Morning Report

20.08.2013

Figure of the day: Norwegian GDP

NOK & 3m NIBOR
8.00 7.90 7.80 7.70 7.60 7.50 1.90

Today Norwegian GDP for the second quarter is published. We expect growth in mainland-GDP of 0.7%, but the uncertainty is as always significant and surprises may have a market impact. The global stock markets continue to be affected by expectations that the Fed will soon begin to reduce its purchases of securities. Except for the Oslo Stock Exchange, most markets fell yesterday. The decline was moderate in Europe and the U.S., while the Asian markets have weakened more markedly. In the U.S., the market has now fallen for four consecutive days. In Asia both the Nikkei and Hang Seng fell substantially and the Nikkei is down more than 2%. In the absence of important news, movements in the currency market were small yesterday, at least for the currencies we normally focus on. The euro strengthened, however, somewhat on the comments from the Bundesbank that the ECB's change of interest rate policy to forward guidance was not independent of future inflation. The currencies in several emerging economies have nevertheless fallen markedly in the past and the decline continued yesterday. This applies especially Indian rupee as yesterday reached a record low 63.30 against the dollar, but also Indonesian rupia and the Brazilian real. The latter two both fell to the lowest in four years in yesterday's trading. The decline is caused by weak economies. India and Indonesia have large current account deficits, while Brazil is struggling with high inflation. The currencies are also affected by the tapering signals, which means that investors seems to pull their investments out of emerging economies on a broad basis. Internationally, the long-term rates continued to rise during the past week. The increase is driven primarily by the U.S. market and again the reason is expectations of Fed's reduction of its quantitative easing. The 10-year government bond yield in the United States yesterday reached 2.90%, the highest level in two years. In early May the interest rate was by comparison only 1.6%. However, the rise in U.S. interest rates is also transmitted to the European markets. Ten-year government in Germany has risen to 1.9%. The interest rate increase has also been driven by improved key data. Today there are no key figures on the US calendar. Only the Chicago Fed Index is released today and it does not attract the market's attention. Wednesday night, however, the minutes of the Fed's monetary policy meeting on July 30 & 31 will be released. The minutes can provide new signals to the market about reductions will start at the forthcoming meeting of 18 September. The Norwegian krone tended slightly weaker against most currencies yesterday. This despite the fact that oil prices remain high (Brent priced up to 110), the turbulence is Egypt and the loss of exports from Libya. Today the focus in the Norwegian market will be the publication of GDP for the second quarter. After China, U.S., UK, Eurozone, Sweden, the Baltic countries (and others) all have presented their figures for GDP in the second quarter, the Norwegian data are finally out today. By all means, there are also countries that have not yet submitted their numbers, for example Denmark, Austria and India. If late publication means higher quality (and fewer future revisions), it could of course be good reasons to wait a bit for the numbers. Mainland GDP rose 0.7 percent from the fourth quarter to the first quarter. We expect the same growth for the second quarter and there is also consensus estimate, according to Reuters. There appears to be considerable uncertainty: The lowest estimate is 0.3%, while the highest is 1.3%. Norges Bank expected 0.7% in its June report. Overall GDP fell 0.2% in the first quarter and we now expect an increase of 0.7%. According to Reuters, the consensus expectation is 1.0%. Surprises to the figures could provide market impact. Our estimate for mainland GDP is based on an increase in private consumption, showing a moderate increase of 0.6% in the second quarter. Exports seem to have leaped, and international trade is likely to boost growth. On the other hand, we believe that oil investment will show a decline in the second quarter. This is based on the investment survey from Statistics Norway in May, and lower oil investments will contribute to a decline in overall investment. knut.magnussen@dnb.no

1.80
1.70

23-Jul

06-Aug

1.60 20-Aug
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond

3.0 2.8 2.6 2.4 2.2 2.0 23-Jul
Rate

06-Aug

115 105 95 85 75 65 20-Aug

Diff (bp, rha)

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 64 76 30 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 24 16 91 23

Yesterdays key economic events (GMT) 00:50 Japan Trade balance

As of Jul

Unit Bn.

