Morning report

Markets Tumbled after Greek Move

02-Nov-2011
The Greek referendum proposal rattled markets. In Greece, Prime Minister Papandreou received support in government for a referendum on crisis package. Some party members said yesterday the Prime Minister to put Greece's future at stake. With support from the government the chances increases that the Parliament will adopt the referendum on Friday. The Prime Minister said that a referendum would give a clear message in and outside Greece on the country's European course and participation in the euro. Polls show that there is a majority to vote down the rescue package in Greece, but at the same time there is a large majority supporting the euro. Some of the criticism of the proposed referendum was that it would create uncertainty for a long time to come and make new payments from the EU / IMF in jeopardy. Papandreou stated that the referendum can take place as soon as conditions of the rescue package are concretized and thus earlier than in January next year as first reported. Today top leaders in EU, IMF and ECB meet in Cannes and also the Greek prime minister is called. The markets tumbled yesterday on news of the referendum. In Norway the benchmark index on the Oslo Stock Exchange fell 4.2 per cent from the previous day. The German DAX index was down 5 per cent and the Euro Stoxx 50 fell 5.2 per cent. In the UK FTSE100 fell by 2.2 per cent, and in the U.S. in the DJIA was down 2.5 per cent. In the U.S., the yield on 10-year Treasuries fell 15 basis points to 1.96 percent. In the foreign exchange market the euro continued weakening and the EURUSD is down 0.5 per cent from yesterday morning. Turbulence has also led to slightly weaker Norwegian and Swedish crown with EURNOK up 0.6 percent from the morning yesterday. Nevertheless trades EURNOK around 7.76 this morning. The relationship between the Norwegian and Swedish krone has been stable. Japanese yen has remained stable against the dollar over the past day. Yesterday offered, however, the Bank of Japan offered dollars to banks in market operations on Wednesday for the first time since July last year, a sign that market strains from Europe's sovereign debt crisis may be broadening. In Norway PMI has come down. The index for October fell 3.3 points to 50.8. It was a larger decline than expected. Employment Index is now in negative territory. The lower growth abroad and weaker growth prospects and global uncertainty probably turn into the numbers. In Sweden, however, PMI rose 1.7 points to 49.8 in October, against the expected 47.2. Today PMI figures for the euro zone, including Germany will be released. According to the EFF / NEF / FINN.no and ECON Pyry, Norwegian existing home prices rose 0.8 per cent from September to October. The prices in October were thus 9.3 percent higher than a year before. There are few signs that uncertain times have dampened buying enthusiasm. Household purchases of cars have also remained buoyant. Seasonally adjusted figures for the first time registration were 14,194 vehicles in October, up 2.6 percent from the previous month. The last 12 months, recorded 166 ', the highest since 1986. Also in the United States PMI figures were released yesterday. The ISM index for manufacturing fell 0.8 points to 50.8 in October, compared with 52.0 expected. Yesterday started the monetary policy meeting of the Fed and the decisions will be announced today. This time Fed will also hold a press conference. Some Fed representatives has argued for QE3 as the growth remains weak and that the effects of operation twist appears to be small. However we find it unlikely that QE3 is adopted now. The improvement in GDP in the third quarter gives the Fed the opportunity to see how things develop. Moreover, QE3 probably have limited effect on long rates, which is already very low. FOMC releases new forecasts after this meeting. kyrre.aamdal@dnbnor.no

NOK & 3m NIB OR

8.00 7.80 7.60 7.40 22-Sep 12-Oct 3m ra. 3.20 3.10 3.00 2.90 1-Nov EURNOK

SEK & 3m STIBOR

9.4 9.3 9.2 9.1 9.0 8.9 22-Sep 12-Oct 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

2.60 2.55 2.50 2.45 1-Nov EURSEK

+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) 08:00 Norway PMI 09:30 UK GDP 13:00 USA ISM, manufacturing Todays key economic events (GMT) 09:00 Norway LFS unemployment 11:15 USA ADP employment 15:30 USA Feds interest rate decision France EU/IMF/ECB summit meeting

