Morning report

Rumours drive market developments

26-Sep-2011
Rumours about what that will happen with Greece and what new measures European leaders will come up with is putting its mark on market developments. The yearly IMF meeting did not result in any concrete actions, but the world leaders emphasize that they will act collectively to restore confidence and financial stability, and to support growth. Friday was yet another volatile day in financial markets. Speculations of an upcoming Greek default were again in focus. According to some news paper articles, the Greek Finance Minister was quoted saying that he saw three scenarios to resolve the Greek debt crisis, including one involving a haircut of 50 per cent for bondholders. These rumours were however later denied by Greek government officials. Furthermore the Greek newspaper Ekathimineri reported that there was a strong probability that the latest austerity measures proposed by the Greek Prime Minister, Papandreou, may not pass parliament. A vote on the new emergency property tax has been postponed and the newspaper says that at least five or six members from Papandreou's party (PASOK) are not willing to vote for the new tax cuts. Papandreou's party only has a small majority in the Parliament (154 of 300 seats) and these votes could be crucial. Domestic Greek commentators do however believe the austerity measures will be passed. The rumours are many and the pressure to come up with a solution to remove market uncertainties continues to mount. Many had hoped that this weekend's yearly IMF meeting, where central bankers and financial ministers from the member countries met, would result in new coordinated measures (like during the financial crisis in 2008), but got disappointed. In their communiqu the IMF writes that the global economy has entered a dangerous place, calling for exceptional vigilance, coordination and readiness to take bold action. They also write that the IMF are encouraged by the determination of their euro area colleagues to do what is needed to resolve the euro area crisis and that the IMF stand ready to strongly support this effort. But, as mentioned, the meeting did not result in any concrete measures. There are, however, rumours that an outline for a new, large and ambitious plan for the euro area is taking shape. According to BBC the plan is expected to involve a 50 per cent write down of Greece government debt. Furthermore the plan also envisages an increase in the size of the European Union bailout fund to 2 trillion euro. It is said that European governments hope to have this plan in place in five to six months. Measures of this size may be just what that is needed to calm the nervous financial markets. But, this is still only rumours and it is left to be seen what the European countries actually manages to agree upon. The rumours that European leaders are working on a new and forceful European rescue helped lift market sentiment slightly on Friday. The yield on 10 year US government bonds rose somewhat, after reaching a 60 year low on Thursday. US stock markets went up. But looking at last week in total, the US equity markets fell about six per cent. The Norwegian stock market declined about seven per cent last week. Until new measures to solve the European debt crisis have been launched, markets are likely to remain very nervous and volatile. So far today we have seen that Asian stock markets are down and that the euro is weakening. The slump in the euro seen today seems to be related to the uncertainty around the Euro area debt crisis. Further more worries that the important German business indicator, the IFO-index, which is due to be released later today, may show further declines seem to weigh on the currency. The IFOindex has fallen markedly over the last two months and reached its lowest level since May 2010 in August. Consensus expects the index to decline further this month. (to 106,5 according to Reuters) Such a development will add to signs the biggest Europan economy is deteriorating and may fuel fear on a new recession in the euro area. camilla.viland@dnbnor.no

NOK & 3m NIBOR

8.00 7.80 7.60 7.40 16-Aug 5-Sep 3m ra. 3.20 3.10 3.00 2.90 23-Sep EURNOK

SEK & 3m STIBOR

9.5 9.3 9.1 8.9 8.7 16-Aug 5-Sep 2.65 2.60 2.55 2.50 2.45 23-Sep EURSEK

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

+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) 06:45 France Business Climate 08:00 Italy Retail Sales Todays key economic events (GMT) 08:00 Germany IFO Business Climate 12:30 USA National Activity Index 14:00 USA New homes

As of Sep Jul As of Sep Aug Aug

Unit Index m/m % Unit Index Index Mill.

