Morning Report 16.08.2012 NOK & 3m NIBOR 2.10 2.15 2.20 2.25 2.30 15-Aug 26-Jul 6-Jul 7.20 7.30 7.40 7.50 7.60 3 m ra. EURNOK SEK & 3m STIBOR 2.00 2.10 2.20 15-Aug 26-Jul 6-Jul 8.2 8.6 9.0 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 Regional sales (+47) Bergen 56 13 27 20 Bodø 75 52 9910 Fredrikstad 69 39 41 50 Hamar 62 54 14 82 Haugesund 52 72 09 06 Lillehammer 61 24 79 56 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 01 73 80 Ålesund 70 11 69 85 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 Camilla Viland 22 01 77 41 Magne Østnor 22 01 76 57 Kyrre Aamdal 22 01 76 67 Credit Research (+47) Ole Einar Stokstad 22 01 78 37 Mikael L. Gjerding 22 01 77 62 Rolv Kristian Heitmann 22 01 76 77 Thomas Larsen 22 01 77 36 Knut Olav Rønningen 22 01 78 15 Lower 3m NIBOR Norwegian money market rates has slowed in line with lower risk premiums in money markets. Norwegian three-month money market rate (3m NIBOR) fell 6 basis points yesterday to 2.10 percent. A week ago the interest rate was around 2.24 per cent. The decline in 3M NIBOR has pulled near FRA rates down. The relatively low interest rates partly reflects expectations of rate cuts this fall, but also that premiums in the money market have decreased. The latter has been most important lately and is a result of lower risk premiums in international money markets. Lower risk premiums in money markets have been accompanied by lower implied volatility and higher prices in the U.S. stock market. Also long- term U.S. Treasury yields have increased in August, and overall this points to some higher risk appetite. But the rise in government bond yields is modest and the desire to take ris k is probably not much changed. The decline in EUR-USD basis swaps may also be related to that European banks over time have reduced their need for U.S. dollar. Yesterday's figures gave no significant new impetus to the U.S. stock market where the main indices ended virtually unchanged from the previous day. August is vacation month in large parts of Europe and the flow of news from there is currently limited. In the market for U.S. Treasuries yields rose slightly yesterday and the trend has continued in the Asian session. In currency markets the U.S. dollar has strengthened 0.7 percent against the Japanese yen since yesterday morning, and 0.4 percent against the euro. Pound sterling has held its value against the dollar, and thus strengthened against the euro. The Swedish krona has strengthened against the euro, while the Norwegian krone has remained stable despite the a rise in oil prices. Oil prices (Brent) is now just over 116 USD / barrel. The Empire State index for August where the increase in July was followed by a fall in August disappointed. The index fell 13.3 p to -5.85, compared with 6.50 expected and is thus back to levels around the "double dip-fears" in autumn 2010 and autumn 2011. Inventories and deliveries both fell much. The index has limited relevance to the national figures, but is the first release in the monthly cycle. More positive was the industrial production. This rose 0.6 percent in July, against the expected 0.5 percent, according to Reuters. On the other hand, growth in June was revised down 0.3 percentage points. Manufacturing production rose 0.5 percent from June, and the underlying growth slowed from 1.5 percent to 1.0 percent. Capacity utilization, however, rose to its highest level since April 2008. The figures are not strong, but still show sustained improvement. The housing market has gradually improved the home builder's expectations. Yesterday's NAHB index added into this picture with an increase from 35 to 37 in August – the highest level since February 2007. The Consumer Price Index in July remained unchanged from the previous month. It was expected a rise of 0.2 percent and the annual inflation rate fell from 1.7 percent to 1.4 percent. Core inflation (CPI ex. Food / energy) rose 0.1 percent, marginally below expectations, and the annual rate fell one tenth to 2.1 percent. Food, clothing, transportation, and (especially) hotels pulled down overall inflation rate from June to July. Oil prices still had a negative effect on inflation, but this effect seems to disappear in the near future. In the UK, number of registered unemployed fell by 5,900 people in July, compared with an expected increase of 6,000. The Olympic Games may be an explanation to the July figures. LFS unemployment (3m average) fell by 0.1 percentage points to 8.0 percent in June. Employment increased 0.4 percent year / year in June. High unemployment and slack in the economy dampens wage growth. There was also reflected in yesterday's wage figures. Total wages, including bonuses, rose 1.6 percent in June, compared with expected 1.8 percent. Excluding bonuses, wages rose by 1.8 percent in June, versus expected 1.9. Wage growth is well below a normal level and i mplies a clear decline in real wages. In Norway, Statistics Norway released the trade figures for July. These showed a decline in traditional exports from the previous month. Electricity and processed petroleum products contributed to lower growth. Exclusive these products, the export trend seems to remain relativ ely good. [email protected] Yesterday's key economic events (GMT) As of Unit Prior Poll Actual 08:30 UK BoE Minutes 12:30 US CPI, total Jul m/m % 0.0 0.2 0.1 13:15 US Goods production Jul m/m % 0.4 0.4 0.5 14:00 US NAHB housing market Aug index 35 35 37 Today’s key economic events (GMT) As of Unit Prior Poll DNB 08:30 UK Retail trade Jul m/m % 0.1 0.0 12:30 US Housing starts Jul mill 0.760 0.758 12:30 US Initial claims week 32 1000 361 14:00 US Philadelphia Fed Aug Index -12.9 -4.0
