Morning Report

05.06.2013

Nervous Stock Markets

Yesterday equity markets in the United States dropped about 0.5 per cent for the main indices. Speculation about a possible tightening by the Fed seems to be a cause, see below. 10-year U.S. government bond yields were little changed, however. The U.S. dollar has depreciated 0.2 per cent against the euro and 0.3 per cent against the Japanese yen since yesterday morning. In currency markets incidentally there have been relatively small movements in the last day, except for EURSEK which has risen 0.6 per cent. Most of the increase occurred yesterday morning. Part of the reason may be weaker than expected figures for activity in the Swedish service sector. The weaker Swedish krona pulled along the NOK, so EURNOK is now trading 0.3 percent higher than yesterday morning. The decline in the stock market continued in Asia today. Nikkei 225 has fallen 3.8 per cent as typing, while the Korean Kospi Index is down 1 percent. In Singapore, Hang Seng fell 1 percent. Yesterday the President of the Kansas City Fed, Esther George, had to cancel an address in Santa Fe because of illness. But the speech was posted on the websites of the bank. The lecture was about the economic recovery and monetary policy and had the subtitle "Taking the First Step Towards the Long Run." In her address she said: "History suggests that waiting too long to acknowledge the economys progress and prepare markets for more-normal policy settings carries no less risk than tightening too soon." This helped to reinforce speculation in the markets that the Fed might stat tapering purchases of securities already in or right over the summer. The speech, however, brought little new. Kansas City Fed has long been opposition to the Fed's latest round of quantitative easing and has voted against at all the FOMC-meetings. That she argues for an early withdrawal of purchases of securities should thus not be any surprise. The market reactions suggest that the markets are nervous in relation to monetary policy going forward. Hope of continued quantitative easing and fears of tapering seem currently to be important drivers of the markets. Tuesday's weak ISM index strengthened the hope. The question now is whether Friday's employment figures will strengthen hope or increase fear. Yesterday was a relatively quiet day regarding macro figures, but some figures are worth reporting. In the United States trade deficit increased in April. Exports rose 1.2 per cent in April after falling 1.0 per cent the previous month. Imports rose 2.4 per cent m/m, and 3.1 per cent excluding oil. The trade deficit was USD $ 40.3 billion in April, compared with the expected 41.0 billion and 3.3 billion higher than in March. The figures point to a broadly neutral contribution to GDP-growth in the second quarter. In Sweden, an activity index for the services sector in April was released. It showed a decrease of 1.2 per cent from March. The increase from the previous to the last three-month period was 0.1 per cent in April. It has been a fairly broad decline in the service sector in Sweden over the past year, with the exception of retail and public sector. The numbers were clearly weaker than expected and may point to a slowdown in GDP growth in the second quarter. The Swedish krona weakened slightly on the numbers. Today is the day for PMI for the services sectors in May. China has already released the index, and the PMI for the services ended at 51.2 in May, up from 51.1 in April. April figures were the lowest since August 2011 and the May figures confirm the low level. The national statistics agency makes their own PMI indices, and the May index for the services sector showed a slight decrease. The latter figure was released two days ago. Overall, the picture of the service sector is still weak in China. Later today PMI figures for the euro zone and UK will be released. In the afternoon we will get the ISM for the service sector in the United States. For the euro zone, also retail sales in April and detailed figures for GDP in the first quarter are on the agenda. In the U.S. the number of orders of durable goods for April will be out today. In the evening the Fed's presents its Beige Book. kyrre.aamdal@dnb.no

Norw ay: 10y Gov't Bond 2.4 90 85 2.3 80 2.2 75 2.1 70 2.0 65 03-May 22-May 05-Jun
Rate 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) 07:30 Sweden Activity index services 09:00 EMU PPI 12:30 USA Trade balance Todays key economic events (GMT) 07:58 EMU PMI, services 14:00 US ISM, services 18:00 US Beige Book

As of Apr Apr Apr As of May May

Unit m/m % y/y % bn Unit Index Index

Prior -0.9 0.7 -37.1r Prior 47.5 53.1

Poll 0.3 0.2 -40.0 Poll 47.5 53.4

Actual -1.2 -0.2 -40.3 DNB

Morning Report
05.06.2013

3m LIBOR
0.125

0.120
0.115

0.110 03-May
EUR

22-May

0.28 0.28 0.27 0.27 0.27 0.27 05-Jun

Oil price & NOK TWI 94 110 93 105 92 100 91 90 95 03-May 22-May 05-Jun
NOK TWI USD/b (rha)

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 99.92 1.3061 0.8531 7.4544 8.5503 1.2401 7.5843 5.8081 5.81 88.70 101.77 8.894 6.120

