Morning report

Bundestag voted yes

30-Sep-2011
The German Bundestag yesterday voted in favour of expanding the euro area rescue fund. The decision open up the way for European officials to focus on what next steps that can be made to stem the debt crisis and to dampen financial market volatility. German lawmakers yesterday approved an expansion of the euro area rescue fund (EFSF). The lower house of parliament passed the measure with 523 votes in favor and 85 against. In total the EFSF is supposed to be increased from 440 to 780, billion euro, whereas Germany's share will be EUR 211 billion. The decision increases the likelihood of emergency funds to debt burdened European countries. It also opens up the way for European officials to focus on what next steps that can be made to stem the debt crisis and dampen financial market volatility. The decision was positively received by markets. Still, investors remain cautious. The euro rose in the aftermath of the decision, but has since fallen back. The yield on 10 year German and US government bonds hover around 2 per cent. The development on international stock markets has been mixed over the past 24 hours. The international key data released yesterday, was also a mixed bag. The European sentiment index dropped from 94.4 to 95.0, more than expected. The index is now at its lowest levels since December 2009 and point towards an annual growth rate in the euro area of around zero. The decline was broad based, both when looking at the underlying components and across various countries. The German employment data were more encouraging. The unemployment rate fell from 7.0 to 6.9 per cent. However recent falls in firm's employment expectations indicate that the development in the labour market will weaken going forward. The US key figures generally surprised on the upside yesterday. Q2 GDP growth was revised up, and more than expected due to better developments in private consumption and exports than previously reported. Initial claims (last week) and pending home sales in August were also better than expected. On the Norwegian agenda, the retail sales figures for August were yesterday's highlight. After a decline in July, retail sales increased by 1.7% in August. According to Reuters consensus expectations were for a 0.6% increase. Hence the outcome was surprisingly strong. The goods consumption index, which also includes car sales, electricity and petrol, increased by 2.0 per cent. The terror attacks on July 22nd probably contributed to the decline in July, and there was a catchup effect in August. High electricity prices in the beginning of the year have contributed to moderate the growth in retail sales, but this effect has probably dried up. The August figures indicate that consumption growth is returning, but the figures are volatile. Norges Bank expects that consumer demand will grow by 3.5% this year, but that seems for too optimistic. Today US personal consumption figures for August are due. So far in 2011 consumption has disappointed and in the second quarter there were hardly any consumption growth at all. A weak labour market, low wage growth, decreasing income growth and higher inflation are probably factors behind this development. The figures for July was, however, encouraging (+0.8% m/m) and thus, the third quarter might come out better than the second. Consensus expects private consumption to have grown by 0.2 per cent in August. Other key figures of interest today are the euro area inflation figures and Norwegian labour market data. camilla.viland@dnbnor.no

NOK & 3m NIBOR

8.00 7.80 7.60 7.40 19-Aug 8-Sep 3m ra. 3.20 3.10 3.00 2.90 28-Sep EURNOK

SEK & 3m STIBOR

9.5 9.3 9.1 8.9 8.7 19-Aug 8-Sep 2.50 2.45 28-Sep EURSEK 2.60 2.55

3m ra.
Headquarters 0021 Oslo Stranden 21 Offices Abroad New York London Shanghai Singapore Stockholm Sales Oslo (+47) Equity Fixed Income FX/IR Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund +47 03000

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850 22 94 89 40 22 01 78 20 22 01 76 50 55 75 69 61 52 61 38 22 51 77 73 33 73 21 55 39 05 72 27 07 01 84 62 58 37 84 95 87 41 14 09 32 28 76 04 96 74 13 60 80 60 50 69 06 27 62 50 30 80 89 00 09

Research Regional Sales (+47) Eirik Larsen 22 01 76 55 Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Maren Romstad Camilla Viland Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding se Haagensen Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen 22 22 22 22 22 22 22 22 22 22 22 22 22 01 01 01 01 01 01 01 01 01 01 01 01 01 76 78 78 76 76 77 76 78 77 76 76 77 78 56 03 24 63 64 41 67 37 62 93 77 36 15

Yesterday's key economic events (GMT) 07:55 Germany Unemployment, change 08:00 Norway Retail sales 12:30 US 3rd estimate, GDP 12:30 US Initial claims 14:00 US Pending home sales Todays key economic events (GMT) 07:00 Norway Registered unemployment 09:00 EMU CPI, flash 12:30 US PCE, core 12:30 US Private consumption 13:45 US Chicago PMI

As of Sep Aug Q2 W38 Aug As of Sep Sep Aug Aug Sep

Unit 1000 % q/q ar % 1000 % Unit % na y/y % m/m % m/m % Index

Prior -8 -0.9 1.0 428r -1.3 Prior 2.7 2.5 0.2 0.8 56.5

Poll Actual -8 -26 0.7 1.7 1.2 1.3 420 391 -3.0 -1.2 Poll DnB NOR 2.6 2.8 2.5 0.2 0.2 56.0