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Morning Report
16.08.2012
NOK & 3m NIBOR
2.102.15
2.20
2.252.30
15-Aug26-Jul6-Jul
7.207.30
7.40
7.507.60
3m ra. EURNOK SEK & 3m STIBOR
2.00
2.10
2.20
15-Aug26-Jul6-Jul
8.2
8.6
9.0
3m ra. EURSEK Headquarters +47 030000021 OsloStranden 21
Offices AbroadNew York +1 212 681 3800London +44 207 6211111Shanghai +86 21 6132 2888Singapore +65 6220 6144Stockholm +46 8 4734850
Sales Oslo (+47)Equity 22 94 89 40Fixed Income 22 01 78 20
Regional sales (+47)Bergen 56 13 27 20 Bodø 75 52 9910Fredrikstad 69 39 41 50Hamar 62 54 14 82Haugesund 52 72 09 06Lillehammer 61 24 79 56Kristiansand 38 07 28 62Oslo 22 01 76 50 Stavanger 51 84 04 30Tromsø 77 62 96 80Trondheim 73 58 74 89Tønsberg 33 01 73 80 Ålesund 70 11 69 85
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 03Ole André Kjennerud 22 01 78 24Knut A. Magnussen 22 01 76 63Camilla Viland 22 01 77 41Magne Østnor 22 01 76 57Kyrre Aamdal 22 01 76 67
Credit Research (+47)Ole Einar Stokstad 22 01 78 37Mikael L. Gjerding 22 01 77 62Rolv Kristian Heitmann 22 01 76 77Thomas Larsen 22 01 77 36Knut Olav Rønningen 22 01 78 15
Lower 3m NIBORNorwegian money market rates has slowed in line with lower risk premiums in money markets.
Norwegian three-month money market rate (3m NIBOR) fell 6 basis points yesterday to 2.10 percent. Aweek ago the interest rate was around 2.24 per cent. The decline in 3M NIBOR has pulled near FRArates down. The relatively low interest rates partly reflects expectations of rate cuts this fall, but also thatpremiums in the money market have decreased. The latter has been most important lately and is aresult of lower risk premiums in international money markets. Lower risk premiums in money marketshave been accompanied by lower implied volatility and higher prices in the U.S. stock market. Also long-term U.S. Treasury yields have increased in August, and overall this points to some higher risk appetite.But the rise in government bond yields is modest and the desire to take risk is probably not muchchanged. The decline in EUR-USD basis swaps may also be related to that European banks over timehave reduced their need for U.S. dollar.
Yesterday's figures gave no significant new impetus to the U.S. stock market where the main indicesended virtually unchanged from the previous day. August is vacation month in large parts of Europe and
the flow of news from there is currently limited. In the market for U.S. Treasuries yields rose slightlyyesterday and the trend has continued in the Asian session. In currency markets the U.S. dollar hasstrengthened 0.7 percent against the Japanese yen since yesterday morning, and 0.4 percent againstthe euro. Pound sterling has held its value against the dollar, and thus strengthened against the euro.The Swedish krona has strengthened against the euro, while the Norwegian krone has remainedstable despite the a rise in oil prices. Oil prices (Brent) is now just over 116 USD / barrel.
The Empire State index for August where the increase in July was followed by a fall in Augustdisappointed. The index fell 13.3 p to -5.85, compared with 6.50 expected and is thus back to levelsaround the "double dip-fears" in autumn 2010 and autumn 2011. Inventories and deliveries both fellmuch. The index has limited relevance to the national figures, but is the first release in the monthly cycle.More positive was the industrial production. This rose 0.6 percent in July, against the expected 0.5percent, according to Reuters. On the other hand, growth in June was revised down 0.3 percentagepoints. Manufacturing production rose 0.5 percent from June, and the underlying growth slowed from 1.5
percent to 1.0 percent. Capacity utilization, however, rose to its highest level since April 2008. Thefigures are not strong, but still show sustained improvement. The housing market has gradually improvedthe home builder's expectations. Yesterday's NAHB index added into this picture with an increase from35 to 37 in August – the highest level since February 2007. The Consumer Price Index in July remainedunchanged from the previous month. It was expected a rise of 0.2 percent and the annual inflation ratefell from 1.7 percent to 1.4 percent. Core inflation (CPI ex. Food / energy) rose 0.1 percent, marginallybelow expectations, and the annual rate fell one tenth to 2.1 percent. Food, clothing, transportation, and(especially) hotels pulled down overall inflation rate from June to July. Oil prices still had a negative effecton inflation, but this effect seems to disappear in the near future.
