Morning Report

18.04.2013

The Riksbank weakened the krona

The Swedish Riksbank significantly lowered their interest rate path. This weakened the Swedish krona and lowered market rates. Turmoil in financial markets is increasing. Uncertainty in financial markets has increased lately. Yesterday stock markets declined and long dated interest rated declined. The euro has weakened on speculations that ECB may cut the interest rate. The volatility in stock markets have also picked opp. Markets are probably worried by terror attacks in the IS. The oil price declined again yesterday. The Riksbank held the repo rate unchanged at 1.0 percent at yesterdays MPC-meeting. As usual a minority, i.e. Svensson and Ekholm, wanted to cut the interest rate (to 0.5% and 0.75% respectively). The interest rate path was taken down significantly, and the Riksbank now signals that the first rate hike will come sometime at the end of 2014, three quarters later than anticipated at the last meeting, in February. In the new rate path, the Riksbank signals that there is a greater likelihood of rate cut than rate hike in the period up to the second half of 2014. In the press release the Riksbank said that the downward revisions of the rate path are a reflection of a greater need for supporting the economic rebound and bringing inflation up to its target of 2 percent. The Riksbank now expects that inflation will be below its target of 2 percent until the beginning of 2015. The reason for lower inflation expectations seems to be, among other factors, a stronger SEK. The SEK weakened markedly versus the euro after the announcement and the depreciation continued throughout yesterday. Swedish FRA rates fell 6-10 bps after the release of the new interest rate path. The minutes from the Bank of England interest rate meeting earlier this month revealed that there are still three members of the committee who wants to increase the quantitative easing. This was the third consecutive meeting where the committee was split. The arguments remain more or less the same. The majority emphasizes the risk of increased inflation expectations. Signs of a weakening labour market may change their minds. New figures show that the registered unemployment fell somewhat also in March (nine month in a row), while LFS unemployment increased in January. (3 month average). Furthermore the strong employment growth seems to abate. In addition, wage growth declined and was only 0.8% in February. With an inflation rate at 2.8%, real wages are falling noticeably. This is weighing on the private consumption. Retail sales figures for March are due today. A decline of 0.8% is expected after strong growth in February (2.0%) Fed's Beige book reiterated the message that the economy continues to expand at a moderate pace. Two of the regions, New York and Dallas, reported even that the pace had increased slightly from the previous report. This was somewhat surprising in light of some key figures have come out on the weak side in March. Our own macro scores also showed a little improvement in the U.S. economy in the last update that we made yesterday. Most districts also reported that activity in the industry had picked up since the last report. Even for employment there was a positive review, with unchanged or improved development. The overall outlook was also considered as optimistic, although there is some uncertainty about fiscal policy. All in all, a positive report which certainly will mean that the discussion about the reduction of the quantitative easing will continue at the FOMC meeting on 30 April. Japanese exports rose more than expected in March. In particular, exports to the U.S. picked up, and the country is once again Japan's main export destination. Despite higher exports, Japan still has a trade deficit. Housing prices in China continues to increase. The annual growth rose from 2.1% in February to 3.6% in March. The Chinese housing market is one of the risks that were highlighted in the IMF's Financial Stability Report (GFSR) yesterday. The main picture in this report, however, is that the global financial system is more stable now than six months ago. All seven main categories considered are better, including the risks in the emerging economies. The greatest improvement has been to liquidity risk and risk appetite. F Norges Bank publishes the bank lending survey for the first quarter this morning. The survey will probably show that banks have become more restrictive in their lending as a result of more stringent capital requirements. Governor ystein Olsen is giving a speech for ACI Norway in the Shipping club in Oslo this afternoon. knut.magnussen@dnb.no Yesterdays key economic events (GMT) As of Unit 07:30 Sweden Riksbank MP Meeting 08:30 UK Minutes from BoE meeting 18:00 USA Beige Book As of Unit Todays key economic events (GMT) 08:00 Norway Norways Bank's lending survey Q1 2013 08:30 UK Retail Sales Mar m/m % 12:30 USA Initial Claims W 15 1000 Prior Poll Actual

Norw ay: 10y Gov't Bond 2.3 100

2.2
2.1

90
80 18-Mar
Rate

2.0
04-Apr

70 18-Apr
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 62 96 80 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

Prior 2.1 346

Poll -0.8 350

DNB

Morning Report
18.04.2013

3m LIBOR
0.140 0.135 0.130 0.125 0.120 18-Mar
EUR

04-Apr

0.29 0.29 0.28 0.28 0.27 18-Apr

Oil price & NOK TWI

108
103

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 98.34 1.3179 0.8584 7.4562 8.3917 1.2164 7.5521 5.7321 5.83 90.09 101.35 8.798 6.210

Today 97.88 1.3042 0.8556 7.4549 8.5013 1.2156 7.5710 5.8061 5.94 89.12 101.60 8.852 6.231

