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Morning Report 01.08.2013

LFS data confirm Norwegian slowing NOK & 3m NIBOR 8.10

7.90 7.70

7.50 04-Jul

18-Jul

EURNOK

1.90 1.80 1.70 1.60 1.50 01-Aug 3m (rha)

Norw ay: 10y Gov't Bond 2.8 2.6 2.4 2.2 2.0

125

105 85 04-Jul

18-Jul

Rate

Diff (bp, rha)

Headquarter Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm

65 01-Aug

+47 03000

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

Sales Oslo (+47) Equity Fixed Income

22 94 89 40 24 16 90 30

Regional Sales (+47) Bergen Bodø Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Tromsø Trondheim Tønsberg Ålesund

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

Private Clients

24 16 90 90

Research Regional Sales (+47) Eirik Larsen

24 16 90 77

Research FX/IR (+47) Øystein Dørum Kjersti Haugland Ole André Kjennerud Knut A. Magnussen Camilla Viland Magne Østnor Kyrre Aamdal

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

Credit Research (+47) Ole Einar Stokstad Martin Børter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rønningen Kristina Solbakken Magnus Vie Sundal

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

According to Statistics Norway's labour force survey (LFS) there was 93,000 job seekers in May (average from April to June), equal to 3.4% of the workforce. The consensus expectation was 3.4%, our estimate was 3.6%. Unemployment is now at its lowest since October. That should not be interpreted as an indication of the slowing having come to an end, however. The LFS data are based on a sample survey, and are uncertain. Therefore, one should study the trend in the numbers, rather than the monthly changes. We have for a long time underlined that the LFS unemployment has risen much more than the register-based data, indicating possible errors in the LFS figures. But despite this, the trend is clear: Over the past year unemployment has risen, suggesting growth being below trend and lower than in 2011-12. This is in line with our expectations. Other LFS data supports this, as the data in practice show zero jobs growth over the last year. In manufacturing, retail trade, hotels and restaurants, and health and social services the number of jobs has declined over the past year. For manufacturing, this corresponds well with data from Norges Bank's regional network, NHO's business barometer, and Staistics Norway’s own business sentiment survey. The latter was published yesterday and shows lower new orders and production in the second quarter, and overall a weaker picture than 1-2 years ago. When unemployment is declining even with stagnating employment, this reflects that labour force participation ratios are declining, in particular for younger age groups. This can eg. indicate that young job seekers, without rights to unemployment insurance, do not actively seek jobs as weak retail sales holds down the number of jobs in shops. While there is no crisis - activity in the Norwegian economy is high and unemployment is low - there is thus little doubt that growth is slowing. According to Eurostat, euro zone unemployment fell by 24,000 from May to June, the first monthly decline in more than two years. The unemployment rate decreased from 12.2% to 12.1%, a tenth lower than expected. Consumer price inflation was stable at 1.6% in July, as expected, but core inflation slowed a tenth to 1.1%. Thus, overall inflation may deviate further from the ECB's goal going forward. This forms part of the backdrop when the ECB's 23-strong Council meets today. At 1145 GMT, the decision is published. We expect - like most everybody else - no policy changes now. Slow growth, low pressure and low inflation favour further rate cuts, although it is uncertain whether it will have much effect. Rather, it now seems that the ECB is trying to play more on market expectations through forward guidance. In addition, the ECB has stated that it is working on other measures to improve access to credit in the euro zone. The ECB's latest lending survey suggests that banks are now loosening credit to some extent. Also, financial market stress has eased somewhat over the past month. Thus, there is less need for urgent action. We continue to expect a rate cut in the autumn, however. The Bank of England's monetary policy committee is also meeting today. No policy changes are expected. US GDP data surprised positively. GDP rose by an annualized 1.7% from Q1 to Q2, vs. an expected 1.0%. The surprise corresponded almost exactly to the downward revision of Q1, from 1.8% to 1.1%. Also, 2012 GDP was revised from a growth rate of 2.2% up to 2.8%. Private consumption increased by 1.8% in Q2, after growth of 2.3% in Q1, suggesting that households have weathered the tax increases from the start of the year pretty well. The ADP report was also better than expected, with a private jobs growth of 200,000 in July, against an expected 180,000). This indicates that overall job growth was high in July. The important labour market report is released tomorrow. As expected, the Fed left policy unchanged yesterday. The statement contained little new. Recent growth was now seen as “modest”, whereas it in June had been characterized as “moderate”. Growth is still expected to pick up, however. In addition, the statement contained a new passage stating that inflation persistently below 2% could pose risks to economic performance. In June, James Bullard had a dissenting remark about the dangers of too low inflation. This dissent is now longer necessary. At the next Fed meeting, 17/18 September, FOMC members will provide new growth estimates and Bernanke will hold a press conference. In our view, this will provide a good opportunity to start, and at the same time justify, a gradual reduction of asset purchases. The market impact of the Fed decision was muted. The yield on ten-year government bonds fell by 8-9 basis points. The USD weakened ½% against the EUR and JPY, but recouped it afterwards. S&P500 gained 0.5%, but later fell back and ended the day almost zero. In Europe, stock markets ended marginally in the black, while Asia has opened the day in positive territory. oystein.dorum@dnb.no Yesterday’s key economic events (GMT) 08:00 Norway LFS unemployment 12:30 US GDP 18:00 US FOMC meeting Today’s key economic events (GMT) 11:00 UK BoE QE 11:45 EZ ECB rate decision 14:00 US ISM, manufacturing