Prior 105 -0.2 Prior 108.7 -0.06 0.298

Poll 102 Poll 106.5 0.295

Actual 99 -0.1 DnB NOR

26-Sep-2011

Morning report

Oil spot & NOK TWI

130 110 90 70 16-Aug 100 98 96 94 23-Sep $/b

SPOT RATES 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 76.64 1.350 0.874 1.223 7.901 9.368 7.445 5.857 7.648 0.846 9.045 6.946 9.071 1.187 10.732 Last 76.29 1.340 0.867 1.222 7.895 9.333 7.443 5.892 7.725 0.847 9.106 6.966 9.135 1.184 10.770 % -0.5% -0.7% -0.7% -0.1% -0.1% -0.4% 0.0% 0.6% 1.0% 0.1% 0.7% 0.3% 0.7% -0.2% 0.4% In 1 m ...3 m 80 80 1.35 1.35 0.86 0.86 1.20 1.20 8.00 7.80 9.30 9.10 7.45 7.45 5.93 5.78 7.41 7.22 0.86 0.86 9.3 9.1 6.89 6.74 5.51 5.39 1.16 1.17 10.81 10.58 ...6 m ...12 m 80 90 1.30 1.25 0.84 0.82 1.20 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 7.20 5.54 6.48 1.17 1.17 10.71 10.98 FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB USD 0.9658 1.0369 0.9118 18.52 5.5543 1.5454 7.8016 118.21 0.2777 2.5775 0.5297 0.7678 3.3052 1.3072 32.4880 % -1.26% 0.85% 0.63% 1.22% 0.72% -0.09% -0.02% 0.03% 0.09% 0.88% 0.74% -1.35% 1.80% 0.67% 1.11%

5-Sep

NOK TWI ra.

EUR vs GBP & CHF

1.25 1.20 1.15 1.10 1.05 16-Aug 5-Sep GBP r.a 0.89 0.87 0.85 0.83 0.81 23-Sep CHF

Gov. Bonds, 10y

2.25 2.00 1.75 1.50 16-Aug 3.00 2.50 2.00 1.50 23-Sep SEK

5-Sep

NOK, ra.

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

JPY and DowJones

14 12 10 8 16-Aug 5-Sep USDJPY ra. DowJones, 1000 78 77 76 75 23-Sep

10y 10y yield vs bund

SWAP AND MONEYMARKET RATES (Source: Reuters) NIBOR STIBOR EURIBOR USD LIBOR Prior Last Prior Last Prior Last Prior Last 2.89 2.91 2.33 2.33 1.29 1.29 0.23 0.24 3.04 3.11 2.51 2.51 1.49 1.49 0.36 0.36 3.22 3.29 2.53 2.53 1.70 1.70 0.54 0.54 3.30 3.41 2.58 2.58 1.85 1.85 0.69 0.69 2.87 2.90 1.89 1.90 1.52 1.51 0.68 0.65 3.24 3.24 2.15 2.13 1.93 1.88 1.15 1.14 3.46 3.50 2.34 2.32 2.19 2.17 1.58 1.56 3.67 3.69 2.44 2.42 2.47 2.44 2.01 1.97 GOVERNMENT BONDS (Source: Reuters) NORWAY SWEDEN GERMANY US Prior Last Prior Last Prior Last Prior Last 116.56 0.00 118.073 117.44 104.522 104.77 102.65625 102.97 2.26 0.00 1.64 1.70 1.70 1.72 1.83 1.80 0.56 -1.72 -0.06 -0.02 0.13 0.08 INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 3.05 4.25 2.50 3.00 1.50 3.00 3.20 4.50 2.75 3.25 1.50 3.25 3.50 4.50 2.90 3.25 1.50 3.25 3m libor 10y swap 0.35 3.00 0.35 3.25 0.35 3.25

In 3m 6m 12m
1.49 1.44 1.39

USD and gold

2000 1900 1800 1700 1600 1500 16-Aug 5-Sep EURUSD ra.

1.34 23-Sep Gold

EURSEK & OMXS

9.4 9.2 9.0 8.8 16-Aug 5-Sep OMXS ra. 500 450 400 350 23-Sep EURSEK

FRA NOK DEC MAR JUN SEP FRA SEK DEC MAR JUN SEP

3m 2.70 2.40 2.37 2.36 3m 2.01 1.71 1.61 1.60

Prior 2.71 2.40 2.37 2.37 Prior 2.02 1.73 1.63 1.60

chg -0.01 0.00 0.00 -0.01 chg -0.01 -0.02 -0.03 0.01

TWI Today NOK 98.73 SEK 123.16 EUR 105.52 USD 78.70 GBP 78.70 Comm. Today Brent spot 111.5 Brent 1m 101.8 Spot gold 1689.0

% - 0.04 0.60 - 0.71 0.51 Last 111.5 104.0 1689.0

Stock ex. Today Dow Jones 10,771.5 Nasdaq 2,483.2 FTSE100 5,066.8 Eurostoxx50 2,026.0 Dax 5,196.6 Nikkei225 8,374.1 Oslo 342.05 Stockholm 395.99 Copenhagen 440.90

% 0.4% 1.1% 0.5% 1.5% 0.6% : -1.2% -0.3% -0.1%

Morning report
26-Sep-2011
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