Morning Report

12.12.2012

More stimulus from the Fed

Today's main event is the monetary policy meeting in Fed. There are indications that the central bank will make further stimulus measures to boost the economy.
1.90 1.80 1.70

7.40 7.30 7.20

21Nov

11Dec
EURNOK

Markets seem to be characterized by a somewhat cautious approach ahead of today's monetary policy meeting in the United States. U.S. equity markets rose yesterday, partly due to positive signals about fiscal cliff. President Obama has presented a new offer to Republican negotiator Boehner, where the demand for higher tax revenues is reduced somewhat. Stock markets in Europe also rose yesterday and the Asian have risen overnight. In currency markets, the euro appreciated against the dollar after the German ZEW index surprised positively. U.S. and German long-term rates rose marginally yesterday, while the ten-year government bond rates in Italy and in Spain corrected downwards by 11 and 8 basis points after the relatively sharp rise Monday. The fear of Berlusconi disappeared relatively quickly. Tonight the Fed's monetary policy meeting will conclude with the press release and a press conference. The central bank will also issues new forecasts for economic activity and new interest rate expectations. Based on discussions at the last meeting, it seems likely that the Fed will announce an increase in its purchases of government bonds today. At that meeting, several representatives said that it would be appropriate to increase purchases of securities next year after MEP (Maturity Extension Program), also called "Operation Twist" is now finished. Most likely the Fed will begin buying longterm government bonds for a fixed amount per month, probably of the same order as they are already buying of mortgage bonds, ie 40 billion dollars. As for mortgage bonds, the Fed will limit the total amount of purchases. The justification for such an extension of QE3 will be that the labor market remains weak, with high unemployment and low employment growth. Actual inflation is low and falling, even if inflation expectations edged up after the announcement of QE3 in September. Although this is the view of the majority in FOMC, there are also members who are strongly opposed to more QE. Hence, Fed may choose a continuation of the MEP, by selling government bonds with maturities from 3 to 6 years, and buying bonds with longer maturities. Most analysts seem to expect that the Fed chooses to increase holdings of government bonds. Furthermore, we believe much of the statement will be the same as at the previous meeting. However, it seems obvious that the interest rate expectations of FOMC members will be revised in the direction of later rate hikes. None of yesterday's figures from the U.S. indicated a reduced need for more stimuli. American exports and imports fell sharply in October, respectively. 3.6% and 2.1%. The trade was hit by Hurricane Sandy that swept across the east coast of the country and closed the port of New Jersey for several days. The trade deficit increased from 41.6 billion in September to 42.2 billion in October. A somewhat larger deficit was expected. The deficit was lower than the average for the third quarter, which means that the contribution to growth from foreign trade may turn out to be positive in the fourth quarter. The negative effects of Sandy are also of a temporary nature, and trade is likely to pick up again in November. The NFIB sentiment Indicator for U.S. small businesses fell sharply in November. The benchmark index fell from 93.1 in October to 87.5 in November - the lowest in three years. The decrease of index of the economic outlook fell from +2 to -35, which was a bigger fall than in any month in 2008/09. The reason for the increased pessimism (small business has been pessimists long) is probably related to the uncertainty surrounding the "fiscal cliff" and the consequences of Obama's new health care law. In Europe, the German ZEW surprised index positive in December. The index rose from -15.7 in November to 6.9 in December. This was much better than expected (-12.0) and the best reading since May. The increase was probably due to the improvement in the financial markets. Today, industrial production for the euro zone s due. Despite the weak performance of the major economies, it is expected that production will increase by 0.2% for the euro zone in October. From the UK new figures for labor market is published this morning. It is, according to Reuters expected that the claimant count rate will continue to increase by 7,000 in November, while the LFS unemployment rate is expected unchanged at 7.8% in October. Wage growth is expected unchanged at 1.9%. knut.magnussen@dnb.no

SEK & 3m STIBOR

8.6 8.5 8.4

1.45 1.40 1.35

11Dec

Headquarters 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

+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 62 96 80 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

Yesterdays key economic events (GMT) 09:00 Germany ZEW 11:30 USA NFIB 12:30 USA Foreign trade Todays key economic events (GMT) 10:30 UK Registrert ledighet 11:00 MU Vareproduksjon 18:30 USA Feds rentebeslutning

As of Dec Nov Oct As of nov okt n/a

Unit index index Bill. Unit 1000 m/m % %

Prior -15.7 93.1 -41.6 Prior 10.1 -2.3 0.25

Poll -13.5 -42.0 Poll 7.0 0.2 0.25

Actual 6.9 87.5 -42.2 DNB

0.25

Morning Report
12.12.2012

SPOT RATES AND FORECASTS

94 92 90 11-Dec
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.20 1.19 01Nov

