Morning Report

30.05.2012

Volatile markets
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

Global stock markets rebounded yesterday, while Asian markets have opened sharply down today. Data from Statistics Norway show that labour market conditions are tightening in Norway. Global stock markets rebounded yesterday. Asian markets ended in plus, led by both the Hang Seng index in Hong Kong, the Kospi index in Korea and the Nikkei index in Japan. But so far today, all have opened sharply down. The Hang Seng index has fallen by 1.8 per cent, almost reversing the increase from the last three trading days. During the last week there have been signals from the Chinese authorities indicating that they are ready to press the gas if the economy slowdown proved to be too severe. Yesterday, however, Sina, a Chinese news portal, claimed that the government was not willing to go as far as during the financial crisis of 2008-09, when a large-scale investment boom worth nearly 635 billion dollars was initiated. At the same time it should be noted that the government has already come up with specific measures to stimulate the economy. On May 23 the central government announced that 10.4 billion dollar will be provided in subsidies in the construction of 2.3 million public-owned housing units that will be out on the rental market. In addition, the Finance Ministry has allocated 5 billion dollar to construction of homes for low-income groups. Investment projects with a start-up in 2012 will also be accelerated, especially within infrastructure. Also European and US stocks ended in positive territory yesterday. Among other things, the Oslo Stock Exchange is up 0.8 percent since yesterday morning, while the DAX index has increased by 1.2 percent. The market improvement seems to end in the stock markets, and a lack of risk appetite seems to be more characteristic for movements in other assets. Yields on US Treasury are down 3 basis points from yesterday to 1.72 percent. The 10-year German Bund yield is currently at 1.37 percent, unchanged from yesterday. Corresponding rates in Italy has increased slightly since yesterday, while Spanish 10 year bonds have broken through the 6.5-percent line. As mentioned in yesterday's report the spread to German government bond yields has never been larger in the euro's history. In FX, the euro has weakened by 0.5 percent against the dollar and 0.6 percent against the yen. The Norwegian krone has appreciated marginally against the euro and EURNOK is now traded at 7.53. Market movements recently appear in particular to be affected by the events in two European countries, Spain and Greece. Also yesterday's news headlines were affected by these countries. According to the Financial Times the ECB rejects a scheme in which Spanish authorities will capitalize Bankia by using newly issued government bonds which Bankia in turn can use as collateral when applying for new loans at the ECB. According to Financial Times, such a solution is considered by the ECB as an extension of monetary financing. By EU law this is regarded as illegal, and it thus seems unlikely that the highly unconventional suggestion by the Spanish authorities will materialize. There seems to be a spate of polls coming from Greece these days. In the newest it is clear that Greeks still want to keep the euro. In the survey, which was taken up by the GPO SA, 81 percent of respondents still wants Greece to remain in the euro zone. However, 77 percent also say that the austerity measures induced by the Troika should be renegotiated, which is in line with what the left-wing party Syriza wants. More than half, or 52.4 percent to be precise, say that they want to keep the euro if they were forced to carry out the austerity measures, while 44.5 percent say they should go out if the tightening measures continue. It therefore seems to be a marginal majority that supports the combination of euro + tightening in favor of no euro + no tightening measures. Figures from Statistics Norway showed yesterday that Norwegian labor market conditions are tightening. Unemployment in March (average of the period February - April) was 3.0 percent. According to Reuters, this was 0.2 percentage point lower than consensus. By comparison, unemployment in the previous three-month period (November - January) was 3.3 percent. The labor force increased by 11 000 persons while employment rose by 19 000 persons. This represents an annualized employment growth of 3.0 percent. Yesterday's numbers came in on the strong side compared to Norges Bank's projections. The Central Bank estimated in their latest Monetary Policy Report that the unemployment rate would be 3 percent with employment growth at 1 percent. This figure is thus the latest of a series of strong macroeconomic data, and supports our view that Norges Bank will raise its key interest rate in August by 0.25 percentage points. ole.kjennerud@dnb.no Yesterday's key economic events (GMT) 07:15 Sweden Consumer confidence 08:00 Norway LFS unemployment 14:00 USA Cons. confidence, CB Todays key economic events (GMT) 07:30 Sweden GDP 09:00 EMU Sentiment index 14:00 USA Pending home sales As of May Mar May As of Q1 May Apr Unit Index % Index Unit q/q % Index Index % Prior Poll 4.7 2.6 3.2 3.2 68.7 70.0 Prior Poll -1.1 92.8 92.5 4.1 0.5 Actual 5.9 3.0 64.9 DNB 0.0

19-Apr 9-May 29-May

SEK & 3m STIBOR 9.3 9.1 8.9 8.7 19-Apr

3m ra.