30-Sep-2011

Morning report

Oil spot & NOK TWI

130 110 90 70 19-Aug 100 98 96 94 28-Sep $/b

SPOT RATES AND FORECASTS (Source: Reuters and DnB NOR Markets)
FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK Prior 76.59 1.354 0.870 1.219 7.857 9.227 7.443 5.802 7.586 0.852 9.037 6.811 8.911 1.175 10.596 Last 76.55 1.361 0.871 1.221 7.849 9.237 7.443 5.773 7.542 0.851 9.019 6.788 8.872 1.176 10.606 % -0.1% 0.5% 0.2% 0.2% -0.1% 0.1% 0.0% -0.5% -0.6% -0.2% -0.2% -0.3% -0.4% 0.2% 0.1% In 1 m ...3 m 80 80 1.35 1.35 0.86 0.86 1.20 1.20 8.00 7.80 9.30 9.10 7.45 7.45 5.93 5.78 7.41 7.22 0.86 0.86 9.3 9.1 6.89 6.74 5.51 5.39 1.16 1.17 10.81 10.58 ...6 m ...12 m 80 90 1.30 1.25 0.84 0.82 1.20 1.25 7.70 7.70 9.00 9.00 7.45 7.45 5.92 6.16 7.40 6.84 0.86 0.86 9.2 9.4 6.92 7.20 5.54 6.48 1.17 1.17 10.71 10.98 FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB USD 0.9792 1.0327 0.8976 18.02 5.4711 1.5624 7.7950 117.98 0.2767 2.5386 0.5219 0.7785 3.2633 1.2971 31.9550 % 0.13% -0.07% -0.29% -0.75% -0.46% 0.29% 0.01% -0.42% -0.14% -0.46% -0.46% 0.22% -0.70% -0.02% 0.45%

8-Sep

NOK TWI ra.

EUR vs GBP & CHF

1.25 1.20 1.15 1.10 1.05 19-Aug 8-Sep GBP r.a 0.89 0.87 0.85 0.83 0.81 28-Sep CHF

Gov. Bonds, 10y

2.25 2.00 1.75 1.50 19-Aug 3.00 2.50 2.00 1.50 28-Sep SEK

8-Sep

NOK, ra.

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

JPY and DowJones

14 12 10 8 19-Aug 8-Sep USDJPY ra. DowJones, 1000 78 77 76 75 28-Sep

10y 10y yield vs bund

SWAP AND MONEYMARKET RATES (Source: Reuters) NIBOR STIBOR EURIBOR USD LIBOR Prior Last Prior Last Prior Last Prior Last 2.83 2.73 2.32 2.32 1.29 1.30 0.24 0.24 3.09 2.99 2.51 2.51 1.49 1.49 0.37 0.37 3.31 3.28 2.53 2.53 1.70 1.70 0.54 0.55 3.41 3.40 2.58 2.58 1.86 1.86 0.69 0.69 2.91 2.91 2.06 2.05 1.63 1.66 0.70 0.72 3.22 3.23 2.32 2.33 2.01 2.05 1.22 1.26 3.46 3.47 2.53 2.52 2.33 2.35 1.70 1.72 3.66 3.69 2.65 2.62 2.61 2.62 2.14 2.16 GOVERNMENT BONDS (Source: Reuters) US NORWAY SWEDEN GERMANY Prior Last Prior Last Prior Last Prior Last 115.55 111.20 115.627 115.63 102.298 102.27 101.23438 101.19 2.42 2.43 1.87 1.87 1.99 2.00 1.99 2.00 0.43 0.44 -0.12 -0.13 0.00 0.01 INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 3.05 4.25 2.50 3.00 1.50 3.00 3.20 4.50 2.75 3.25 1.50 3.25 3.50 4.50 2.90 3.25 1.50 3.25 3m libor 10y swap 0.35 3.00 0.35 3.25 0.35 3.25

In 3m 6m 12m
1.49 1.44 1.39

USD and gold

2000 1900 1800 1700 1600 1500 19-Aug 8-Sep EURUSD ra.

1.34 28-Sep Gold

EURSEK & OMXS

9.4 9.2 9.0 8.8 19-Aug 8-Sep OMXS ra. 450 430 410 390 370 350 28-Sep EURSEK

FRA NOK DEC MAR JUN SEP FRA SEK DEC MAR JUN SEP

3m 2.70 2.42 2.39 2.39 3m 2.11 1.81 1.78 1.78

Prior 2.70 2.43 2.38 2.38 Prior 2.11 1.81 1.78 1.75

chg 0.00 -0.01 0.01 0.01 chg 0.00 0.01 0.00 0.03

TWI Today NOK 98.20 SEK 121.80 EUR 106.46 USD 77.78 GBP 79.30 Comm. Today Brent spot 110.8 Brent 1m 103.7 Spot gold 1643.0

% - 0.12 0.16 0.35 - 0.40 - 0.13 Last 110.8 103.8 1643.0

Stock ex. Today Dow Jones 11,010.9 Nasdaq 2,491.6 FTSE100 5,217.6 Eurostoxx50 2,176.6 Dax 5,578.4 Nikkei225 8,701.2 Oslo 347.67 Stockholm 413.39 Copenhagen 457.14

% -1.6% -2.2% -1.4% -0.8% -0.9% 0.0% -1.1% -2.2% -1.2%

Morning report
30-Sep-2011
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