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29-May-09 SOON SUMMERTIME

Equity markets confirm they are mighty and resilient (the S&P 500, up again yesterday +1.54 %, is now up 35 % since March 9th, and
equity indexes are now rid of a bear market rally) as they are facing major challenges, each of them being regarded as a part of a
recovery scenario:
1) Long term U.S. Treasury rates rise sharply: the 10-year Treasury rate rose to 3.73 % on Wednesday may 27th (before easing to
3.61 % yesterday), but remember that they went as low as 2.05 % at the end of last year. At that time, 10-year European Treasury rate
was roughly 80 bp above U.S. ones. Today the spread is near to zero. The yield curve is steepening sharply. Some economists consider
that this steepening is connected to a provisional huge budget deficit that may reach a record of 15 % of GDP. But the realty is that the
current account deficit is decreasing (fewer than 3 % of GDP) as the trade deficit is shrinking rapidly (that should send rates downward)
and that rates reflect the potential strength of the economy. The upward move seems stronger than the downward pressure that Fed’s
Quantitative Easing should produce. In open market operations, the Fed has announced its intention to purchase up to $1.75 trillion in
longer-term Treasury notes and bonds, agency debt, and agency MBS during this year. This program is intended to stimulate real
economic activity by holding down intermediate- and long-term interest rates by bringing down the term premium on these securities--a
mechanism that is distinct from the traditional channel whereby a shift in the stance of monetary policy affects longer-term yields by
changing the expected path of short-term interest rates. That the Fed is holding a portfolio of long-term assets on its books is not
especially unusual--prior to the onset of the financial crisis, the Fed held about $150 billion of Treasury securities with maturities of more
than five years. The Fed could end up financing its holdings of some low-yielding long-term assets with more expensive short-term
liabilities or, it might have to sell some of these assets at a loss as long-term rates rise. But in gauging the potential cost to taxpayers
associated with future interest rate movements, several considerations are important to keep in mind. First, some of the Treasury and
GSE debt that it is acquiring will run off over the next few years without any need for outright sales, as will some of the MBS as individuals
sell or refinance their homes. Second, the yield curve currently has a steep upward slope. Accordingly, the Fed is now earning an
abnormally high net rate of return by funding its acquisition of long-term assets with almost zero-cost excess reserves--and this relative
yield relationship is likely to last for some time. Third, the Fed’s purchases of long-term securities are boosting economic activity and, in
the process, increasing government tax receipts relative to what they would have been in the absence of such purchases.
2) Oil prices surge: yesterday, WTI was above $65 /bbl (remember $31.4 /bbl on December 22nd 2008!). This move is followed by overall
raw material prices (CRB index up 24 % since its lowest on march 3rd). This is another harbinger of economic recovery. Recently Opec
members indirectly meant that a reasonable target for oil prices would be around $70 /bbl. Yesterday, the Opec’s voice was softer as it
decided to leave quota unchanged (“Although some recent positive economic indicators point towards the possibility of the recession
bottoming out before year-end, the world is nevertheless still faced with weak industrial production, shrinking world trade and high
unemployment: for this reason, the Conference decided to maintain current production levels unchanged for the time being”).
3) The dollar’s recent plunge (1.3995 EUR/USD this morning, vs. a low of 1.2530 on February 18th) will be a booster for U.S. exports
and help reduce again the trade deficit. There are major reasons to this drop: China pledging for another reserve currency ahead of the
G20, China and Brazil trying to avoid the dollar for bilateral trade, Quantitative Easing by the Fed, rise in oil prices…Anyway, rising gold
prices (above $960 /oz this morning) may indicate further decline of the dollar…
“Sell in May and go away” was not the right thing to do! Today, for the last session of the month, markets may be led again by
financial and energy shares
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 65,2 1,3977 96,55 3,61 3,66 1,88 3,11 3,07 0,48 1,32 1,81 0,72 2,01 1,78 1,54 1,20 1,25 US
Perf 1d % 3,48 0,25 0,33 -0,55 bp 3,4 bp 1,47 2,52 1,39 0,31 0,14 0,73 -0,23 1,04 -0,41 0,62 0,11 0,36 Europe
ECONOMIC DATA with impact
US Q1 GDP revision (12h30 gmt) expected –5.5% from previous s-6.1% / minor as old story already, focus Q2 and market rebound
sustainability as well as recovery speed and timing
Chicago PMI (13h45 gmt) expected 42 from previous 40.1 / interesting as fresh May survey
Michigan Index (14h gmt) expected 68 from previous s67.9% / final data, upside possibility / minor as focus now switch from nice
confidence to spending
Swiss, Norway, Denmark and Ireland will be closed on Monday
POSITIVE IMPACTS
SEMICONDUCTORS : Toshiba plans to raise semiconductor production back to levels prior to its current output reduction / Toshiba has
seen its inventories shrink & as overseas chip demand for cellphones and other purposes are showing recovery signs / To be noted:
rd
Chartered Semiconductor (world 3 -largest chipmaker), denied a press report that it received a $1.7bn bid from Abu Dhabi’s fund
PERNOD RICARD completed its €800 m long-dated 5-year bond issue to help pay down loans and extend its debt maturity.
HEIDELBERGCEMENT : The son of A.Merckle & the creditor banks of the empire he inherited have agreed a plan to restructure its debt
MAERSK… : The Baltic Exchange's main sea freight index rose 4.2% yesterday to a near 8-month high helped by China's demand
CREDIT AGR. / GENERALI : The shareholders pact over the governance of their stake at ISP has been suspended (Generali CEO)
CREDIT SUISSE has begun a plan to sell its London property estate and raise up to £500m (FT)
MUNICH RE expects to be able to push for rate rises of around 20% for reinsurance policies that are covering U.S. Atlantic hurricanes
and are up for renewal in July
E.ON : The circle of suitors for E.ON's Thuega unit is growing wider as HEAG Energie is set to join a consortium preparing a bid / Thuega
is understood to be worth up to €4 bn
UK REAL ESTATE : U.K. house prices posted their strongest monthly gain for 19 months in May = Price of a typical house jumped 1.2%
in May (-0.9% exp.) (Nationwide Building Society)
SEVERN TREND : FY revenue £1.64bn (1.55bn exp) / PTP £292m (276m exp) / On leakage, believes it has outperformed against its
OFWAT annual target / FY dividend 67.34p (+2%)
VIVENDI : The dividend payment in shares at €17, ended yesterday evening… / Could help the stock today…
NEGATIVE IMPACTS
BSKY B. bid £160 m for Virgin Media's set of 7 digital television channels, a 60% premium over other bidders (FT)
BAYER and JNJ said the FDA declined to approve their experimental blood thinning pill Xarelto, asking for more information.
SAP : Outgoing co-CEO said a current improvement in the economy was driven not by real demand but by inventory re-stocking / He
reaffirmed expectations of returning to double-digit growth (FAZ)
DANONE launched its €3 bn rights issue = Shareholders can subscribe to 4 new shares for each 17 existing / Rights issue open
from June 1 to June 12 / Subs. price €24.73 per share (31.4% discount to may 28 close) / Said it may make big acquisitions in mid-term
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

