Morning report Strong US retail sales US September retail sales w ere a positive surprise, but American consumers have become more pessimistic this month. Finance ministers and central bank governors from G20 countries state that they expect a comprehensive debt crisis plan on Sunday. 17-Oct-2011 Long government bond yields in "safe countries" rose during Friday's session, as did international stock markets. The rise has continued in Asian markets today. Increased risk willingness has weakened safe havens, which is also reflected in FX markets. The euro has strengthened against the dollar and the scandies have strengthened, while the yen and the Swiss Franc have weakened. NOK & 3m NIBOR 2.90 3.00 3.10 3.20 14-Oct 26-Sep 6-Sep 7.40 7.60 7.80 8.00 The news that US retail sales increased by 1. 1% m/ m in September (expected 0.7%) contributed to the positive sentiment. Core sales (excluding cars) increased by 0.6% m/m, the double of what was expected. Also, r evision showed a 0.4% m/m rise in sales in August, instead of the flat development which was originally reported. Note these are value numbers, and hence some of the surprise may be due to stronger-than-expected price growth. However: Consumption growth may be about 2% (annualized) in Q3, which should reduce speculations that the US economy is experiencing another recession. Unfortunately, the Michigan consumer sentiment index reveals that consumers have become more pessimistic in October. The preliminary estimate was 57.7, down from 59.4 in September. The decline from 71.5 in June reflects the stock market plunge and a disappointing ly weak labor market. Luckily, the index has showed poor correlation with actual spending throughout the financial crisis. 3m ra. EURNOK SEK & 3m STIBOR 2.45 2.50 2.55 2.60 14-Oct 26-Sep 6-Sep 8.9 9.0 9.1 9.2 9.3 9.4 The risk-on sentiment was also spurred by the belief in an approaching solution to the European debt crisis, a topic which is likely to dominate this w eek's markets as well. The wording in the statement from the meeting between financial ministers and central bank governors in G20 on Saturday was unusually direct: "We look forward to (…) the outcome of the European Council on October 23 to decisively address the current challenges through a comprehensive plan." The statement contributed to strengthening investors' belief that a convincing plan, including the write-down of Greek debt and a recapitalization of European banks, will be launched on Sunday. According to Reuters there are speculations that the EFSF fund may converted into being an insurance fund for European banks, covering the first 20 per cents of a bank's losses on government debt, to increase its firepower. 3m ra. EURSEK Headquarters +47 03000 0021 Oslo Stranden 21 Offices Abroad New York +1 212 681 3800 London +44 207 6211111 Shanghai +86 21 6132 2888 Singapore +65 6220 6144 Stockholm +46 8 4734850 Sales Oslo (+47) Equity 22 94 89 40 Fixed Income 22 01 78 20 FX/IR 22 01 76 50 Regional sales (+47) Bergen 55 21 95 80 Bodø 75 55 87 60 Fredrikstad 69 39 41 50 Hamar 61 05 14 69 Haugesund 52 72 09 06 Lillehammer 61 27 32 27 Kristiansand 38 07 28 62 Oslo 22 01 76 50 Stavanger 51 84 04 30 Tromsø 77 62 96 80 Trondheim 73 58 74 89 Tønsberg 33 37 13 00 Ålesund 73 84 60 09 Research Regional Sales (+47) Eirik Larsen 22 01 76 55 Research FX/IR (+47) Øystein Dørum 22 01 76 56 Kjersti Haugland 22 01 78 03 Ole André Kjennerud 22 01 78 24 Knut A. Magnussen 22 01 76 63 Maren Romstad 22 01 76 64 Camilla Viland 22 01 77 41 Kyrre Aamdal 22 01 76 67 Credit Research (+47) Ole Einar Stokstad 22 01 78 37 Mikael L. Gjerding 22 01 77 62 Åse Haagensen 22 01 76 93 Rolv Kristian Heitmann 22 01 76 77 Thomas Larsen 22 01 77 36 Knut Olav Rønningen 22 01 78 15 This week's most important Norw egian event will be Wednesday's interest rate meeting, featuring another Monetary P olicy Report, and hence: a new interest rate path. The governor's hiking plans were cancelled already after one and a half months after the release of the previous report, and Mr Olsen has expressed substantial uncertaint y regarding the interest rate setting throughout the autumn. The market pricing has for a long time indicated cuts, while many analysts have asserted that the key policy rate will be left unchanged at 2.25% throughout 