0.82 0.81 0.80 0.79 0.78 21Nov 11Dec

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

Prior 82.52 1.301 0.805 1.208 7.342 8.661 7.460 5.672 6.846 0.850 9.135 6.648 8.055 1.181 10.761

Last 82.89 1.300 0.807 1.212 7.346 8.621 7.459 5.649 6.819 0.852 9.107 6.630 8.000 1.175 10.686

% 0.4% 0.0% 0.2% 0.3% 0.1% -0.5% 0.0% -0.4% -0.4% 0.3% -0.3% -0.3% -0.7% -0.5% -0.7%

In 1 m ...3 m 82 80 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.60 8.55 7.45 7.45 5.75 6.04 7.01 7.55 0.85 0.85 9.1 9.1 6.77 7.13 5.55 5.70 1.18 1.18 10.75 10.76

...6 m ...12 m 78 80 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 7.75 7.40 0.85 0.86 9.1 9.1 7.08 6.88 5.53 5.50 1.17 1.16 10.70 10.60

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

USD % 1.0539 0.09% 0.9862 0.00% 0.9322 -0.04% 19.43 0.07% 5.7375 0.00% 1.6110 -0.03% 7.7500 -0.01% 127.11 ###### 0.2818 -0.21% 2.6556 -0.01% 0.5357 -0.02% 0.8408 0.15% 3.1435 -0.02% 1.2218 0.05% 30.7480 0.12%

EURSEK & OMXS

500 21-Nov
450 11-Dec
EURSEK

OMXS ra.

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

NIBOR Prior 1.83 1.88 2.08 2.21 2.17 2.44 2.74 3.08

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.82 1.41 1.40 0.05 1.87 1.41 1.40 0.12 2.05 1.49 1.49 0.22 2.19 1.61 1.60 0.33 2.19 1.30 1.31 0.44 2.47 1.50 1.52 0.78 2.76 1.75 1.76 1.16

Last 0.05 0.12 0.21 0.32 0.46 0.80 1.17

USD LIBOR Prior 0.21 0.31 0.52 0.70 0.43 0.77 1.19

Last 0.21 0.31 0.52 0.69 0.45 0.77 1.19

Gov. Bonds, 10y 1.60 1.50 1.40 1.30 01Nov 21Nov 11Dec
SEK NOK, ra.

3.10 The time series server does 1.60have enough resources to complete the re 2.03 not 1.61 1.71 1.71 GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 117.88 117.94 101.62 101.43 1.46 0.14 1.46 0.11 1.32 1.34

2.40 2.20 2.00 1.80

10y 10y yield vs bund

NORWAY Prior Last 98.91 98.50 2.12 0.79 2.16 0.82

US Prior 99.71875 1.66 0.33

Last 99.63 1.67 0.33

JPY and Dow Jones 13.5 84 82 13.0 80 12.5 78 12.0 76 012111Nov Nov Dec

1800 1750 1700 1650

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y sw ap 3m stibor 10y sw ap 3m euribor 10y sw ap 3m libor 10y In 3m 1.90 3.25 1.30 2.25 0.30 1.75 0.35 6m 1.90 3.25 1.30 2.25 0.25 1.75 0.35 12m 2.15 3.50 1.30 2.50 0.25 2.00 0.35 USDJPY ra. DowJones, 1000 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today DEC 1.90 1.89 0.01 NOK 91.86 - 0.03 Dow Jones 13,248.4 USD and gold MAR 1.89 1.89 0.00 SEK 114.63 - 0.12 Nasdaq 3,022.3 1.35 JUN 1.86 1.87 -0.01 EUR 102.57 0.02 S&P 500 1,427.8 SEP 1.86 1.85 0.01 USD 80.10 0.06 Eurostoxx50 2,624.0 1.30 FRA SEK 3m Prior chg GBP 0.00 ###### Dax 7,589.8 1.25 The time series server does not have enough resources to complete the request for: SEK3F1= DEC 1.40 #VALUE! Comm. Today Last Nikkei225 9,581.5 012111MAR 1.23 1.22 0.01 Brent spot 108.6 Invalid field(s). Oslo 444.98 Nov Nov Dec JUN 1.16 1.15 0.01 Brent 1m 108.5 108.0 Stockholm 527.62 EURUSD ra. Gold SEP 1.14 1.13 0.01 Spot gold 0.0 1710.0 Copenhagen 656.55 Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25

Morning Report
12.12.2012
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