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Morning Report 02.08.2013

No surprises from ECB or BoE NOK & 3m NIBOR 8.10

7.90 7.70

7.50 05-Jul

19-Jul

EURNOK

1.90 1.80 1.70 1.60 1.50 02-Aug 3m (rha)

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

125

105

The ECB and BoE both held monetary policy unchanged at yesterday’s meetings. Draghi reiterated that the ECB will keep rates at current level or lower for an extensive period. A strong ISM index and lower than expected initial claims contributed to new record highs on US stock markets and a stronger dollar. The European and British PMIs also came in stronger than expected, while the Norwegian PMI disappointed. The European central bank kept, as expected, monetary policy unchanged yesterday. Mario Draghi reiterated that European rates would remain at current level, or lower, for an extended period. This forward guidance was unanimous, but Draghi avoided any question on whether or not the decision to keep interest rates unchanged or if interest rate cuts had been discussed. Another rate cut is this still a possibility. Future Monetary policy will be contingent on inflation expectations. As of today the ECB see a subdued outlook for inflation. Furthermore Draghi said that the current policy support a gradual recovery in economic activity in the remainder of the year and into 2014. This risk on the economic outlook is, however, still viewed to be on the downside.

85 05-Jul

19-Jul

Rate

Diff (bp, rha)

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

65 02-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

Bank of England also decided to keep monetary policy unchanged, as expected. The market is now awaiting next week’s inflation report and announcement on forward guidance. Some sort of forward guidance is expected to be introduced, possibly related to specific threshold, similar to Fed’s policy. At last months’ meeting Bank of England moved in the direction of forward guidance when they published a press release which said the latest market development, with increasing interest rates, was unwarranted. Another central bank than soon may make some changes to monetary policy is the Federal Reserve. The US central bank has signaled that they soon will start to taper asset purchases if the positive economic development continues. Yesterday’s ISM index was far stronger than expected and seem to increase the possibility that the Fed soon will start to reduce its quantitative easing. The index rose from 50.9 to 55.4 in July, and is by a result at its highest level in two years. Consensus had expected an outcome of 52.0. The index point towards GDP growth of 2.5-3.0 per cent in Q3 (annualized). The labor market developments are in particular important for monetary policy. Initial claims fell more than expected last week and were at the lowest level since 2008. Today the monthly labor market data for July are released. In June employment rose by 195’ and the unemployment rate held steady at 7.6 per cent. Consensus believes the unemployment rate dropped to 7.5 per cent in July and that 184’ new jobs were created. We are more optimistic and believe employment grew by 207’ people in July. Such an outcome would further increase the probably of Fed starting to taper asset purchases shortly. The euro area manufacturing PMI index rose to 50.3 in July, slightly stronger than expected and indicated by the flash estimate (50.1). The index is again above 50, indicating increased activity in the manufacturing sector and is, thus, yet another sign that the euro area us emerging from its longest recession ever. The British PMI index (CIPS) rose from 52.9 to 54.6 in July, which is the highest level since March 2011. The outcome was far better than expected (52.8) and it immediately strengthened the pound. The index currently point towards manufacturing growth of about 1.5 per cent. The PMI continues the run of surprisingly strong data from Britain. The Norwegian PMI index rose, from 46.9 in June to 47.5 in July. The outcome was lower than expected (49.0). A level below 50 indicates decreasing manufacturing activity. However the participation in the survey was very low in July, as in June. The figures should, thus, be interpreted with caution. It will be more important to see whether the index remain around these low levels going forward, when people are back from summer vacation. The Norwegian housing figures released yesterday were also surprisingly weak. House prices fell 1.2 per cent seasonally adjusted in July. The turnover is normally low in July and as a result special event may have affected the outcome. Nevertheless, the figures released yesterday support the view that the house price growth is moderating. Today Norwegian labour market data are released. So far in 2013, the labor market has weakened, however the situation seem to have stabilized over the last few months. We expect that unemployment increased by 500 persons in July (seasonally adjusted), and that the unadjusted unemployment rate increased from 2.5 to 2.8 per cent. camilla.viland@dnb.no Yesterday’s key economic events (GMT) As of Unit Prior Poll Actual 11:00 UK BoE QE Bn 375 375 375 11:45 EZ ECB rate decision % 0.5 0.5 0.5 14:00 US ISM, manufacturing Jul Index 50.9 52.0 55.4 As of Unit Prior Poll DNB Today’s key economic events (GMT) 08:00 Norway Reg. unemployment nsa Jul % 2.5 2.8 2.8 12:30 USA Non-farm payrolls Jul 1000 195 184 207 12:30 USA Unemployment rate Jul % 7.6 7.5


