Morning Report

25.06.2012

EU-summit this week

But expectations of progress are contained.

15-May 4-Jun 22-Jun

Euro pessimism led to declines in most stock markets on Friday, and Asian markets are opening in negative territory today. US, German and Norwegian long government bond yields have nevertheless risen. Some of this may be due to a supply effect: $99 billion of US t-bills and bonds will be auctioned this week. There have been modest changes in the major currency crosses. Like on Friday morning EURUSD trades at 1.25, EURGBP at 0.80 and EURNOK slightly above 7.48. Yen has appreciated somewhat against the dollar. The IFO index indicates that Germany has entered a downturn. It fell more than expected in June, by 1.6 points to 105.3. This was the second consecutive month of decline, caused by a fall in the future expectations index, which points to zero growth in GDP (y/y) in Q2. The fall is steepest for the manufacturers. Thursdays unemployment figures will show whether the slowdown has fed into the labor market, which has been very strong lately. Important euro zone releases this week will be sentiment indices on Thursday and flash CPI (June) on Friday. The market mood brightened slightly when ECB eased its collateral requirements on Friday. The central bank now allows financial institutions, which have experienced a number of credit rating downgrades recently, to use a broader range of asset backed securities to gain access to cash. This includes ABSs backed by mortgages, loans to small and medium businesses, car loans, leasing and consumer credit. Haircuts will vary between 16 percent (highly rated securities) to 32 percent (low-rated). In the course of a brief meeting in Rome on Friday state leaders of Germany, France, Italy and Spain agreed on a package for "growth measures" amounting to 130 billion euros, equivalent to about 1 percent of the GDP in the euro zone. This was an important achievement for France's new president Hollande, whose main message in the election campaign was that the crisis should be met with stimuli measures, not just budget cuts. His view is shared by Italy and Spain, while Merkel is much more reluctant to expand government spending in todays climate. In return she will expect that France eventually ratifies EU's new fiscal treaty. Merkel maintains that euro bonds cannot be a reality until national governments have surrender budget powers to Brussels. Hollande on the other hand says that one can not give up sovereignty, if the mindset of solidarity is not strengthened. The discussion will continue in the two-day EU summit starting on Thursday. The market does not expect any substantial decisions to be taken, but rather further steps towards a banking/fiscal union to be outlined with a schedule towards the next summits in October and December. Merkel will also try to gain support for the introduction of a tax on financial transactions, to placate the domestic opposition ahead of the ratification of the ESM and the fiscal treaty. The lower house of the Bundestag will probably ratify the two on Friday. The Greek foreign minister will meet in Brussels to try and negotiate the terms related to the 130 billion bail-out package. He had to step in after Finance Minister Rapanos was admitted to a hospital suffering from nausea before inauguration on Friday. Prime Minister Samaras underwent eye surgery on Saturday, and is therefore unable to attend the summit. Negotiations will be difficult. German Finance Minister Schuble made it clear in an interview with Bild am Sonntag yesterday that he expects the Greek authorities to enact the programme agreed upon quickly and without further delay instead of asking how much others can do for them. The interview was done in conjunction with a poll done by the newspaper, which showed that 78 percent of Germans and 65 percent of the French wants Greece to leave the euro zone. 51 percent of Spaniards and 49 percent of Italians has the same view. There will be several important Norwegian macro releases this week: The labor force survey on Wednesday, registered unemployment on Thursday, and retail sales on Friday. From the US we get consumer confidence indices, orders statistics, housing market indicators (first out is todays new homes sales, which are expected to have risen slightly in May), monthly private spending and income figures, revised Q1 GDP figures and Chicago PMI on Friday. China's official PMI (NBS) is published on Sunday. kjersti.haugland@dnb.no Yesterdays key economic events (GMT) 08:00 Germany IFO index Todays key economic events (GMT) 12:30 US Chicago Fed activity 14:00 US New homes sales As of Jun As of May May Unit Index Unit Index Mill Prior 106.9 Prior 0.1 0.343 Poll 105.9 Poll 0.345 Actual 105.3 DNB

SEK & 3m STIBOR 9.3 9.1 8.9 8.7 15-May 4-Jun

2.20

2.00 22-Jun
E URSEK

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 FX/IR

22 94 89 40 22 01 78 20 22 01 76 50

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
25.06.2012

SPOT RATES AND FORECASTS

96 94 92 90 22-Jun

1.20 1.20 1.20 1.20

EUR vs GBP & CHF 0.82 0.81 0.80 0.79

15-May 4-Jun 22-Jun

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

Prior 80.45 1.257 0.807 1.201 7.496 8.814 7.434 5.963 7.416 0.851 9.305 7.013 8.722 1.178 10.933