In the UK, number of registered unemployed fell by 5,900 people in July, compared with an expectedincrease of 6,000. The Olympic Games may be an explanation to the July figures. LFS unemployment(3m average) fell by 0.1 percentage points to 8.0 percent in June. Employment increased 0.4 percentyear / year in June. High unemployment and slack in the economy dampens wage growth. There wasalso reflected in yesterday's wage figures. Total wages, including bonuses, rose 1.6 percent in June,
compared with expected 1.8 percent. Excluding bonuses, wages rose by 1.8 percent in June, versusexpected 1.9. Wage growth is well below a normal level and implies a clear decline in real wages.
In Norway, Statistics Norway released the trade figures for July. These showed a decline intraditional exports from the previous month. Electricity and processed petroleum products contributed tolower growth. Exclusive these products, the export trend seems to remain relatively good.
Yesterday's key economic events (GMT) As of Unit Prior Poll Actual08:30 UK BoE Minutes12:30 US CPI, total Jul m/m % 0.0 0.2 0.1
13:15 US Goods production Jul m/m % 0.4 0.4 0.514:00 US NAHB housing market Aug index 35 35 37Today’s key economic events (GMT) As of Unit Prior Poll DNB
08:30 UK Retail trade Jul m/m % 0.1 0.012:30 US Housing starts Jul mill 0.760 0.75812:30 US Initial claims week 32 1000 36114:00 US Philadelphia Fed Aug Index -12.9 -4.0
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Morning Report
16.08.2012
Oil spot & NOK TWI
90
92
94
96
15-Aug26-Jul6-Jul
8595
105115125
NOK TWI ra. $/b EUR vs GBP & CHF
0.76
0.78
0.80
0.82
15-Aug26-Jul6-Jul
1.20
1.20
1.20
1.20
GBP r.a CHF EURSEK & OMXS
350400450
500550
15-Aug26-Jul6-Jul
8.1
8.3
8.5
8.7
OMXS ra. Gov. Bonds, 10y
1.001.502.002.503.00
15-Aug26-Jul6-Jul
1.00
1.20
1.40
1.60
NOK, ra. SEK JPY and DowJones
75
7779
81
15-Aug26-Jul6-Jul
12.0
12.513.0
13.5
USDJPY ra.DowJones, 1000
USD and gold
1.20
1.22
1.24
1.26
15-Aug26-Jul6-Jul
1520
1570
1620
1670
EURUSD ra. Gold
FX Prior Last % In 1 m ...3 m ...6 m ...12 m FX USD %
USDJPY 79.00 79.24 0.3% 80 84 85 85 AUD 1.0486 -0.19%EURUSD 1.229 1.227 -0.2% 1.23 1.30 1.35 1.40 CAD 0.9894 -0.02%
EURGBP 0.784 0.784 0.1% 0.79 0.83 0.85 0.87 CHF 0.9793 0.17%
EURCHF 1.202 1.201 0.0% 1.20 1.20 1.20 1.30 CZK 20.32 0.06%
EURNOK 7.312 7.320 0.1% 7.35 7.50 7.50 7.60 DKK 6.0696 0.21%
EURSEK 8.210 8.230 0.2% 8.40 9.00 9.00 9.00 GBP 1.5654 -0.20%
EURDKK 7.444 7.443 0.0% 7.45 7.45 7.45 7.45 HKD 7.7576 -0.01%
USDNOK 5.949 5.970 0.4% 5.98 5.77 5.56 5.43 ISK 120.36 0.17%
JPYNOK 7.537 7.530 -0.1% 7.47 6.87 6.54 6.39 KWD 0.2829 -0.12%
SEKNOK 0.893 0.890 -0.3% 0.88 0.83 0.83 0.84 LTL 2.8147 0.14%
GBPNOK 9.331 9.341 0.1% 9.3 9.0 8.8 8.7 LVL 0.5680 0.16%
USDSEK 6.687 6.715 0.4% 6.83 6.92 6.67 6.43 NZD 0.8067 -0.09%
JPYSEK 8.467 8.470 0.0% 5.46 5.82 5.67 5.46 PLN 3.3331 0.39%
NOKSEK 1.124 1.125 0.1% 1.14 1.20 1.20 1.18 SGD 1.2523 0.17%
GBPSEK 10.477 10.506 0.3% 10.63 10.84 10.59 10.34 RUB 31.9150 0.11%
SPOT RATES AND FORECASTS
Prior Last Prior Last Prior Last Prior Last
1m 1.84 1.81 1.83 1.83 0.08 0.08 0.24 0.24
3m 2.16 2.10 2.04 2.03 0.21 0.21 0.44 0.43
6m 2.41 2.37 2.29 2.28 0.51 0.51 0.72 0.72
12m 2.54 2.50 2.40 2.39 0.67 0.66 0.88 0.883y 2.39 2.39 1.81 1.79 0.74 0.75 0.60 0.63
5y 2.70 2.71 1.96 1.95 1.13 1.15 1.01 1.03