Today 99.56 1.3099 0.8542 7.4550 8.6051 1.2394 7.6087 5.8097 5.84 88.44 102.05 8.912 6.140

Spot rates and forecasts In 1m Aug-13 Nov-13 May-14 FX 0700 -0.4 102 105 107 110 AUD 0.3 1.27 1.26 1.30 1.32 CAD 0.1 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.6 8.55 8.45 8.50 8.60 RUB -0.1 1.24 1.25 1.27 1.30 GBP 0.3 7.55 7.50 7.45 7.40 HKD 0.0 5.94 5.95 5.73 5.61 KWD 0.4 5.83 5.67 5.36 5.10 LTL -0.3 88.3 88.8 87.6 86.0 LVL 0.3 101.3 100.7 100.0 99.3 NZD 0.2 8.88 8.82 8.66 8.51 SEK 0.3 608.87 600.00 586.61 569.23 SGD

USD NOK 0.959 5.571 1.034 5.619 0.946 613.777 19.715 29.457 31.942 18.181 1.534 8.906 7.761 0.748 0.285 20.358 2.636 2.203 0.536 10.833 0.802 4.655 6.569 88.411 1.248 4.654

US dollar 6.0 5.9 5.9 5.8 5.8 5.7 03-May 1.33 1.31 1.29 1.27 1.25 05-Jun
EURUSD(rha)

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

Prior 1.68 1.77 1.85 2.03 2.11 2.46 2.81 3.16

Last 1.70 1.76 1.86 2.02 2.12 2.48 2.83 3.17

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

Prior 1.17 1.22 1.27 1.50 1.85 2.12 2.41

Interest rates Last USD 1.17 1m 1.22 3m 1.27 6m #N/A 12m 1.50 3y 1.84 5y 2.12 7y 2.40 10y

Prior 0.19 0.27 0.42 0.69 0.66 1.17 1.69 2.28

Last 0.19 0.27 0.41 0.69 0.65 1.22 1.73 2.30

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

Prior 0.06 0.12 0.20 0.40 0.61 0.96 1.31 1.75

Last 0.06 0.12 0.20 0.40 0.61 0.98 1.34 1.76 Last 99.63 1.54 -0.58 10y sw ap 1.75 1.75 2.00

22-May

USDNOK

Japanese yen 104.0 7.0 102.0 6.5 100.0 6.0 98.0 5.5 96.0 94.0 5.0 03-May 22-May 05-Jun
USDJ PY JPYNOK(rha)

Norw ay Prior NST475 97.51 10y yld 2.28 - US spread 0.15 3m nibor 1.80 1.80 1.80

Norw ay Aug-13 Nov-13 May-14

Governm ent bonds Last SEK Prior Last US Prior 97.10 10y 95.58 95.74 10y 96.61 2.33 10y yld 1.97 1.96 10y yld 2.13 0.20 - US spread -0.16 -0.17 30y yld 3.27 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Aug-13 Nov-13 May-14 1.20 1.20 1.45 2.25 2.25 2.50 Aug-13 Nov-13 May-14 0.35 0.35 0.35

Last Germany Prior 96.64 10y 99.79 2.12 10y yld 1.52 3.29 - US spread -0.61 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25

Germany Aug-13 Nov-13 May-14

SEKNOK & CHFNOK

89
88

87 03-May

22-May

6.3 6.2 6.1 6.0 5.9 5.8 05-Jun

SEKNOK

Equities
15700 15200 14700 14200 13700 03May
Dow Jones

22May

500 490 480 470 460 05-Jun

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

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.51 1.52 1 18.09.2013 0.29 Last 92.73 92.56 1.45 1.45 1 18.12.2013 0.54 Oil price: (Ldn,cl) 1m 1.49 1.50 2 19.03.2014 0.79 SPOT 103.17 103.31 1.25 1.31 5 15.05.2015 1.94 Gold price 04.06.2013 PM 1.56 1.64 8 19.05.2017 3.96 AM: 1402.5 1399.5 0.00 0.00 0 24.05.2023 9.97 Equities Today 0700 % last 2.26 2.31 5 24.05.2023 9.97 Dow Jones 15177.54 -0.5% 2.28 2.33 5 24.05.2023 9.97 Nasdaq C. 3445.26 -0.6% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6558.58 0.5% 1.80 1.91 1m 1.77 1.70 Eurostoxx50 2755.70 0.3% 1.79 1.91 3m 1.88 1.76 DAX 8295.96 0.1% 1.80 1.93 6m 1.93 1.86 Nikkei 225 13014.87 -3.8% 1.83 1.97 12m 2.08 2.02 OSEBX 486.57 -0.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
05.06.2013
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