Morning Report

30.10.2012

Bank of Japan with more stimulus

NOK & 3m NIBOR 2.00 7.50 7.45 1.95 7.40 1.90 7.35 1.85 7.30 19-Sep 9-Oct 29-Oct
3m ra. EURNOK

Bank of Japan increased its purchases of securities (QE), but the market was still disappointed and the yen strengthened vs the dollar. Grim key indicators showed a sharp slowdown of the Japanese economy. Due to the hurricane Sandy the U.S. stock and bond markets are closed today. The hurricane Sandy has caused huge damages and the U.S. stock exchange is closed today. This is the first time since 1985 that the stock market is closed due to a hurricane. The bond market will also be closed today, having closed earlier than usual yesterday. Interest rates were trending downwards yesterday as a result of the hurricane due to flight-to-safety effects. The hurricane also reduced the crude oil price as refinery activity was negatively affected. In the currency market, the dollar remained relatively stable against the euro. The outcome of the BoJ meeting contributed to a marked strengthening of the yen vs the dollar. Bank and Japan announced an increase in QE from 80 to 91 trillion in order to improve the financial conditions for households and businesses by forcing risk premiums and long-term rates down. In addition, the central bank establishes a new lending facility for banks, "Stimulating Bank Lending Facility", in an attempt to stimulate banks lending activities. The facility is unlimited. Earlier last night economic indicators showed that the Japanese economy is about to slow sharply. Industrial production fell at 4.1% in September, while a decline of 3.3% was expected. This came after a fall of 1.6% the month before, and MITI estimates a further decline of 1.5% next month. Private consumption fell by 1.9% in September, also a far larger decline than projected. Hence a significant decline in GDP should be expected for the third quarter. The labor market, however, appears to remain relatively stable for now. The unemployment rate remained unchanged at 4.2% in September. American consumer demand picked up in September. Nominal consumption rose by 0.8%, while the increase was 0.4% adjusted for inflation. Consumption of goods rose by more than 1%. The strong expansion can be decomposed into two: Lower savings and increased income, which both contributed equally to the increase. The savings rate fell from 3.7% to 3.3%, while income growth rose 0.4%. The decline in the saving must be viewed in light of the significant reduction of household debt burden over the past year. Today housing prices (Case-Shiller) for August will be released. A rise of 0.5% is expected. Swedish retail sales surprised on the upside with an upturn of 1.7% in September. An increase of only 0.3% was expected. The data tend to be very volatile and must be interpreted cautiously. Despite the healthy growth, there is currently no significant indications of a substantial turnaround in consumer demand. Income growth is moderate and consumer confidence has weakened recently. On the other hand, the central bank's interest rate cuts and signals of more may have had a positive effect on the desire to buy. The SEK strengthened slightly against the euro after the release. Various sentiment surveys from the euro zone will be released today. The consumer confidence index is expected to rise slightly, while the indices for businesses are expected to fall. The overall index is projected to decline from 85 to 84. New figures for German unemployment are also due today. As a result of slower growth, unemployment has begun to rise slightly, but remains low for the time being. The rate has been stable at 6.8% since last December. For October, a slight increase in the number of unemployed is expected, and the rate is projected to increase to 6.9%. Despite low unemployment German inflation is still moderate. Preliminary figures for inflation in October (based on data from six states) indicate an inflation rate of 2.1% - the same as in September. With only a week left for the U.S. presidential election, the outcome is still very uncertain. Romney leads polls by a small margin and thus may end up with the majority of votes, while Obama is still likely to take most electoral votes and thus secure reelection. The election will this time as well as before be settled in the swing states, where Ohio stands out as the most important. Recent polls indicate that the Democrats will retain the Senate, while Republicans will retain their majority in the House. knut.magnussen@dnb.no Yesterdays key economic events (GMT) 07:30 Sweden Retail sales 12:30 USA Personal consumption 12:30 USA PCE deflator Todays key economic events (GMT) 03:00 Japan BoJ interest rate meeting 08:55 Germany Unemployment, change 10:00 EMU Sentiment index As of Sep Sep Sep As of Oct Oct Unit m/m, % m/m, % m/m, % Unit % 1000 Index Prior -0.4 0.5 0.1 Prior 0.1 9 85.0 Poll 0.3 0.6 0.1 Poll 0.1 10 84.0 Actual 1.7 0.8 0.1 DNB 0.1

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 19-Sep 9-Oct 1.70 1.60 1.50 1.40 29-Oct
EURSEK

3m ra.

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850

Sales Oslo (+47) Equity Fixed Income

22 94 89 40 22 01 78 20

Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

56 13 27 20 75 52 9910 69 39 41 50 62 54 14 82 52 72 09 06 61 24 79 56 38 07 28 62 22 01 76 50 51 84 04 30 77 62 96 80 73 58 74 89 33 01 73 80 70 11 69 85

Research Regional Sales (+47) Eirik Larsen 22 01 76 55

Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 22 01 77 41 22 01 76 57 22 01 76 67

Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

22 01 78 37 22 01 77 62 22 01 76 77 22 01 77 36 22 01 78 15

Morning Report
30.10.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 120 115 110 105 19-Sep 9-Oct 94 93 92 91 29-Oct
$/b

NOK TWI r a.