29-May-09 SOON SUMMERTIME

ENEL priced its €8-bn rights issue at €2.48 per share (Yest. Close of €4.4275) / It set the options ratio at 13 new shares for every 25
shares already held / The offering will involve the issuance of up to 3.217bn new shares / The capital hike will start on June 1 / Italy's
Economy Ministry (21.87% stake) + Cassa Depositi e Prestiti (10.3% stake) intends to participate in the capital increase
MICHELIN plans to stop production for a further 8 days at its Clermont-Ferrand plant in France in coming months (La Lettre de l’Exp.)
SANTANDER’s CEO said that the economic recovery, when it arrives, will be weak as govts + central banks withdraw their stimulus
efforts / In addition, he forecast a rapid rise in interest rates in the world's developed economies & sees rates of 1% "unsustainable”
SOC GEN issued €1.7bn of pref. shr to a French govt holding / The share have no voting rights &can’t be converted into ordinary stock

DELL : Q1 revenue $12.34bn (12.67bn exp) / EPS $0.24 (0.23 exp) / GM 17.6% / On track to $4bn in annualized cost cuts / Warned that
the painful slump in demand for its personal computers has yet to reach a bottom
RESULTS DIVIDENDS EVENTS
Ackermans & van Haaren (€1.39) / Nexans (€2.00) / Suez
Today Arcandor Alcatel Lucent AGM / Time Warner at Bernstein conf
Env (€0.65)
Dutsche Land : End of short selling ban / Gaming, Restaurant and
Monday Delhaize (€1.48) / Legrand (€0.70) /
Leisure conference at Goldman Sachs / TMT conf at Merrill Lynch
Tuesday Bouygues / Kingfisher / Car sales France Telecom (€0.80) / Grifols (€0.232096) ABB AGM / Hermes AGM / WPP AGM
Cable & Wireless (6.30 GBp) / EADS (€0.20) / Vodafone Electronic Arts analyst meeting / Tenaris AGM / Acciona AGM /
Wednesday Bombardier / (GBp 5,777778) / WPPP (GBp 11.42222) / British Food Bombardier AGM / Peugeot AGM / ASML at Merrill Lynch TMT conf /
(GBp 7,666667) European Gaming Companies conf at Credit Suisse
Vallourec AGM / Acciona AGM / Home Depot analyst meeting /
Thursday Johnson Matthey Hermes (€1.03) /
Power, Gas & Utilities conf at Citigroup
TRADING IDEAS
Opeing down we should be recovering today, watch for any Fed annoucement that should buy Treasuries, and outflow from bonds coming into
equities. Big underweight from fund manager on UK, Europe and Japan equity.
BUY THE DOLLAR to play latest counter move, the rising US rates and the steepeneing of the curve is reflecting recoevry there.
BUY DOLLAR names such as STM / TOTAL / EADS / ALCATEL / VALLOUREC
BUY PHILIPS / VIVENDI / NOKIA / KPN / FTE / DTE / GSZ / EDF / ACCOR looking good
BUY ALLIANZ / MUNICH RE / EON / BAYER / DANONE / SANOFI to play eco recovery