Prior -180.8

Poll -785.6

Actual -1024

Todays key economic events (GMT) 08:00 Norway Mainland GDP 08:00 Norway GDP 12:30 USA Chicago Fed Activity Index

As of Q2 Q2 Jul

Unit q/q % q/q % Index

Prior 0.7 -0.2 -0.1

Poll 0.7 1.0

DNB 0.7 0.7

Morning Report
20.08.2013

3m LIBOR
0.155 0.150 0.145 0.140 0.135 0.27 0.27 0.26 0.26 0.26 20-Aug
USD (rha)

23-Jul
EUR

06-Aug

Oil price & NOK TWI

97 96 96 95 95 94 110

105
100

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 97.61 1.3328 0.8530 7.4568 8.6824 1.2350 7.8830 5.9168 6.06 90.88 105.76 9.246 6.386

Today 97.36 1.3348 0.8534 7.4583 8.6938 1.2325 7.9065 5.9230 6.09 91.00 106.03 9.271 6.417

Spot rates and forecasts In 1m Oct-13 Jan-14 -0.3 98 102 107 0.2 1.30 1.26 1.30 0.0 0.85 0.85 0.86 0.0 7.45 7.45 7.45 0.1 8.55 8.45 8.50 -0.2 1.24 1.25 1.27 0.3 7.80 7.70 7.70 0.1 6.00 6.11 5.92 0.4 6.12 5.99 5.54 0.1 91.2 91.1 90.6 0.3 104.7 103.4 103.4 0.3 9.18 9.06 8.95 0.5 6.29 6.16 6.06

Jul-14 FX 0700 110 AUD 1.32 CAD 0.87 CHF 7.45 CZK 8.60 RUB 1.30 GBP 7.70 HKD 5.83 KWD 5.30 LTL 89.5 LVL 103.4 NZD 8.85 SEK 5.92 SGD

USD 0.906 1.038 0.924 19.363 32.983 1.564 7.755 0.285 2.587 0.527 0.798 6.515 1.278

NOK 5.365 5.709 6.417 30.591 17.959 9.271 0.764 20.798 2.290 11.242 4.729 91.000 4.635

23-Jul

06-Aug

95 20-Aug
USD/b (rha)

NOK TWI

US dollar 6.0 6.0 5.9 5.9 5.8

23-Jul 06-Aug
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 20-Aug

EURUSD(rha)

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

Prior 1.64 1.73 1.81 1.98 2.25 2.69 3.06 3.39

Last 1.63 1.73 1.81 1.97 2.26 2.70 3.09 3.41

Interest rates SEK Prior Last USD 1m 1.08 1.08 1m 3m 1.20 1.20 3m 6m 1.29 1.29 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.84 1.84 3y 5y 2.30 2.30 5y 7y 2.60 2.60 7y 10y 2.88 2.88 10y

Prior 0.18 0.26 0.39 0.67 0.85 1.66 2.30 2.89

Last 0.18 0.26 0.39 0.67 0.91 1.71 2.43 2.97

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

Prior 0.08 0.15 0.27 0.48 0.84 1.34 1.75 2.20

Last 0.08 0.15 0.27 0.48 0.85 1.34 1.75 2.19 Last 96.48 1.90 -0.93 10y sw ap 1.75 1.75 2.00

102.0 100.0 98.0 96.0 94.0

Japanese yen

23-Jul
USDJ PY

06-Aug

7.0 6.5 6.0 5.5 5.0 20-Aug

Norw ay Prior NST475 92.63 10y yld 2.88 - US spread 0.01 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 92.50 10y 91.62 91.63 10y 96.83 2.89 10y yld 2.44 2.44 10y yld 2.86 0.06 - US spread -0.43 -0.40 30y yld 3.88 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 97.09 10y 96.50 2.83 10y yld 1.90 3.87 - US spread -0.97 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

93

91
89

87 23-Jul 06-Aug
SEKNOK

6.5 6.4 6.3 6.2 6.1 6.0 20-Aug

CHFNOK (rha)

Equities
16200 15700 15200 14700 14200 13700 23-Jul
Dow Jones

505 500 495 490 485 06Aug 20Aug

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.51 1.51 1 18.12.2013 0.33 Last 95.95 95.82 1.59 1.47 -13 19.03.2014 0.58 Oil price: (Ldn,cl) 1m 1.60 1.60 1 18.06.2014 0.83 SPOT 110.05 109.37 1.71 1.71 0 15.05.2015 1.73 Gold price 19.08.2013 PM 2.02 2.03 2 19.05.2017 3.75 AM: 1369.3 1365.0 2.86 2.87 1 24.05.2023 9.76 Equities Today 0700 % last 2.86 2.87 1 24.05.2023 9.76 Dow Jones 15010.74 -0.5% 2.88 2.89 2 24.05.2023 9.76 Nasdaq C. 3589.09 -0.4% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6465.73 -0.5% 1.75 1.85 1m 1.75 1.63 Eurostoxx50 2823.35 -1.1% 1.75 1.88 3m 1.80 1.73 DAX 8366.29 -0.3% 1.80 1.95 6m 1.88 1.81 Nikkei 225 13436.93 -2.3% 1.89 2.05 12m 2.05 1.97 OSEBX 503.51 0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
20.08.2013
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