Last 80.07 1.250 0.803 1.201 7.492 8.815 7.434 5.995 7.489 0.851 9.332 7.056 8.805 1.177 10.976

% -0.5% -0.6% -0.4% 0.0% 0.0% 0.0% 0.0% 0.5% 1.0% 0.0% 0.3% 0.6% 0.9% -0.1% 0.4%

In 1 m ...3 m 80 84 1.23 1.30 0.79 0.83 1.20 1.20 7.60 7.50 9.10 9.00 7.45 7.45 6.18 5.77 7.72 6.87 0.84 0.83 9.6 9.0 7.40 6.92 5.92 5.82 1.20 1.20 11.52 10.84

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.20 1.30 7.50 7.60 9.00 9.00 7.45 7.45 5.56 5.43 6.54 6.39 0.83 0.84 8.8 8.7 6.67 6.43 5.67 5.46 1.20 1.18 10.59 10.34

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

USD 1.0017 1.0274 0.9613 20.63 5.9475 1.5570 7.7601 126.57 0.2810 2.7620 0.5580 0.7876 3.4200 1.2824 33.2130

% -0.53% 0.28% 0.61% 0.56% 0.60% -0.14% 0.00% 0.34% 0.12% 0.52% 0.54% -0.71% 0.38% 0.34% -0.01%

EURSEK & OMXS 9.3 9.1 8.9 8.7 15-May 4-Jun

500 450 400 350 22-Jun

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

NIBOR Prior 2.00 2.29 2.59 2.78 2.74 3.01 3.25 3.47

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.98 1.91 1.90 0.33 2.30 2.14 2.13 0.56 2.61 2.39 2.40 0.87 2.78 2.52 2.52 1.04 2.72 1.84 1.79 0.97 2.98 2.02 1.97 1.32 3.22 2.19 2.13 1.65 3.45 2.35 2.29 1.97

Last 0.32 0.56 0.87 1.03 0.94 1.30 1.61 1.94

USD LIBOR Prior Last 0.25 0.25 0.47 0.46 0.74 0.73 0.91 0.90 0.64 0.64 1.01 0.99 1.39 1.37 1.80 1.78

Gov. Bonds, 10y 1.75 1.50 1.25 3.00 2.50 2.00

1.50 1.00 15-May 4-Jun 22-Jun

10y 10y yield vs bund

NORWAY Prior Last 117.6 98.25 2.17 2.18 0.60 0.64

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 118.12 118.11 101.546 101.89 100.67188 1.52 1.52 1.57 1.54 1.68 -0.05 -0.02 0.11

Last 100.91 1.66 0.11

13.0 12.5

JPY and DowJones

81 79 77

12.0 15-May

4-Jun

75 22-Jun

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.40 3.50 2.10 2.50 0.65 2.25 2.50 3.75 2.05 2.75 0.65 2.75 2.85 4.25 2.20 3.00 0.65 3.25

US 3m libor 10y 0.50 0.50 0.50

swap 2.25 2.50 3.00

USDJPY ra. DowJ ones, 1000

USD and gold 1670 1620 1570 1.30 1.25

1.20 1520 15-May 4-Jun 22-Jun

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % SEP 2.25 2.25 0.00 NOK 93.70 0.04 DEC 2.25 2.26 -0.01 SEK 117.23 0.13 MAR 2.27 2.27 0.00 EUR 99.81 - 0.50 JUN 2.29 2.30 -0.01 USD 82.49 0.34 FRA SEK 3m Prior chg GBP 83.10 - 0.0 SEP 1.88 1.86 0.02 Comm. Today Last DEC 1.70 1.71 -0.01 Brent spot 89.5 89.5 MAR 1.64 1.64 -0.01 Brent 1m 90.9 91.0 JUN 1.61 1.64 -0.04 Spot gold 0.0 1565.5 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 12,640.8 Nasdaq 2,892.4 FTSE100 5,513.7 Eurostoxx50 2,186.8 Dax 6,263.3 Nikkei225 8,734.6 Oslo 385.54 Stockholm #N/A ND Copenhagen 574.45

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