Spot rates and forecasts In 1m Jul-13 Oct-13 Apr-14 FX 0700 -0.5 95 95 95 100 AUD -1.0 1.30 1.32 1.34 1.37 CAD -0.3 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 1.3 8.40 8.40 8.45 8.60 RUB -0.1 1.22 1.22 1.25 1.27 GBP 0.3 7.45 7.40 7.40 7.40 HKD 1.3 5.73 5.61 5.52 5.40 KWD 1.8 6.03 5.90 5.81 5.40 LTL -1.1 88.7 88.1 87.6 86.0 LVL 0.2 100.0 99.3 99.3 99.3 NZD 0.6 8.76 8.71 8.60 8.51 SEK 0.3 610.66 606.56 592.00 582.68 SGD

USD NOK 1.029 5.971 1.026 5.655 0.932 622.651 19.832 29.261 31.840 18.225 1.524 8.846 7.763 0.748 0.285 20.363 2.648 2.192 0.537 10.803 0.845 4.901 6.516 89.050 1.236 4.694

18-Mar

04-Apr

98 18-Apr
USD/b (rha)

NOK TWI

US dollar

5.9 5.8 5.7 5.6 18-Mar

1.35 1.30
04-Apr

1.25 18-Apr
EURUSD(rha)

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

Prior 1.75 1.83 1.90 2.09 2.01 2.34 2.68 3.03

Last 1.75 1.81 1.89 2.05 2.00 2.34 2.67 3.02

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

Prior 1.15 1.24 1.31 #N/A 1.39 1.62 1.86 2.11

Interest rates Last USD 1.15 1m 1.24 3m 1.31 6m #N/A 12m 1.39 3y 1.62 5y 1.87 7y 2.11 10y

Prior 0.20 0.28 0.44 0.72 0.44 0.84 1.32 1.87

Last 0.20 0.28 0.43 0.72 0.46 0.84 1.30 1.84

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

Prior 0.06 0.13 0.22 0.42 0.52 0.83 1.16 1.59

Last 0.06 0.13 0.22 0.42 0.50 0.79 1.12 1.55

USDNOK

Japanese yen 105.0 7.0 100.0 95.0 6.0 90.0 85.0 5.0 18-Mar 04-Apr 18-Apr
USDJ PY JPYNOK(rha)

Norw ay Prior NST475 98.55 10y yld 2.16 - US spread 0.45 3m nibor 1.85 1.85 1.85

Norw ay Jul-13 Oct-13 Apr-14

Governm ent bonds Last SEK Prior Last US Prior 98.50 10y 98.97 98.89 10y 102.61 2.17 10y yld 1.61 1.62 10y yld 1.71 0.49 - US spread -0.10 -0.07 30y yld 2.88 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jul-13 Oct-13 Apr-14 1.20 1.20 1.20 2.25 2.25 2.50 Jul-13 Oct-13 Apr-14 0.35 0.35 0.35

Last Germany Prior Last 102.86 10y 102.03 102.45 1.68 10y yld 1.28 1.23 2.87 - US spread -0.43 -0.45 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

Germany Jul-13 Oct-13 Apr-14

SEKNOK & CHFNOK 91 6.3

90
89

6.2
6.1

88 18-Mar 04-Apr
SEKNOK

6.0 18-Apr
CHFNOK (rha)

Equities
15200

14700 14200
13700 18-Mar 04-Apr

490 480 470 460 450 440 18-Apr

NOK sov. NST20 NST21 NST22 NST471 NST472 NST473 NST475 NST475 NOK FRA JUN SEP DEC MAR

Dow Jones

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.58 1.63 5 18.09.2013 0.42 Last 92.68 92.36 1.56 1.57 1 18.12.2013 0.67 Oil price: (Ldn,cl) 1m 1.64 1.64 0 19.03.2014 0.92 SPOT 96.07 97.41 1.29 1.29 0 15.05.2015 2.07 Gold price 17.04.2013 PM 1.41 1.40 -1 19.05.2017 4.09 AM: 1380.0 1392.0 1.62 1.62 0 22.05.2019 6.10 Equities Today 0700 % last 2.15 2.15 1 24.05.2023 10.10 Dow Jones 14618.59 -0.9% 2.16 2.17 1 24.05.2023 10.10 Nasdaq C. 3204.67 -1.8% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6244.21 -1.0% 1.77 1.85 1m 1.82 1.75 Eurostoxx50 2553.49 -2.1% 1.72 1.82 3m 1.90 1.81 DAX 7503.03 -2.3% 1.71 1.82 6m 1.93 1.89 Nikkei 225 13263.27 -0.9% 1.72 1.84 12m 2.07 2.05 OSEBX 457.23 -1.2% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
18.04.2013
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