BUY CARREFOUR / SELL METRO // BUY ST GOBAIN / SELL LAFARGE // BUY DAIMLER / SELL PEUGEOT // BUY ENI / SELL REPSOL // BUY
GLAXO / SELL ASTRAZENCA // BUY LINDE / SELL BASF
BROKER METEOROLOGY
SANOFI AVENTIS .................................RAISED TO BUY FROM HOLD ....................................................................... BY CITIGROUP
VEOLIA ENVIRONNEMENT .................RAISED TO NEUTRAL ................................................................................... BY JPMORGAN
SUEZ ENVIRONNEMENT ......................RAISED TO OVERWEIGHT ............................................................................ BY JPMORGAN
MARKS & SPENCER ............................RAISED TO NEUTRAL FROM UNDERWEIGHT ....................................................... BY HSBC
MAN GROUP .........................................ADDED TO MOST PREFERED LIST ................................................................... BY MERRILL
DEUTSCHE BOERSE ...........................ADDED TO MOST PREFERRED LIST ................................................................ BY MERRILL
AHOLD ..................................................RAISED TO OUTPERFORM FROM NEUTRAL ......................................................BY EXANE
STANDARD CHARTERED ...................RAISED TO HOLD FROM SELL ................................................................................. BY RBS

STORA ENSO ........................................CUT TO UNDERPERFORM FROM BUY ............................................................. BY MERRILL

HALFORDS ...........................................CUT TO SELL FROM NEUTRAL ......................................................... BY GOLDMAN SACHS
FIELMANN ............................................CUT TO SELL FROM NEUTRAL ......................................................... BY GOLDMAN SACHS
H&M........................................................ADDED TO CONVICTION SELL LIST ................................................. BY GOLDMAN SACHS
FORTUM ................................................CUT TO UNDERWEIGHT .................................................................. BY MORGAN STANLEY
BRITISH INSURANCE ...........................CUT TO HOLD FROM BUY .......................................................................................... BY CITI

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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29-May-09 SOON SUMMERTIME

CHART OF THE DAY

US Continuing claims and ADP survey
Since 2001

400 8000

200 7000

0 6000

-200 5000

-400 4000

-600 3000

-800 2000
01 02 03 04 05 06 07 08 09

Emploi dans le secteur privé, ADP survey (000's, monthly)

Nombre de chômeurs indemnisés, continuous claims (000's monthly)

Source : Bloomberg

Continuing claims reached 6 788 000 in the United-States a new historical high. This Data is reflecting restrained hiring showing the
difficulty to find a job in the United-States once you have been lay off.

Time Country Indicator Period GE forecasts Consensus Previous

00.30 GMT Japan Jobless rate April 5,0% 4,8%
00.50 GMT Japan Industrial production (preliminary) April 3,3%,-32,5%YoY 1,6%MoM
10.00 GMT Euro zone Consumer price index (estimate) May 0,2 %YoY 0,2%YoY 0,6% YoY
13.30 GMT United-States Gross Domestic Product (annualized) preliminary First quarter - 5% -5,5% -6,1%
13.30 GMT United-States Personal consumption First quarter 2,0% 2,2%
13.30 GMT United-States Personal consumption core First quarter 1,5% 1,5%
14.45 GMT United-States Chicago purchasing managers First quarter 42,0 40,1
15.00 GMT United-States University of Michigan confidence May 68,0 67,9
17.00 GMT France Total jobseekers May 2 518 000 2 2448 000