As of May Q2 As of

Jul

Unit % q/q % % Unit Bn % Index

Prior 3.5 1.1r 0.25 Prior 375 0.5 50.9

Poll 3.5 1.4 Poll 375 0.5 52.0

Actual 3.4 1.7 0.25 DNB 375 0.5


Morning Report 01.08.2013

3m LIBOR 0.155 0.150 0.145 0.140 0.135 0.130

04-Jul

0.28 0.27 0.27 0.26 0.26 01-Aug

18-Jul

EUR

USD (rha)

Oil price & NOK TWI 98 97 96 95 94 93

110

105 100

04-Jul

95 01-Aug

18-Jul

NOK TWI

USD/b (rha)

US dollar 6.4 6.2 6.0 5.8 5.6 04-Jul

18-Jul

USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 01-Aug

100.0 98.0

96.0 04-Jul

18-Jul

USDJ PY

7.0 6.5 6.0 5.5 5.0 01-Aug

JPYNOK(rha)

6.6

91

6.4

89

6.2

87 18-Jul

SEKNOK

6.0 01-Aug CHFNOK (rha)

Equities 15700 15200 14700 14200 13700

510 500 490 480 470 460 450 04-Jul

18-Jul

Dow Jones

01Aug Os lo (rha)

Today 98.68 1.3252 0.8748 7.4549 8.6819 1.2328 7.8710 5.9385 6.02 90.70 105.61 9.000 6.388

%

Spot rates and forecasts In … 1m Oct-13 Jan-14 0.8 98 102 107 -0.1 1.30 1.26 1.30 0.3 0.85 0.85 0.86 0.0 7.45 7.45 7.45 -0.4 8.55 8.45 8.50 0.1 1.24 1.25 1.27 -0.2 7.80 7.70 7.70 -0.2 6.00 6.11 5.92 -0.9 6.12 5.99 5.54 0.1 91.2 91.1 90.6 -0.3 104.7 103.4 103.4 -0.6 9.18 9.06 8.95 -0.3 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 0.897 1.029 0.931 19.596 33.005 1.515 7.756 0.285 2.606 0.531 0.797 6.558 1.274

NOK 5.327 5.771 6.388 30.310 17.996 9.000 0.766 20.813 2.279 11.185 4.734 90.700 4.663

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

Prior 1.63 1.72 1.77 1.93 2.12 2.55 2.93

Last 1.64 1.72 1.78 1.92 2.14 2.57 2.96

Interest rates SEK Prior Last USD 1m 1.10 1.10 1m 3m 1.19 1.19 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.65 1.65 3y 5y 2.08 2.08 5y 7y 2.38 2.38 7y