2012. We are convinced that the new interest rate path will be far flatter than the June path, and expect it to indicate that the next move is up, either in March or in May. US consumer price inflation has surprised on the upside lately, which makes the Fed's assessments on whe ther to provide further monetary easing more difficult (especially regarding another round of asset purchases). Core inflation rose to 2.0% in August, and is expected to edge up to 2.1% when September numbers are released on Wednesday. On the other side of the world, Chinese Q3 GDP is released tomorrow . The national accounts are released only a fortnight after the end of the quarter, a speed that makes us highly skeptical about the quality of the statistics. Annual growth is expected to edge down from 9.5% in Q2 to 9.2% in Q3. "Europe's most important index" , the IFO index, is released on Friday , and will give us an important signal regarding the momentum in the euro area's dominant economy. Despite the recent declines, it is still well above its historical average and expectations point to an o nly marginal decline in October. [email protected] Friday's key economic events (GMT) As of Unit Prior Poll Actual 12:30 USA Personal cons. ex autos Sep M/m % 0.5r 0.3 0.6 12:30 USA Personal consumption Sep M/m % 0.4r 0.7 1.1 13:55 USA Michigan cons. confidence okt Index 59.4 60.2 57.5 Today’s key economic events (GMT) As of Unit Prior Poll DnB NOR 12:30 USA Empire state (NY Fed) Oct Index -8.8 -4.0 13:15 USA Industrial production Sep m/m % 0.2 0.2 02:00 China GDP Q3 q/q % 2.2 2.1
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Morning report
Strong US retail sales
US September retail sales w ere a positive surprise, but American consumers havebecome more pessimistic this month. Finance ministers and central bank governors fromG20 countries state that they expect a comprehensive debt crisis plan on Sunday.
17-Oct-2011
Long government bond yields in "safe countries" rose during Friday's session, as did internationalstock markets. The rise has continued in Asian markets today. Increased risk willingness hasweakened safe havens, which is also reflected in FX markets. The euro has strengthened againstthe dollar and the scandies have strengthened, while the yen and the Swiss Franc have weakened.
NOK & 3m NIBOR
2.90
3.00
3.10
3.20
14-Oct26-Sep6-Sep
7.40
7.60
7.80
8.00
The news that US retail sales increased by 1.1% m/ m in September (expected 0.7%)contributed to the positive sentiment. Core sales (excluding cars) increased by 0.6% m/m, thedouble of what was expected. Also, revision showed a 0.4% m/m rise in sales in August, instead of the flat development which was originally reported. Note these are value numbers, and hence someof the surprise may be due to stronger-than-expected price growth. However: Consumption growthmay be about 2% (annualized) in Q3, which should reduce speculations that the US economy isexperiencing another recession. Unfortunately, the Michigan consumer sentiment index reveals thatconsumers have become more pessimistic in October. The preliminary estimate was 57.7, downfrom 59.4 in September. The decline from 71.5 in June reflects the stock market plunge and adisappointingly weak labor market. Luckily, the index has showed poor correlation with actualspending throughout the financial crisis.
3m ra. EURNOK
SEK & 3m STIBOR
2.45
2.50
2.55
2.60
14-Oct26-Sep6-Sep
8.9
9.0
9.1
9.2
9.3
9.4 The risk-on sentiment was also spurred by the belief in an approaching solution to theEuropean debt crisis, a topic which is likely to dominate this w eek's markets as well. Thewording in the statement from the meeting between financial ministers and central bank governorsin G20 on Saturday was unusually direct: "We look forward to (…) the outcome of the EuropeanCouncil on October 23 to decisively address the current challenges through a comprehensive plan."The statement contributed to strengthening investors' belief that a convincing plan, including the
write-down of Greek debt and a recapitalization of European banks, will be launched on Sunday.According to Reuters there are speculations that the EFSF fund may converted into being aninsurance fund for European banks, covering the first 20 per cents of a bank's losses ongovernment debt, to increase its firepower.