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

DJIA 8403,8 - 0,17% - 4,25% EUR/USD 1,4011 -0,02% 0,18%
S&P 500 906,8 0,44% 0,40% EUR/JPY 135,18 -1,77% 6,19%
Nas daq 1751,8 1,41% 11,08% USD/JPY 96,49 -1,78% 6,07%
CA C 40 3263,7 1,77% 1,42% Oil Price % 5 Days Ytd
DA X 4932,9 0,66% 2,55% Brent $/b 63,7 7,78% 52,63%
Eur os tox x 50 2453,2 1,38% 0,23% Gold Price % 5 Days Ytd
DJ 600 207,9 0,26% 4,83% Gold $/oz 964,8 0,72% 9,32%
FTSE 100 4387,5 - 1,78% - 1,05% Rates USA Euro Japan
Nikkei 9486,5 2,03% 7,08% Central Banks* 0,25 1,00 0,10
Shanghai Comp 2632,9 - 0,64% 44,60% Overnight 0,15 0,83 0,10
Sens ex ( India) 14545,1 4,07% 50,77% 3 Months 0,14 0,73 0,20
MICEX ( Rus s ia) 1075,0 3,93% 73,52% 10 Y ears** 3,62 3,66 1,50
Bov es pa ( Bras il) 53040,7 5,90% 41,25% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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29-May-09 SOON SUMMERTIME

ECONOMIC DATA PREVIEW
Watch in the United-States the preliminary release of the Gross Domestic Product (annualized) for the first quarter due at 13.30
GMT, expected to be slightly revised from 6.1% to 5% due to the improvement of the trade deficit released in volume and to a
possible revision of the stocks level.

Watch in the Euro area the unemployment rate for April due at 10.00 GMT, expected to continue to increase as exports are still
significantly affected by the global economic downturn and as domestic consumption is not taking over. Watch as well the consumer
price index for May due at 10.00 GMT as well, expected to drop led by the decline of energy prices. The euro area will then be very
close to a deflation situation./JB

ECONOMY
UNITED-STATES : DURABLE GOODS ORDERS ROSE MORE THAN EXPECTED AND NEW HOME SALES SLIGHTLY INCREASED IN APRIL
After dropping of 2.1% in March durable good orders rose more than expected by 1.9% in April (forecast 0.5%). Excluding transportation
durable goods orders rose from -2.7% in March to 0.8% in April. If we look to the breakdown we see an increase of the capital goods of
1.8% (prior -2.6%) which can be consider as and advanced indicator of investment. We see as well a rise of 2.7% in machinery orders
and of 3.8% of fabricated metals. These data are another encouraging sign for the US economy confirming that the bottom has been
reached in the United-States and that the economy is contracting at a slower pace. Meanwhile new home sales rose in April to reach
352 000 (forecast 360 000). For the past five months new home sales remained in a range between 330 000 and 360 000. If we make a
projection of the recent rise of the NAHB index we can forecast that new home sales could reach 500 000 which could reverse the
plunge since last September

EURO ZONE : EURO ZONE ECONOMIC CONFIDENCE REMAINED WEAK BUT INCREASED IN MAY
After reaching a low point at 64.7 in March the Euro zone economic confidence rose of 67.2 in April. As expected Euro zone sentiment
rose again in May to reach 69.3. This index probably the best advanced indicator of the European GDP can be considered as
encouraging for the future even if its remained at a weak level and far from its long term average at 100.2. Sentiment improved in all
major euro zone economy Nevertheless we can say that the rise of the economic confidence index confirmed that the bottom might
have been reached in France and the GDP should shrink at a slower pace at the second quarter.

GERMANY : UNEMPLOYMENT ROSE LESS THAN EXPECTED IN MAY

German’s unemployment rate rose less than expected at 8.2% (forecast 8.4%) The number of people out of work increased by 1000 to
3.46 million which is less than economists forecasted. This said its important to notice that German unemployment is heavily flattered by
the way unemployment is calculated. by a change. Indeed the labour agency mentioned that figures are distorted by appreciatively 20
000 due to a new rule instructing it not to count those undergoing training in a company as considered to be unemployed /JB
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29-May-09 SOON SUMMERTIME

VIX index : implied volatility on the S&P 500 $Libor - 3-Month (Interbank Rate)
6
85
80
5,5
75 5
70
65 4,5
60 4
55
50 3,5
45 3
40
35 2,5
30 2
25
20 1,5
15
1
10
5 0,5
29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009 29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009
Source : Bloomberg Source : Bloomberg

United States : 10-year Treasury yield 10-year Treasury spread USA-Euro zone
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
29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009 29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009
Source : Bloomberg Source : Bloomberg

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

150 1,65
140
1,6
130
1,55
120
110 1,5
100
1,45
90
80
1,4

70 1,35
60
1,3
50
40
1,25

30 1,2
29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009 29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009
Source : Bloomberg Source : Bloomberg