Prior 0.19 0.27 0.40 0.67 0.74 1.54 2.17

Last 0.19 0.27 0.40 0.67 0.76 1.54 2.19

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

Prior 0.08 0.15 0.26 0.47 0.73 1.19 1.57

Last 0.08 0.15 0.26 0.47 0.73 1.18 1.55

10y

3.28

3.30

10y

2.76

2.79

10y

1.99

1.98

Last Germany Prior 92.72 10y 98.24 2.60 10y yld 1.70 3.66 - US spread -0.92

Last 99.06 1.61 -0.99

10y sw ap

Germany

3m euribor

10y sw ap

2.25 2.25 2.50

Oct-13 Jan-14 Jul-14

0.20 0.25 0.20

1.75 1.75 2.00

Norw ay Prior NST475 94.25 10y yld 2.67 - US spread 0.05

Norw ay

3m nibor

Oct-13 Jan-14 Jul-14

1.55 1.55 1.55

SEKNOK & CHFNOK 93

04-Jul

Last 97.92 1.3266 0.8723 7.4546 8.7141 1.2321 7.8899 5.9488 6.08 90.64 105.90 9.052 6.408

EURUSD(rha)

Japanese yen

102.0

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

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

2.65

2.65

10y

Governm ent bonds Last SEK Prior Last US Prior 94.01 10y 93.71 94.29 10y 92.50 2.70 10y yld 2.19 2.13 10y yld 2.62 0.11 - US spread -0.43 -0.47 30y yld 3.68 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

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.63 1.49 -14 18.12.2013 0.38 Last 95.33 95.58 1.41 1.42 1 19.03.2014 0.63 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.88 SPOT 109.08 107.84 1.46 1.49 2 15.05.2015 1.79 Gold price 31.07.2013 PM 1.75 1.75 0 19.05.2017 3.80 AM: 1324.2 1314.5 2.65 2.69 3 24.05.2023 9.82 Equities Today 0700 % last 2.65 2.69 3 24.05.2023 9.82 Dow Jones 15499.54 -0.1% 2.67 2.70 3 24.05.2023 9.82 Nasdaq C. 3626.37 0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6621.06 0.8% 1.71 1.80 1m 1.75 1.64 Eurostoxx50 2768.15 0.3% 1.70 1.81 3m 1.82 1.72 DAX 8275.97 0.1% 1.72 1.85 6m 1.87 1.78 Nikkei 225 14005.77 2.5% 1.76 1.92 12m 2.00 1.92 OSEBX 495.36 0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets


Morning Report 01.08.2013 IMPORTANT/DISCLAIMER This note (the “Note”) must be seen as marketing material and not as an investment recommendation within the meaning of the Norwegian Securities Trading Act of 2007 paragraph 3-10 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876. The Note has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bank organized under the laws of the Kingdom of Norway (the “Bank”), for information purposes only. The Note shall not be used for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (individually, each a “DNB Party”; collectively, “DNB Parties”) do not guarantee the accuracy, completeness, timeliness or availability of the Note. DNB Parties are not responsible for any errors or omissions, regardless of the cause, nor for the results obtained from the use of the Note, nor for the security or maintenance of any data input by the user. The Note is provided on an “as is” basis. DNB PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE NOTE’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE NOTE WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Note, even if advised of the possibility of such damages. Any opinions expressed herein reflect the Bank’s judgment at the time the Note was prepared and DNB Parties assume no obligation to update the Note in any form or format. The Note should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. No DNB Party is acting as fiduciary or investment advisor in connection with the dissemination of the Note. While the Note is based on information obtained from public sources that the Bank believes to be reliable, no DNB Party has performed an audit of, nor accepts any duty of due diligence or independent verification of, any information it receives. Confidentiality rules and internal rules restrict the exchange of information between different parts of the Bank and this may prevent employees of DNB Markets who are preparing the Note from utilizing or being aware of information available in DNB Markets/the Bank which may be relevant to the recipients of the Note. The Note is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. Distribution of material like the Note is in certain jurisdictions restricted by law. Persons in possession of the Note should seek further guidance regarding such restrictions before distributing the Note. The Note is for clients only, and not for publication, and has been prepared for information purposes only by DNB Markets - a division of DNB Bank ASA registered in Norway with registration number NO 984 851 006 (the Register of Business Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet), The Monetary Authority of Singapore, and on a limited basis by the Financial Conduct Authority and the Prudential Regulation Authority of the UK, and the Financial Supervisory Authority of Sweden. Details about the extent of our regulation by local authorities outside Norway are available from us on request. Additional information for clients in Singapore The Note has been distributed by the Singapore branch of DNB Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of any product referred to in the Note, taking into account your specific financial objectives, financial situation or particular needs before making a commitment to purchase any such product. You have received a copy of the Note because you have been classified either as an accredited investor, an expert investor or as an institutional investor, as these terms have been defined under Singapore’s Financial Advisers Act (Cap. 110) (“FAA”) and/or the Financial Advisers Regulations (“FAR”). The Singapore branch of DNB Bank ASA is a financial adviser exempt from licensing under the FAA but is otherwise subject to the legal requirements of the FAA and of the FAR. By virtue of your status as an accredited investor or as an expert investor, the Singapore branch of DNB Bank ASA is, in respect of certain of its dealings with you or services rendered to you, exempt from having to comply with certain regulatory requirements of the FAA and FAR, including without limitation, sections 25, 27 and 36 of the FAA. Section 25 of the FAA requires a financial adviser to disclose material information concerning designated investment products which are recommended by the financial adviser to you as the client. Section 27 of the FAA requires a financial adviser to have a reasonable basis for making investment recommendations to you as the client. Section 36 of the FAA requires a financial adviser to include, within any circular or written communications in which he makes recommendations concerning securities, a statement of the nature of any interest which the financial adviser (and any person connected or associated with the financial adviser) might have in the securities. Please contact the Singapore branch of DNB Bank ASA at +65 6212 0753 in respect of any matters arising from, or in connection with, the Note. The Note is intended for and is to be circulated only to persons who are classified as an accredited investor, an expert investor or an institutional investor. If you are not an accredited investor, an expert investor or an institutional investor, please contact the Singapore branch of DNB Bank ASA at +65 6212 0753. We, the DNB group, our associates, officers and/or employees may have interests in any products referred to in the Note by acting in various roles including as distributor, holder of principal positions, adviser or lender. We, the DNB group, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DNB group, our associates, officers and/or employees may buy or sell products as principal or agent and may effect transactions which are not consistent with the information set out in the Note. Additional Information, including for Recipients in the In the United States: The Note does not constitute an offer to sell or buy a security and does not include information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer; rather, it is a “market letter,” as the term is defined in NASD Rule 2211.


Morning Report 01.08.2013

3m LIBOR 0.155 0.150 0.145 0.140 0.135 0.130

04-Jul

0.28 0.27 0.27 0.26 0.26 01-Aug

18-Jul

EUR

USD (rha)

Oil price & NOK TWI 98 97 96 95 94 93

110

105 100

04-Jul

95 01-Aug

18-Jul

NOK TWI

USD/b (rha)

US dollar 6.4 6.2 6.0 5.8 5.6 04-Jul

18-Jul

USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 01-Aug

100.0 98.0

96.0 04-Jul

18-Jul

USDJ PY

7.0 6.5 6.0 5.5 5.0 01-Aug

JPYNOK(rha)

6.6

91

6.4

89

6.2

87 18-Jul

SEKNOK

6.0 01-Aug CHFNOK (rha)

Equities 15700 15200 14700 14200 13700

510 500 490 480 470 460 450 04-Jul

18-Jul

Dow Jones

01Aug Os lo (rha)

Today 98.68 1.3252 0.8748 7.4549 8.6819 1.2328 7.8710 5.9385 6.02 90.70 105.61 9.000 6.388

%

Spot rates and forecasts In … 1m Oct-13 Jan-14 0.8 98 102 107 -0.1 1.30 1.26 1.30 0.3 0.85 0.85 0.86 0.0 7.45 7.45 7.45 -0.4 8.55 8.45 8.50 0.1 1.24 1.25 1.27 -0.2 7.80 7.70 7.70 -0.2 6.00 6.11 5.92 -0.9 6.12 5.99 5.54 0.1 91.2 91.1 90.6 -0.3 104.7 103.4 103.4 -0.6 9.18 9.06 8.95 -0.3 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 0.897 1.029 0.931 19.596 33.005 1.515 7.756 0.285 2.606 0.531 0.797 6.558 1.274

NOK 5.327 5.771 6.388 30.310 17.996 9.000 0.766 20.813 2.279 11.185 4.734 90.700 4.663

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

Prior 1.63 1.72 1.77 1.93 2.12 2.55 2.93

Last 1.64 1.72 1.78 1.92 2.14 2.57 2.96

Interest rates SEK Prior Last USD 1m 1.10 1.10 1m 3m 1.19 1.19 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.65 1.65 3y 5y 2.08 2.08 5y 7y 2.38 2.38 7y

Prior 0.19 0.27 0.40 0.67 0.74 1.54 2.17

Last 0.19 0.27 0.40 0.67 0.76 1.54 2.19

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

Prior 0.08 0.15 0.26 0.47 0.73 1.19 1.57

Last 0.08 0.15 0.26 0.47 0.73 1.18 1.55

10y

3.28

3.30

10y

2.76

2.79

10y

1.99

1.98

Last Germany Prior 92.72 10y 98.24 2.60 10y yld 1.70 3.66 - US spread -0.92

Last 99.06 1.61 -0.99

10y sw ap

Germany

3m euribor

10y sw ap

2.25 2.25 2.50

Oct-13 Jan-14 Jul-14

0.20 0.25 0.20

1.75 1.75 2.00

Norw ay Prior NST475 94.25 10y yld 2.67 - US spread 0.05

Norw ay

3m nibor

Oct-13 Jan-14 Jul-14

1.55 1.55 1.55

SEKNOK & CHFNOK 93

04-Jul

Last 97.92 1.3266 0.8723 7.4546 8.7141 1.2321 7.8899 5.9488 6.08 90.64 105.90 9.052 6.408

EURUSD(rha)

Japanese yen

102.0

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

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

2.65

2.65

10y

Governm ent bonds Last SEK Prior Last US Prior 94.01 10y 93.71 94.29 10y 92.50 2.70 10y yld 2.19 2.13 10y yld 2.62 0.11 - US spread -0.43 -0.47 30y yld 3.68 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

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.63 1.49 -14 18.12.2013 0.38 Last 95.33 95.58 1.41 1.42 1 19.03.2014 0.63 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.88 SPOT 109.08 107.84 1.46 1.49 2 15.05.2015 1.79 Gold price 31.07.2013 PM 1.75 1.75 0 19.05.2017 3.80 AM: 1324.2 1314.5 2.65 2.69 3 24.05.2023 9.82 Equities Today 0700 % last 2.65 2.69 3 24.05.2023 9.82 Dow Jones 15499.54 -0.1% 2.67 2.70 3 24.05.2023 9.82 Nasdaq C. 3626.37 0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6621.06 0.8% 1.71 1.80 1m 1.75 1.64 Eurostoxx50 2768.15 0.3% 1.70 1.81 3m 1.82 1.72 DAX 8275.97 0.1% 1.72 1.85 6m 1.87 1.78 Nikkei 225 14005.77 2.5% 1.76 1.92 12m 2.00 1.92 OSEBX 495.36 0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets


Mre130801