.07 3.39

Last 1.82 1.93 2.08 2.32 2.40 2.77 3.08 3.40

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

Prior 1.11 1.16 1.26 1.52 1.56 1.90 2.18 2.44

Interest rates Last USD 1.11 1m 1.16 3m 1.26 6m 1.52 12m 1.57 3y 1.91 5y 2.19 7y 2.44 10y

Prior 0.20 0.29 0.46 0.77 0.52 0.95 1.43 2.00

Last 0.20 0.29 0.47 0.76 0.54 0.99 1.49 2.04

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

Prior 0.06 0.15 0.26 0.49 0.72 1.07 1.42 1.84

Last 0.06 0.15 0.26 0.48 0.74 1.10 1.45 1.87 Last 98.74 1.64 -0.33 10y sw ap 1.75 1.75 2.00

Japanese yen

95.0 90.0 85.0

16-Jan
USDJ PY

7.0 6.0

Norw ay Prior NST475 94.50 10y yld 2.62 - US spread 0.66 3m nibor 1.85 1.85 1.85

Norw ay

30-Jan

5.0 13-Feb
JPYNOK(rha)

Governm ent bonds Last SEK Prior Last US Prior 94.46 10y 112.25 112.25 10y 97.05 2.62 10y yld 2.04 2.04 10y yld 1.96 0.65 - US spread 0.08 0.07 30y yld 3.17 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 May-13 Aug-13 Feb-14 1.10 1.10 1.10 2.25 2.25 2.50 May-13 Aug-13 Feb-14 0.35 0.35 0.35

Last Germany Prior 96.91 10y 99.00 1.97 10y yld 1.61 3.18 - US spread -0.35 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany May-13 Aug-13 Feb-14

May-13 Aug-13 Feb-14

SEKNOK & CHFNOK 87 86 85 84 83 16-Jan 30-Jan

SEKNOK CHFNOK(rha)

6.1 6.0 5.9 5.8 13-Feb

Equities 14200 13700 13200 12700 12200 16-Jan 30-Jan

Dow J.I.

475 470 465 460 455 450 13-Feb

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 1.72 1.74 1 19.06.2013 0.35 Last 90.02 89.99 2.08 2.09 1 18.09.2013 0.59 Oil price: (Ldn,cl) 1m 1.73 1.71 -1 18.12.2013 0.84 SPOT 118.63 118.58 1.67 1.68 0 15.05.2015 2.25 Gold price 12.02.2013 PM 1.91 1.92 1 19.05.2017 4.26 AM: 1652.0 1647.5 2.12 2.14 2 22.05.2019 6.27 Equities Today 0700 % last 2.58 2.60 2 24.05.2023 10.28 Dow Jones 14018.70 0.3% 2.62 2.62 0 24.05.2023 10.28 Nasdaq C. 3186.49 -0.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6338.38 1.0% 1.95 2.08 1m 1.90 1.82 Eurostoxx50 2648.83 1.0% 1.95 2.07 3m 2.02 1.93 DAX 7660.19 0.3% 1.97 2.11 6m 2.12 2.08 Nikkei 225 11251.41 -1.0% 2.03 2.18 12m 2.30 2.32 OSEBX 471.70 0.8% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets