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13-Mar-09 DRAGONBULL
February’s US retail sales data, released yesterday, show that since the turn of the year consumption appears to have
stabilized, albeit at a much lower level. The 0.1% m/m drop in sales values compares favorably to the average monthly fall of 3% seen in
Q4. Moreover, the 1.0% rise in January was revised up to 1.8%. Sales in both January and February were supported by the rebound in
gasoline prices – gas sales rose by 3.4% in February. But aside from auto sales, which dropped by 4.3%, sales of discretionary items did
well. Consumers therefore appear willing to spend at the right price. That said, with equity and home prices plunging and unemployment
soaring (initial jobless claims rose by 654k last week up from 639k the week before), a meaningful recovery in consumption still seems
some way off. Nonetheless, these figures provide some hope and support other evidence in suggesting that the fall in GDP in Q1 won’t be
as bad as in Q4.
January’s absolutely horrific German industrial production figures (released yesterday) suggest that the economy’s rate of
contraction is still accelerating. The 7.5% monthly drop was far sharper than had been expected (consensus -3.0%) and left the annual
growth rate at a miserable -19.3% - easily a record low. The sheer size of the fall suggests that there might have been some one-off
factors at work which could unwind in the next month or two. But the business surveys still point to double digit annual falls in production.
German economy may contract by 4 % this year.
The Swiss National Bank’s decision to cut interest rates to 0.25%, provide more liquidity to the banking sector, intervene in currency
markets and purchase bonds from the private sector, pushes it towards the top of the table of central banks acting aggressively to stem
the effects of the global crisis. Such support is certainly needed. GDP fell by a relatively modest 0.3% in Q4, leaving the annual growth
rate at -0.1%. But leading indicators such as the KOF barometer point to far steeper falls to come. Switzerland will suffer from a heavy
reliance on the financial services sector and GDP may fall by around 2.5% this year and 1.5% in 2010
The Fed’s program to revive the market for securities backed by consumer loans may start with just a handful of deals,
according to participants in the preparations, delaying its prospects of easing the credit crunch. Timothy Geithner is counting on the TALF,
a joint program with the Fed, to expand to as much as $1 trillion to unfreeze credit markets. Any sign of failure of the effort may leave
lenders less willing to boost lending for everything from car purchases to farming equipment. The TALF’s $200 billion first phase would
finance AAA rated securities containing loans for autos, education, credit cards and small businesses. Officials eventually plan to finance
other assets, including commercial mortgage-backed securities.
China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the
investment is safe, Wen Jiabao said. “We have lent a huge amount of money to the United States,” Wen said at a press briefing in
Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a
little bit worried. I request the U.S. to maintain its good credit, to honour its promises and to guarantee the safety of China’s assets.” China
should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said.
Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.
ECB President Jean-Claude Trichet’s new weapon to battle the recession is taking him closer than it seems to zero interest
rates. Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to usurp the benchmark
refinancing rate and become the main driver of short- term borrowing costs. At just 0.5 percent, the deposit rate matches the Bank of
England’s key setting and is only a step away from the zero-to-0.25-% range the Fed uses.
In a strong rally, stocks moved higher again on Thursday when traders grew increasingly bullish. Some of the upward pressure on
the Dow came from General Electric (+12.72%), which posted gains despite losing its triple-A credit rating from Standard &Poor's. S&P
lowered its rating on the conglomerate to AA-plus, a cut not as deep as traders were anticipating. The housing sector continued to show
weakness. U.S. foreclosures jumped 30% in February over the year-ago period, according to the latest RealtyTrac data. Meanwhile, the
government-sponsored mortgage backers continue to be hobbled by bad loans and a bearish housing market. Freddie Mac (-6.66%)
reported a loss of $23.9 billion, or $7.37 a share, compared with a year-ago net loss of $2.5 billion, or $3.97 a share.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 46,7 1,2896 97,79 2,89 3,01 2,61 3,08 9,03 5,14 2,78 3,88 4,29 1,69 3,50 4,07 3,97 3,46 US
Perf 1d % 8,15 -0,13 -0,07 3,3 bp -6,3 bp 0,02 0,32 2,92 4,14 1,11 2,37 2,12 0,12 2,02 1,96 1,67 1,83 Europe
ECONOMIC DATA with impact
US Trade balance 12.30 GMT / -$38 bn exp
University of Michigan confidence 12.30 GMT / 55.0 exp
POSITIVE IMPACTS
K+S has postponed indefinitely a decision on whether to make an offer for Compass Minerals International (FTD)
PEUGEOT-FIAT : A plan for the merger of Fiat and Peugeot has been drawn up by Mediobanca and a strategic consultant / Fiat Chief
Executive is assessing whether and when to present the report to the Fiat board (Il Sole 24 Ore)
BASF : As exp, the EC cleared BASF to buy Ciba, but BASF must sell some assets to allay antitrust concerns / BASF has agreed to sell
businesses in the dyestuffs, plastics, paper and skin care sectors
MAN & Rheinmetall are in talks on cooperation in wheeled military vehicles (FT)
ALLIANZ said that a severe recession would not hit operating significantly but cannot rule out more hits due to credit defaults on
corporate bonds
HYPO REAL ESTATE : The German govt plans to meet with J.C. Flowers on Sunday in a fresh attempt to get the investor to give up his
stake in HRX (Sueddeutsche Zeitung) / The government is seeking an amicable solution
LSE has withdrawn from a consortium that is considering a takeover bid for LCH.Clearnet (FT)
SWISS LIFE confirmed holding talks with TALANX German insurer over its 10% stake in MLP
BHP : JPM Morgan issued a study in which it wrote that BHP should spin off its underperforming aluminium & nickel assets…
EUROPEAN FEB. CAR REGISTRATIONS -18.3% : VOW -10.2% / FORD -12.7% / FIAT -17% / TOYOTA -18%
INDEPENDENT NEWS & MEDIA announced the appointement of Gavin O'reilly as a new CEO

BANK OF AMERICA said it was profitable in Jan & Feb & expecting to be profitable in Full Year
GS, ALLIANZ & AXP : Industrial & Commercial Bank of China’s Chairman said the bank is in talks with its strategic investors about a
possible stake sale / GS, ALLIANZ & AXP own a combined 7.2% stake in ICBC
OIL SECTOR in focus ahead of OPEC's meeting this weekend
NEGATIVE IMPACTS
BARCLAYS may have to raise capital by selling businesses such as its asset management arm (WSJ)
GAZ DE FRANCE : The French government could announce a 7-10% cut in gas prices from April 1st (Le Figaro)
INTESA : S&P's revised its credit outlook to negative from stable and affirmed its 'AA-/A-1+' ratings
SANOFI may buy Merck’s stake in the 3rd biggest animal-health company Merial (May be worth as much as €2bn)
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13-Mar-09 DRAGONBULL
EADS : Airbus A380 deliveries to Emirates in 2009 face delays due to late production (Les Echos)
ALCATEL aims for positive net income … in H2 2010 (Les Echos citing CFO)
EUROPEAN FEB. CAR REGISTRATIONS -18.3% : DAIMLER -30% / BMW -29% / PSA -25% / RNO -23% / GM -22%

BERKSHIRE HATHAWAY issuer default trading cut to AA+ by Fitch

RESULTS DIVIDENDS EVENTS
Today Allianz / ENI / Eiffage Carlsberg (DKK 3.50)
Monday Acerinox / Linde / Steria Endesa (€ 5.897) / Roche (CHF 5.00)
Tuesday Cimport cimentos / Mediaset / Adobe / Goldman Sachs
Baloise / BMW / Unicredit / Inditex / Lanxess / FedEx / Oracle / Land Securities (GBp 16.50) / HSBC ($ 0.111111) / Standard Life
Wednesday HP AGM
General Mills / Nike (GBp 8.555556) / Swiss Re (CHF 0.10)
Thursday Hermes / Prudential / Aegis / HeidelbergCement Novo Nordisk (DKK 6.00)
TRADING IDEAS
BUY TOTAL / ENI / BP / REPSOL to play Oil recovery
BUY AEGON / SANTANDER / BBVA / PHILIPS / TELEFONICA / THYSSEN on reversal Head & Shoulder possibility
BUY BNP / ALLIANZ / DTE / VIVENDI / SAP on double bottom possibility still

BUY FTE / SELL DTE // BUY DANONE / SELL NESTLE / BUY METRO / SELL AHOLD // BUY ALLIANZ / SELL AEGON
BROKER METEOROLOGY
FRANCE TELECOM ....................RAISED TO EQUAL WEIGHT FROM OVERWEIGHT .............................................. BY JPMORGAN
SODEXO ......................................RAISED TO BUY FROM NEUTRAL ............................................................ BY BANK OF AMERICA
LOGITECH ...................................RAISED TO NEUTRAL FROM UNDERPERFORM ..................................... BY BANK OF AMERICA
VALLOUREC ...............................RAISED TO BUY FROM NEUTRAL .............................................................. BY GOLDMAN SACHS
LOGITECH ..................................RAISED TO NEUTRAL .................................................................................................. BY MERRILL

ENEL ...........................................CUT TO NEUTRAL FROM BUY ............................................................................................ BY UBS

INTESA ........................................CUT TO NEUTRAL FROM OVERWEIGHT ......................................................................... BY HSBC
UBI................................................CUT TO NEUTRAL FROM OVERWEIGHT ......................................................................... BY HSBC
SYNGENTA .................................CUT TO NEUTRAL FROM OUTPERFORM ........................................................BY CREDIT SUISSE
LAGARDERE ...............................CUT TO SELL FROM HOLD ................................................................................................... BY CITI

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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13-Mar-09 DRAGONBULL
CHART OF THE DAY
German industrial production
since 1992

10

-5

-10

-15

-20
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source : Bloomberg

Industrial production in Germany dropped the most on record in January as Europe’s largest economy is facing its deepest recession
since world war two. Household which are strongly hit by the credit crunch and by the unemployment are sharply reducing their
consumption and the global economic downturn is humping demand for German’s goods abroad . It is important to bear in mind that
the industry sector account for 24% of the GDP in Germany versus 20% in the Euro area, 17% in France and 13% in the United-
States.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
4.30 GMT Japan Industrial production (final) January -10,0%,-30,8% YoY
4.30 GMT Japan Capacity utilization (final) January -11,8% MoM
5.00 GMT Japan Consumer confidence February 27,0
7.00 GMT Germany Wholesale price index February -0,4%,-5,9% YoY
7.00 GMT Euro zone EU 25 new car registrations February -26,9%
7.45 GMT France Current account January - € 1,2 billion
10.00 GMT Euro zone Labour costs 4th quarter +3,6%YoY + 4,0%YoY
10.00 GMT Euro zone Retail sales January +0,2%,-2,3% YoY 0,0%,-1,6%YoY
12.30 GMT United -States Trade balance January -$38 billion -$38,2 billion -$39,9 billion
12.30 GMT United -States University of Michigan confidence (préliminary) March 55,0 56,3

Inde x e s P rice % 5 D a ys Ytd Forex Price % 5 Days Ytd

DJIA 7170,1 8,85% - 18,30% EUR/USD 1,2917 2,07% -7,56%
S&P 500 750,7 10,10% - 16,89% EUR/JPY 126,41 -1,54% -0,33%
Nas daq 1426,1 9,78% - 9,57% USD/JPY 97,86 0,48% 7,30%
CA C 40 2694,3 4,85% - 16,28% Oil Price % 5 Days Ytd
DA X 3956,2 7,06% - 17,75% Brent $/b 44,3 -0,31% 6,37%
Eur os tox x 50 1962,6 5,96% - 19,81% Gold Price % 5 Days Ytd
DJ 600 167,4 3,67% - 15,63% Gold $/oz 924,9 -1,51% 4,89%
FTSE 100 3712,1 5,40% - 16,29% Rates USA Euro Japan
Nikkei 7569,3 - 3,17% - 14,56% Central Banks* 0,25 1,50 0,09
Shanghai Comp 2140,2 - 3,93% 17,54% Overnight 0,20 0,70 0,09
Sens ex ( India) 8632,5 - 0,99% - 10,52% 3 Months 0,19 0,74 0,24
MICEX ( Rus s ia) 728,2 6,21% 17,55% 10 Y ears** 2,89 3,01 1,32
Bov es pa ( Bras il) 39151,9 4,77% 4,27% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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13-Mar-09 DRAGONBULL
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the trade balance for January due at 12.30 GMT. The U.S. trade deficit is expected to
narrow in January. Indeed despite the fact that the global economic downturn is cutting the demand for American’s goods abroad
humping the exportations, the deep recession is reducing sharply the importations explaining the improvement of the trade deficit.

Watch in Euro area the release of the retail sales for January due at 10.00 GMT and expected to slightly increase despite the drop of
inflation./JB

ECONOMY

UNITED-STATES : RETAIL SALES DECLINED LESS THAN EXPECTED IN FEBRUARY

American retail sales in February declined of 0.1%(prior +1.8%) which is much less than expected (forecast -0.5%).If we look to the
breakdown sales of food and beverage dropped of 0.7% (prior +1.9%)and sales of clothing rose of 2.8% (prior+4.9%). This decline of
the retail sales which data is revealed in value is as well due to the fact that prices stop dropping in February. The fact that the drop of
the retail sales was less than expected indicate that the biggest part of the economy may be starting to stabilize. Anyway the drop of
retail sales in February was mainly led by the slump in demand for cars, indeed the retail sales less autos increased of 0.7% in
February.

UNITED-STATES : INITIAL JOBLESS CLAIMS ROSE AND CONTINUING CLAIMS INCREASED TO AN HISTORICAL HIGH
Initial jobless claims reached 654 000 last week (forecast 644 000) as American companies must face the sharp drop of household
consumption ( 70% of the GDP) hit by the credit crunch and of the weak foreign demand due to the global economic downturn.
Meanwhile continuing claims reached their highest level on record at 5 317 000 ( forecast 5 140 000). This sharp rise of
unemployment underline the fact that companies are over laying off as 50 % of the unemployment is due to the worldwide deep
recession and 50 % will not be based on economic fundamentals but on fears. This could be a good news at the time of the recovery
estimated to start this summer.

UNITED-STATES : BUSINESS INVENTORIES DROPPED AGAIN IN JANUARY

Inventories in the U.S. fell for the fifth month in a row in January of 1.1% (forecast -1.0%). This fell of inventories is faster than sells
indicating that companies are making headway in clearing out unwanted stocks. Companies had enough stocks to last 1.43 months at
the current sales rate showing that the drop of inventories is far to be over.

FRANCE : INFLATION IS RISING IN FEBRUARY

After a five month drop in a row consumer price index rose in February. This rise was quite logical after the “correction effect” of the
sales and after the slight increase of energy prices in January-February. After dropping of 7.5% in January prices in the clothes sector
rose of 1.3% in February. After dropping of 19% from August 2008 to January 2009 energy prices increase of 0.5% in February. There
are still two sectors with a specific trend in the present deflation phase : services and food. Indeed despite the actual pessimism prices
in the service sector increased of 0.5% in January, as well as 1.2% on the three last moths and of 2.7% from a year ago. This
showed that it is a mistake to focus on the manufacturing industry which is going through a deep recession but which is only
accounting for 17 % of the GDP. The rise in services accounting for 70% of the GDP underlined that the recovery can still come from
services. Despite the drop of agricultural prices ( -13% YoY) the food prices are not going down but at the opposite rose of 2.2% from
a year ago. The best rise concerned fresh products which despite a drop of 0.2% in February rose of 3.6% in the three last months
and of 3.8% from a year ago. This showed that the transmission of the drop of production prices to retail prices is not systematic . We
cannot take February rise of inflation as a lasting trend, indeed consumer price index starting in March inflation should rise of 0.8%
and of 0.1% from a year ago showing that deflation is really near by.

GERMANY : INDUSTRIAL PRODUCTION SHARPLY DROPPED ON RECORD IN JANUARY

Industrial production in Germany the largest economy of the Euro area dropped on record in January of -7.5% (forecast-3.0%) and of
19.3% from a year ago (forecast -15.5%). Indeed Germany is facing its deepest recession since world war two and household wich
are sharply hit by the credit crunch and by the unemployment are sharply reducing their consumption. In addition the global economic
downturn is humping demand for German’s goods abroad. Manufacturing orders also plunged in January led by the drop of exports
and companies cut production and jobs. It is important to bear in mind that the industry sector account for 24% of the GDP in
Germany versus 20% in the Euro area, 17% in France and 13% in the United-States./JB
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13-Mar-09 DRAGONBULL
VIXindex: impliedvolatility ontheS&P 500 $Libor -3-Month(InterbankRate)
6
85
80 5,5
75
5
70
65 4,5
60
55 4
50
3,5
45
40 3
35
30 2,5
25
20 2
15 1,5
10
5 1
13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009 13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009
Source : Bloomberg Source : Bloomberg

UnitedStates : 10-year Treasury yield 10-year Treasury spreadUSA-Eurozone

5,5 1,2
5,25 1
5
0,8
4,75
0,6
4,5
4,25 0,4
4 0,2
3,75
0
3,5
3,25 -0,2
3 -0,4
2,75
-0,6
2,5
2,25 -0,8

2 -1
13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009 13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009
Source : Bloomberg Source : Bloomberg

Oil : Brent ($/b) Forex: Eurovs Dollar (EUR/USD)

150 1,65
140
1,6
130
1,55
120
110 1,5
100
1,45
90
1,4
80
70 1,35
60
1,3
50
40
1,25

30 1,2
13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009 13/03/2007 13/09/2007 13/03/2008 13/09/2008 13/03/2009
Source : Bloomberg Source : Bloomberg