EUR vs GBP & CHF 1.22 1.21 1.21 0.82 0.80 0.78

0.76 1.20 19-Sep 9-Oct 29-Oct

GBP r.a CHF

FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK

Prior 79.85 1.291 0.805 1.209 7.447 8.627 7.460 5.774 7.237 0.865 9.257 6.687 8.381 1.159 10.719

Last 79.50 1.292 0.805 1.209 7.446 8.630 7.460 5.766 7.253 0.863 9.250 6.681 8.408 1.161 10.722

% -0.4% 0.1% 0.0% 0. 0% 0.0% 0.0% 0.0% -0.1% 0.2% -0.2% -0.1% -0.1% 0. 3% 0.2% 0. 0%

In 1 m ...3 m 78 76 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.55 8.55 7.45 7.45 5.75 6.04 7.37 7.95 0.85 0.85 9. 1 9.3 6.73 7.13 5.25 5.42 1.17 1.18 10.69 10.96

...6 m ...12 m 76 78 1.20 1.25 0.78 0.80 1. 20 1.20 7.25 7.40 8.50 8.60 7.45 7.45 6.04 5.92 7.95 7.59 0. 85 0.86 9.3 9.3 7. 08 6.88 5. 38 5.37 1.17 1.16 10. 90 10.75

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0361 1.0016 0.9356 19.40 5.7753 1.6048 7.7504 127.61 0.2814 2.6729 0.5394 0.8214 3.2151 1.2214 31.5350

% 0.26% 0.02% -0.14% -0.17% -0.12% 0.08% -0.01% -0.12% -0.05% -0.11% -0.11% 0.22% 0.00% -0.02% 0.14%

EURSEK & OMXS 575 8.9 8.7 500 8.5 425 8.3 350 8.1 19-Sep 9-Oct 29-Oct
OMXS ra. EURSEK

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

NIBOR Prior 1.74 1.86 2.06 2.18 2.25 2.57 2.87 3.22

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.75 1.40 1.40 0.06 1.86 1.48 1.48 0.13 2.06 1.62 1.61 0.28 2.19 1.71 1.70 0.42 2.26 1.39 1.39 0.60 2.56 1.58 1.58 0.97 2.88 1.81 1.81 1.36 3.22 2.05 2.05 1.79

Last 0.06 0.13 0.28 0.42 0.60 0.97 1.35 1.78

USD LIBOR Prior Last 0.21 0.21 0.31 0.31 0.54 0.54 0.72 0.72 0.51 0.50 0.84 0.86 1.28 1.26 1.76 1.75

Gov. Bonds, 10y 1.70 1.60 1.50 2.40 2.20 2.00

1.80 1.40 19-Sep 9-Oct 29-Oct

NOK, ra. SEK

10y 10y yield vs bund

NORWAY Prior Last 99.48 99.48 2.05 2.06 0.58 0.61

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 117.5 117.53 100.2 100.48 99.140625 1.52 1.52 1.47 1.45 1.72 0.05 0.07 0.25 INTEREST RATE FORECASTS SWEDEN GERMANY 3m stibor 10y swap 3m euribor 10y swap 1.30 2.25 0.35 1.75 1.30 2.25 0.25 1.75 1.30 2.50 0.25 2.00

Last 99.14 1.73 0.28

JPY and DowJones 81 14.0 13.5 79 13.0 77 12.5 75 12.0 19-Sep 9-Oct 29-Oct
USDJPY ra. DowJones, 1000

In 3m 6m 12m

NORWAY 3m nibor 10y swap 1.90 3.25 1.90 3.25 2.15 3.50

US 3m libor 10y swap 0.45 1.75 0.45 1.75 0.45 2.25

USD and gold 1820 1720 1620 1520

EURUSD ra.

1.32 1.28 1.24 1.20

Gold

19-Sep 9-Oct 29-Oct

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % DEC 1.84 1.84 0.00 NOK 93.12 - 0.01 MAR 1.84 1.85 -0.01 SEK 114.75 0.06 JUN 1.87 1.88 -0.02 EUR 101.33 0.02 SEP 1.89 1.91 -0.02 USD 80.13 - 0.13 FRA SEK 3m Prior chg GBP 83.70 Last DEC 1.42 1.42 0.00 Comm. Today MAR 1.27 1.27 0.00 Brent spot 110.2 110.2 JUN 1.23 1.22 0.01 Brent 1m 109.0 109.4 SEP 1.23 1.22 0.01 Spot gold 0.0 1707.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones Nasdaq FTSE100 5,795.1 Eurostoxx50 2,478.8 Dax 7,203.2 Nikkei225 8,842.0 Oslo 442.17 Stockholm 499.91 Copenhagen 644.95

% : : -0.2% -0.7% -0.4% 0.0% 0.1% -0.3% 0.3%

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