Morning Report 02.08.2013

3m LIBOR 0.155 0.150 0.145 0.140 0.135 0.130

05-Jul

0.28 0.27 0.27 0.26 0.26 02-Aug

19-Jul

EUR

USD (rha)

Oil price & NOK TWI 98 97 96 95 94 93

110

105 100

05-Jul

95 02-Aug

19-Jul

NOK TWI

USD/b (rha)

US dollar 6.4 6.2 6.0 5.8 5.6 05-Jul

19-Jul

USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 02-Aug

100.0 98.0

96.0 05-Jul

19-Jul

USDJ PY

7.0 6.5 6.0 5.5 5.0 02-Aug

JPYNOK(rha)

6.6

91

6.4

89

6.2

87 19-Jul

SEKNOK

6.0 02-Aug CHFNOK (rha)

Equities 16200 15700 15200 14700 14200 13700

510 500 490 480 470 460 450 05-Jul

19-Jul

Dow Jones

02Aug Os lo (rha)

Today 99.63 1.3211 0.8739 7.4553 8.7245 1.2384 7.8635 5.9535 5.98 90.25 105.52 9.000 6.353

%

Spot rates and forecasts In … 1m Oct-13 Jan-14 1.3 98 102 107 -0.5 1.30 1.26 1.30 -0.2 0.85 0.85 0.86 0.0 7.45 7.45 7.45 0.8 8.55 8.45 8.50 0.5 1.24 1.25 1.27 0.3 7.80 7.70 7.70 0.7 6.00 6.11 5.92 -0.5 6.12 5.99 5.54 -0.5 91.2 91.1 90.6 0.2 104.7 103.4 103.4 0.4 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 0.891 1.035 0.937 19.687 33.089 1.512 7.757 0.285 2.614 0.532 0.789 6.604 1.276

NOK 5.305 5.749 6.353 30.234 17.988 9.000 0.767 20.867 2.277 11.184 4.698 90.250 4.664

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

Prior 1.64 1.72 1.78 1.92 2.14 2.57 2.96

Last 1.63 1.72 1.78 1.92 2.14 2.58 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 1.66 1.66 3y 5y 2.08 2.08 5y 7y 2.38 2.38 7y

Prior 0.19 0.27 0.40 0.67 0.76 1.54 2.19

Last 0.19 0.27 0.40 0.67 0.81 1.64 2.28

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

Prior 0.08 0.15 0.26 0.47 0.73 1.18 1.55

Last 0.08 0.15 0.26 0.47 0.74 1.20 1.58

10y

3.30

3.30

10y

2.79

2.87

10y

1.98

2.00

Last Germany Prior 91.75 10y 98.51 2.71 10y yld 1.67 3.76 - US spread -0.93

Last 98.40 1.68 -1.03

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 94.01 10y yld 2.70 - US spread 0.11

Norw ay

3m nibor

Oct-13 Jan-14 Jul-14

1.55 1.55 1.55

SEKNOK & CHFNOK 93

05-Jul

Last 98.40 1.3273 0.8753 7.4548 8.6567 1.2319 7.8435 5.9104 6.01 90.70 105.26 8.966 6.372

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

2.64

2.64

10y

Governm ent bonds Last SEK Prior Last US Prior 94.13 10y 93.77 93.76 10y 92.72 2.69 10y yld 2.18 2.19 10y yld 2.60 -0.02 - US spread -0.41 -0.53 30y yld 3.66 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 1.49 1.44 -5 18.12.2013 0.38 Last 95.15 95.05 1.42 1.44 2 19.03.2014 0.63 Oil price: (Ldn,cl) 1m 1.52 1.50 -2 18.06.2014 0.88 SPOT 110.83 109.71 1.49 1.49 0 15.05.2015 1.78 Gold price 01.08.2013 PM 1.75 1.75 0 19.05.2017 3.80 AM: 1314.5 1315.0 2.69 2.67 -2 24.05.2023 9.81 Equities Today 0700 % last 2.69 2.67 -2 24.05.2023 9.81 Dow Jones 15628.02 0.8% 2.70 2.69 -1 24.05.2023 9.81 Nasdaq C. 3675.74 1.4% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6681.98 0.9% 1.71 1.80 1m 1.75 1.63 Eurostoxx50 2808.64 1.5% 1.70 1.81 3m 1.82 1.72 DAX 8410.73 1.6% 1.73 1.84 6m 1.87 1.78 Nikkei 225 14436.06 3.1% 1.77 1.93 12m 2.00 1.92 OSEBX 497.77 0.5% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets


Morning Report 02.08.2013 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. 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Mre130802