2.20

2.00 9-May 29-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

Morning Report
30.05.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 125 120 115 110 105 19-Apr 96 94 92 9-May 90 29-May
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.20 1.20 0.83 0.82 0.81 1.20 0.80 1.20 0.79 19-Apr 9-May 29-May
GBP r.a CHF

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

Prior 79.55 1.250 0.799 1.202 7.532 9.004 7.431 6.027 7.579 0.837 9.428 7.207 9.071 1.197 11.274

Last 79.53 1.256 0.799 1.202 7.536 8.977 7.431 6.000 7.544 0.840 9.424 7.150 8.993 1.193 11.236

% 0.0% 0.5% 0.0% 0.0% 0.1% -0.3% 0.0% -0.5% -0.5% 0.3% 0.0% -0.8% -0.9% -0.3% -0.3%

In 1 m ...3 m 80 84 1.23 1.30 0.79 0.83 1.20 1.20 7.60 7.50 9.10 9.00 7.45 7.45 6.18 5.77 7.72 6.87 0.84 0.83 9.6 9.0 7.40 6.92 5.92 5.82 1.20 1.20 11.52 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 0.9886 1.0216 0.9572 20.18 5.9189 1.5712 7.7626 129.70 0.2804 2.7496 0.5564 0.7634 3.4537 1.2748 32.0460

% 0.37% -0.08% -0.43% -1.01% -0.46% 0.44% -0.02% -0.38% -0.11% -0.46% -0.50% 0.08% -0.95% -0.31% -0.83%

EURSEK & OMXS 9.3 9.1 8.9 8.7 19-Apr 9-May 550 500 450 400 350 29-May

OMXS ra. EURSEK

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

NIBOR Prior 1.97 2.34 2.68 2.91 2.79 2.99 3.18 3.37

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.97 1.89 1.89 0.33 2.34 2.13 2.13 0.60 2.68 2.38 2.38 0.91 2.91 2.51 2.50 1.07 2.78 1.79 1.77 0.98 2.98 1.91 1.90 1.26 3.17 2.07 2.06 1.54 3.36 2.22 2.21 1.84

Last 0.33 0.60 0.91 1.07 0.97 1.26 1.55 1.86

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.74 0.74 0.91 0.91 0.74 0.75 1.12 1.12 1.49 1.48 1.90 1.90

Gov. Bonds, 10y 2.00 1.75 1.50 1.25

NOK, ra.

3.00 2.50 2.00 1.50

SEK

19-Apr 9-May 29-May

10y 10y yield vs bund

NORWAY Prior Last 117.6 98.25 2.20 2.18 0.84 0.79

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 119.336 119.32 103.58 103.39 100.01563 1.42 1.42 1.36 1.39 1.75 0.06 0.03 0.39

Last 99.89 1.77 0.38

13.5 13.0 12.5

JPY and DowJones

12.0 19-Apr

9-May

83 81 79 77 75 29-May

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y s wap 3m stibor 10y swap 3m euribor 10y swap 2.50 3.50 2.10 2.75 0.65 2.50 2.45 3.75 2.05 2.75 0.65 2.75 2.75 4.25 2.15 3.00 0.65 3.25
% 0.12 - 0.18 0.35 - 0.49 0.1 Last 108.3 106.7 1579.5

US 3m libor 10y s wap 0.50 2.50 0.50 2.50 0.50 3.00

% : : 0.6% 0.6% 1.2% 0.0% 0.8% 1.8% :

USDJPY ra. DowJones, 1000

USD and gold 1720 1.34 1670 1.32 1620 1.30 1570 1.28 1520 1.26 19-Apr 9-May 29-May
EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.33 2.33 0.00 NOK 94.20 SEP 2.32 2.32 0.00 SEK 119.52 DEC 2.33 2.34 -0.01 EUR 99.94 MAR 2.34 2.35 -0.01 USD 82.11 FRA SEK 3m Prior chg GBP 83.80 JUN 2.11 2.12 -0.01 Comm. Today SEP 1.82 1.83 -0.02 Brent spot 108.9 DEC 1.67 1.68 -0.01 Brent 1m 107.6 MAR 1.60 1.63 -0.02 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 12,580.7 Nasdaq 2,871.0 FTSE100 5,391.1 Eurostoxx50 2,160.3 Dax 6,396.8 Nikkei225 8,657.1 Oslo 395.27 Stockholm 477.58 581.55 Copenhagen

Morning Report
30.05.2012
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