As of Oct Q3 Oct As of Aug Oct Nov

Unit index q/q % index Unit % 1000 %

Prior 54.8 0.1 51.6 Prior 3.2 91.0 0.25

Poll Actual 53.7 50.8 0.4 0.5 52.2 50.8 Poll DnB NOR 3.3 3.3 114.0 0.25 0.25

02-Nov-2011

Morning report

Oil spot & N OK TWI

120 115 110 105 100 22-Sep 12-Oct 96 94 1-Nov $/b 100 98

SPOT R ATES 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 78.33 1.370 0.859 1.215 7.758 9.057 7.441 5.665 7.235 0.857 9.030 6.619 8.448 1.168 10.546 Last 78.12 1.377 0.861 1.217 7.759 9.074 7.441 5.635 7.212 0.856 9.021 6.589 8.436 1.170 10.551 % -0.3% 0.5% 0.2% 0.2% 0.0% 0.2% 0.0% -0.5% -0.3% -0.2% -0.1% -0.5% -0.1% 0.2% 0.0% In 1 m ...3 m 80 80 1.40 1.35 0.88 0.86 1.23 1.23 7.80 7.80 9.20 9.10 7.45 7.45 5.57 5.78 6.96 7.22 0.85 0.86 8.9 9.1 6.57 5.26 1.18 10.45 6.74 5.39 1.17 10.58 ...6 m ...12 m 80 90 1.30 1.25 0.84 0.82 1.23 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 5.54 1.17 10.71 7.20 6.48 1.17 10.98 FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB USD 1.0421 1.0149 0.8839 18.25 5.4028 1.6011 7.7704 115.05 0.2758 2.5068 0.5114 0.7977 3.1973 1.2702 30.6600 % 0.85% -0.52% -0.39% -1.15% -0.58% 0.39% -0.02% -0.61% 0.04% -0.57% -0.56% 0.30% -1.43% -0.49% -0.40%

NOK TWI ra.

EUR vs GBP & CHF

1.25 1.20 1.15 1.10 22-Sep 12-Oct GBP r.a 0.89 0.88 0.87 0.86 0.85 1-Nov CHF

Gov. Bonds, 10y

2.25 2.00 1.75 1.50 22-Sep 12-Oct NOK, ra. 3.00 2.80 2.60 2.40 2.20 2.00 1-Nov SEK

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

JPY and DowJones

13 12 11 10 22-Sep 12-Oct USDJPY ra. DowJones, 1000 79 78 77 76 1-Nov

10y 10y yield vs bund

SWAP AN D MON EYMARKET RATES (Source: Reuters) N IBOR STIBOR EURIBOR USD LIBOR Prior Last Prior Last Prior Last Prior Last 2.77 2.68 2.34 2.35 1.31 1.31 0.25 0.25 3.04 2.98 2.56 2.56 1.53 1.53 0.43 0.43 3.27 3.19 2.59 2.60 1.74 1.73 0.62 0.62 3.49 3.41 2.65 2.66 1.90 1.90 0.77 0.78 2.99 3.04 2.12 2.15 1.56 1.57 0.71 0.72 3.28 3.31 2.23 2.29 1.90 1.92 1.23 1.27 3.53 3.53 2.37 2.44 2.17 2.22 1.71 1.78 3.68 3.71 2.45 2.52 2.46 2.51 2.15 2.22 GOVERNM ENT BON DS (Source: Reuters) US N ORWAY SWEDEN GERMANY Prior Last Prior Last Prior Last Prior Last 114.2 110.10 117.313 117.39 104.321 103.74 101.1875 100.55 2.61 0.80 2.54 0.71 1.71 1.69 1.81 1.83 -0.10 -0.14 INTEREST RATE FORECASTS SWEDEN GERMANY 3m stibor 10y swap 3m euribor 10y swap 2.50 3.00 1.50 3.00 2.55 3.25 1.50 3.25 2.65 3.25 1.50 3.25 1.99 0.18 US 3m libor 10y 0.45 0.35 0.35 2.07 0.24

USD and gold

2000 1900 1800 1700 1600 1500 22-Sep 12-Oct EURUSD ra. 1.47 1.42 1.37 1.32 1-Nov Gold

In 3m 6m 12m

N ORWAY 3m nibor 10y swap 3.15 4.25 3.15 4.50 3.35 4.50

swap 2.75 3.00 3.25

EU RSEK & OMXS

9.4 9.2 9.0 8.8 22-Sep 500 450 400 350 1-Nov EURSEK

FRA NOK DEC MAR J UN SEP FRA SEK DEC MAR J UN SEP

3m 2.88 2.66 2.51 2.49 3m 2.50 2.14 2.01 1.96

Prior 2.84 2.63 2.48 2.47 Prior 2.49 2.13 2.00 1.93

chg 0.04 0.03 0.03 0.02 chg 0.01 0.01 0.01 0.03

TWI NOK SEK EUR USD GBP Comm. Brent spot Brent 1m Spot gold

Today 97.05 119.83 106.95 76.96 80.40 Today 107.5 109.9 1699.0

% 0.04 0.11 0.28 - 0.46 - 0.25 Last 107.5 109.5 1699.0

Stock ex. Today Dow Jones 11,658.0 Nasdaq 2,607.0 FTSE100 5,421.6 Eurostoxx50 2,259.7 Dax 5,834.5 Nikkei225 8,640.4 Oslo 367.94 Stockholm 432.35 Copenhagen 461.87

% -2.5% -2.9% -2.2% -5.3% -5.0% 0.0% -4.2% -4.5% -2.8%

12-Oct

OMXS ra.

Morning report
02-Nov-2011
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