3m ra. EURSEK
eadquarters +47 03000021 Oslotranden 21
ffices Abroadew York +1 212 681 3800ondon +44 207 6211111hanghai +86 21 6132 2888ingapore +65 6220 6144tockholm +46 8 4734850
ales Oslo (+47) quity 22 94 89 40xed Income 22 01 78 20X/IR 22 01 76 50
egional sales (+47)ergen 55 21 95 80 odø 75 55 87 60redrikstad 69 39 41 50
amar 61 05 14 69augesund 52 72 09 06llehammer 61 27 32 27ristiansand 38 07 28 62slo 22 01 76 50 tavanger 51 84 04 30romsø 77 62 96 80rondheim 73 58 74 89ønsberg 33 37 13 00lesund 73 84 60 09
esearch Regional Sales (+47)rik Larsen 22 01 76 55
esearch FX/IR (+47)ystein Dørum 22 01 76 56jersti Haugland 22 01 78 03le André Kjennerud 22 01 78 24nut A. Magnussen 22 01 76 63aren Romstad 22 01 76 64amilla Viland 22 01 77 41yrre Aamdal 22 01 76 67
redit Research (+47)
le Einar Stokstad 22 01 78 37ikael L. Gjerding 22 01 77 62se Haagensen 22 01 76 93olv Kristian Heitmann 22 01 76 77homas Larsen 22 01 77 36nut Olav Rønningen 22 01 78 15
This week's most important Norw egian event will be Wednesday's interest rate meeting,featuring another Monetary Policy Report, and hence: a new interest rate path. Thegovernor's hiking plans were cancelled already after one and a half months after the release of theprevious report, and Mr Olsen has expressed substantial uncertainty regarding the interest ratesetting throughout the autumn. The market pricing has for a long time indicated cuts, while manyanalysts have asserted that the key policy rate will be left unchanged at 2.25% throughout 2012.We are convinced that the new interest rate path will be far flatter than the June path, and expectit to indicate that the next move is up, either in March or in May.
US consumer price inflation has surprised on the upside lately, which makes the Fed's
assessments on whe ther to provide further monetary easing more difficult (especiallyregarding another round of asset purchases). Core inflation rose to 2.0% in August, and isexpected to edge up to 2.1% when September numbers are released on Wednesday. On the otherside of the world, Chinese Q3 GDP is released tomorrow . The national accounts are releasedonly a fortnight after the end of the quarter, a speed that makes us highly skeptical about thequality of the statistics. Annual growth is expected to edge down from 9.5% in Q2 to 9.2% in Q3. "Europe's most important index" , the IFO index, is released on Friday, and will give us animportant signal regarding the momentum in the euro area's dominant economy. Despite therecent declines, it is still well above its historical average and expectations point to an onlymarginal decline in October.
Friday's key economic events (GMT) As of Unit Prior Poll Actual12:30 USA Personal cons. ex autos Sep M/m % 0.5r 0.3 0.612:30 USA Personal consumption Sep M/m % 0.4r 0.7 1.113:55 USA Michigan cons. confidence okt Index 59.4 60.2 57.5
Today’s key economic events (GMT) As of Unit Prior Poll DnB NOR12:30 USA Empire state (NY Fed) Oct Index -8.8 -4.013:15 USA Industrial production Sep m/m % 0.2 0.202:00 China GDP Q3 q/q % 2.2 2.1
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Morning report 17-Oct-2011
FX Prior Last % In 1 m ...3 m ...6 m ...12 m FX USD %
USDJPY 77.25 77.12 -0.2% 80 80 80 90 AUD 1.0322 -0.24%
EURUSD 1.388 1.388 0.0% 1.35 1.35 1.30 1.25 CAD 1.0082 -0.18%
EURGBP 0.878 0.878 0.0% 0.86 0.86 0.84 0.82 CHF 0.8933 0.17%
EURCHF 1.238 1.239 0.1% 1.20 1.20 1.20 1.25 CZK 17.83 -0.02%
EURNOK 7.726 7.713 -0.2% 8.00 7.80 7.70 7.70 DKK 5.3675 -0.05%
EURSEK 9.154 9.131 -0.2% 9.30 9.10 9.00 9.00 GBP 1.5818 -0.03%EURDKK 7.446 7.445 0.0% 7.45 7.45 7.45 7.45 HKD 7.7779 0.00%
USDNOK 5.570 5.560 -0.2% 5.93 5.78 5.92 6.16 ISK 115.28 0.03%
JP YNOK 7.215 7.210 -0.1% 7.41 7.22 7.40 6.84 KWD 0.2760 0.27%
SEKNOK 0.845 0.846 0.2% 0.86 0.86 0.86 0.86 LTL 2.4888 0.02%
GBPNOK 8.823 8.795 -0.3% 9.3 9.1 9.2 9.4 LVL 0.5087 -0.10%
USDSEK 6.601 6.583 -0.3% 6.89 6.74 6.92 7.20 NZD 0.8037 -0.26%
JP YSEK 8.551 8.539 -0.1% 5.51 5.39 5.54 6.48 PLN 3.0832 -0.55%
NOK SEK 1.187 1.184 -0.2% 1.16 1.17 1.17 1.17 SGD 1.2627 -0.24%
GBPSEK 10.438 10.410 -0.3% 10.81 10.58 10.71 10.98 RUB 30.7475 -0 .43%
SPOT RATES AND FORECASTS (Source: Reuters and DnB NOR Markets)
Oil spot & NOK TWI
94
96
98
100
14-Oct26-Sep6-Sep
100
105
110
115
120
125
NOK TWI ra. $/b EUR vs GBP & CHF
0.85
0.86
0.87
0.88
0.89
14-Oct26-Sep6-Sep
1.10
1.15
1.20
1.25
GBP r.a CHF
Prior Last Prior Last Prior Last Prior Last
1m 2.85 2.87 2.32 2.32 1.30 1.31 0.24 0.24
3m 3.08 3.09 2.52 2.52 1.50 1.51 0.40 0.40
6m 3.31 3.30 2.53 2.53 1.72 1.72 0.59 0.59
12m 3.49 3.47 2.58 2.59 1.88 1.88 0.74 0.75
3y 3.14 3.15 2.19 2.22 1.81 1.77 0.86 0.88
5y 3.49 3.50 2.44 2.46 2.19 2.19 1.45 1.48
7y 3.71 3.73 2.62 2.64 2.48 2.51 1.97 2.00
10y 3.90 3.92 2.71 2.73 2.78 2.82 2.42 2.45
Prior Last Prior Last Prior Last Prior Last
10y 112.4 108.20 114.264 114.25 100.374 100.05 98.890625 98.66
10y yield 2.77 2.76 2.01 2.00 2.19 2.24 2.25 2.29
vs bund 0.58 0.52 -0.18 -0.25 0.06 0.05
3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 3m libor 10y swap
In 3m 3.05 4.25 2.50 3.00 1.50 3.00 0.35 3.00
… 6m 3.20 4.50 2.75 3.25 1.50 3.25 0.35 3.25
… 12m 3.50 4.50 2.90 3.25 1.50 3.25 0.35 3.25
SWAP AND MONEYMARKET RATES (Source: Reuters)
GOVERNMENT BONDS (Source: Reuters)
INTEREST RATE FORECASTS
NIBOR STIBOR EURIBOR USD LIBOR
NORWAY SWEDEN GERMANY US
NORWAY SWEDEN GERMANY US
Gov. Bonds, 10y
2.00
2.20
2.40
2.60
2.80
3.00
14-Oct26-Sep6-Sep
1.50
1.75
2.00
2.25
NOK, ra. SEK JPY and DowJones
76
77
78
14-Oct26-Sep6-Sep
10
11
12
USDJPY ra.DowJones, 1000
USD and gold
1.32
1.34
1.36
1.38
1.40
1.42
14-Oct26-Sep6-Sep
1500
1600
1700
1800
1900
2000
FRA NOK 3m Prior chg TWI Today % Stock ex. Today %DEC 2.90 2.90 0.00 NOK 96.49 0.13- Dow Jones 11,644.5 1.4%
MAR 2.65 2.67 -0.02 SEK 120.31 0.31- Nasdaq 2,667.9 1.8%
JUN 2.60 2.61 -0.01 EUR 108.00 0.03- FTSE100 5,466.4 1.2%
SEP 2.60 2.61 -0.01 USD 76.59 0.03- Eurostoxx50 2,355.5 1.0%
FRA SEK 3m Prior chg GBP 79.10 0.00- Dax 5,967.2 0.9%
DEC 2.31 2.32 0.00 Comm. Today Last Nikkei225 8,879.6 0.0%
MAR 2.05 2.04 0.00 Brent spot 115.3 115.3 Oslo 370.35 2.8%
JUN 1.97 1.95 0.02 Brent 1m 112.6 114.7 Stockholm 436.24 2.2%
SEP 1.95 1.96 -0.01 Spot gold 1678.0 1678.0 Copenhagen 459.43 0.1%
EURUSD ra. Gold EURSEK & OMXS
350370
390
410
430
450
14-Oct26-Sep6-Sep
8.8
9.0
9.2
9.4
OMXS ra. EURSEK
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Morning report
17-Oct-2011
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