7y 3.01 3.03 2.15 2.15 1.52 1.54 1.44 1.47
10y 3.30 3.32 2.34 2.34 1.93 1.94 1.92 2.00
Prior Last Prior Last Prior Last Prior Last
10y A No Data 99.05 117.81 117.56 101.836 101.70 98.25 98.13
10y yield 2.02 2.10 1.53 1.55 1.53 1.56 1.82 1.84
vs bund 0.49 0.54 -0.01 -0.01 0.29 0.28
3m nibor 10y swap 3m stibor 10y swap3m euribor 10y swap 3m l ibor 10y swap
In 3m 2.40 3.50 2.10 2.50 0.50 2.25 0.50 2.25
… 6m 2.50 3.75 2.05 2.75 0.50 2.75 0.50 2.50… 12m 2.85 4.25 2.20 3.00 0.50 3.25 0.50 3.00
US
NORWAY SWEDEN GERMANY US
SWAP AND MONEYMARKET RATES
GOVERNMENT BONDS
INTEREST RATE FORECASTS
NIBOR STIBOR EURIBOR USD LIBOR
NORWAY SWEDEN GERMANY
FRA NOK 3m Prior chg TWI Today % Stock ex. Today %
SEP 2.09 2.08 0.01 NOK 91.52 0.10 Dow Jones 13,164.8 -0.1%
DEC 1.95 1.95 0.00 SEK 109.78 0.07 Nasdaq 3,030.9 0.5%
MAR 1.94 1.94 0.00 EUR 97.41 0.02 FTSE100 5,833.0 -0.5%
JUN 1.94 1.93 0.01 USD 82.83 0.17 Eurostoxx50 2,430.4 -0.1%
FRA SEK 3m Prior chg GBP 84.20 0.1- Dax 6,946.8 -0.4%
SEP 1.97 1.97 0.00 Comm. Today Last Nikkei225 9,092.8 0.0%
DEC 1.76 1.77 -0.01 Brent spot 116.3 116.3 Oslo 435.59 0.5%
MAR 1.66 1.65 0.01 Brent 1m 115.9 116.3 Stockholm 505.09 -0.6%
JUN 1.63 1.64 -0.01 Spot gold 0.0 1601.8 Copenhagen 652.14 0.6%
MISCELLANEOUS
Sources to all tables and graphics: Reuters and DNB Markets
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IMPORTANT/DISCLAIMERThis note (the “Note”) must be seen as marketing material and not as an investment recommendation within the meaningof the Norwegian Securities Trading Act of 2007 paragraph 3-10 and the Norwegian Securities Trading Regulation2007/06/29 no. 876. The Note has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bankorganized under the laws of the Kingdom of Norway (the “Bank”), for information purposes only. The Note shall not beused for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as theirdirectors, officers, shareholders, employees or agents (individually, each a “DNB Party”; collectively, “DNB Parties”) do notguarantee the accuracy, completeness, timeliness or availability of the Note. DNB Parties are not responsible for anyerrors or omissions, regardless of the cause, nor for the results obtained from the use of the Note, nor for the security ormaintenance of any data input by the user. The Note is provided on an “as is” basis. DNB PARTIES DISCLAIM ANY ANDALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OFMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWAREERRORS OR DEFECTS, THAT THE NOTE’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE NOTE WILLOPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to anyparty for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs,expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connectionwith any use of the Note, even if advised of the possibility of such damages. Any opinions expressed herein reflect theBank’s judgment at the time the Note was prepared and DNB Parties assume no obligation to update the Note in any formor format. The Note should not be relied on and is not a substitute for the skill, judgment and experience of the user, itsmanagement, employees, advisors and/or clients when making investment and other business decisions. No DNB Party is
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