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5-Jun-09 HI…RE
US stock market overcame a rocky start to trend higher throughout afternoon trading. Stocks lacked direction in the early going as
participants weighed disappointing monthly sales results from retailers against relatively encouraging jobless claims data. Retailers
reported unimpressive comparable store sales for May, which left the group to suffer a 1.2% loss. Retailers had been down as much as
3.0% at their session low. The disappointing sales results came amid challenging macro conditions and tough comparisons. The general
and bear view being that pressure on retailers isn't expected to lighten up in the immediate future, especially given current weakness in
labor markets. The number of initial jobless claims are slowing, though. Initial weekly claims for the week ending May 30 totalled 621,000,
in-line with the consensus estimate. Continuing jobless claims eased back from record highs by coming in at 6.74 million, which is below
what was expected. Working through a half-hearted selling effort in the early going, stocks were able to move higher for the rest of the
session. Gains were strongest in the financial sector, which closed 4.0% higher as bank stocks rallied. Energy (+2.0%) and materials
stocks (+2.2%) were bid higher as participants moved back into the sectors after they slumped in the prior session. Participants were
partly encouraged by a rise in commodity prices, which saw the CRB Commodity Index rebound 2.6% after it slid 2.7% Wednesday.
Big day today, with the US Employment report out at 13h30 UK time. Not that it will bring much new, employment sector remains
weak and will only get better once the economy is on track to a positive growth, but it might unlock the market as well as some
underweight equity fund managers. Indeed whatever the data, if the market keeps on rallying (which we firmly believe), then fundamental
investors will have no other choice than to step in alongside the improving macro indicators. Believe it or not, most of them are so sure
that the current move is short lived, and that the economic improvement will not last, that they even ignore their own indicators which they
used to follow carefully. One example being the “Coppock Indicator” which turned bullish (Barons indicator created in 1962), and some
banks telling you that this indicator although very efficient already sent fake premature signals in the past (may be once since WW2). We
are very surprised at this stage to hear still so many bearish views from asset managers, still betting that equity indices will visit new lows
and happy to remain underweight. Somehow they become an indicator themselves (Merrill Lynch fund survey), and makes us confident
then that some much higher targets will be reached on the equity indices as things are getting better. Not even telling about when a
recovery is granted, or when employment report is improving.
The Employment report on itself is full of possible surprises. On one hand the hiring of government census workers carried over into
May, boosting the overall level of non-farm payrolls again. The other wildcard being employment in the auto sector. Chrysler shut down all
its plants at the start of the month when it entered bankruptcy and GM has closed a number of plants for up to nine weeks. Those sets of
closures will have hit suppliers too.
Next week’s focus being the Retail sales on Thursday, with the Fed beige book on Wednesday, nothing will prevent the market to rise
further more early in the week, driven by flows rather than fundamental news. Indeed, both the important quarterly expiry in two weeks
time requesting some bigger size in term of hedging for the option gamma players when approaching specific strikes, and underweight
fund managers who might reduce their short exposure as time is passing by, will be market supportive. Eurostoxx cash temporary target
2608, before heading higher.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 69,4 1,4194 96,79 3,73 3,64 2,69 2,13 3,51 -1,18 1,54 0,06 1,90 0,95 2,15 1,15 1,32 0,86 US
Perf 1d % 4,90 0,08 -0,22 1,8 bp 6,5 bp 1,74 1,57 2,22 -1,35 0,73 0,70 0,90 0,51 1,19 0,45 0,40 0,25 Europe
ECONOMIC DATA with impact
Employment Report (13.30 UK time) expected 520k job losses from previous 539k / rate 9.2% from previous 8.9% / average hourly
earnings +3.1% from previous 3.2% / important data, although no one really expect the employment sector to be improving so early /
macro indicators are improving although remaining rather weak, and employment is a lagging indicator / anything not “as bad” as before
will be cheered by market players / important, might unlock the market for a while
POSITIVE IMPACTS
BHP-RIO TINTO : Rio Tinto scrapped its $19.5 bn tie-up with Chinalco + instead launched a heavily discounted $15.2 bn rights issue =
The rights-issue shares would be issued in Australia at A$28.29 each and in London at 1,400 pence, on the basis of 21 new shares for
every 40 shares currently held / It also announced an agreement to combine its Australian iron ore mines with BHP / The Rio/BHP
iron ore JV means Chinese & other Asian steel mills have one less major iron ore supplier to deal with, giving Australian miners
domination on iron ore price-setting… / The deal will see BHP pay Rio US$5.8 bn to equalize their stakes in the JV + take BHP's stake
50% from 45% / Value of synergies JV over US$10bn
TELEFONICA would have hired Lazard to manage the sale of its 32.2% stake in Meditel (Morocco's #2 telco) / Could get €400m
ARCANDOR : The federal govt & regional states would be prepared to provide loan guarantees of €450 m (FAZ) / METRO denied press
report which said Metro had offered €100 m for Arcandor's Karstadt and asked for state loan guarantees worth a 3-digit million €.
PPR : CEO of Puma said it was on track to meet savings targets as its cost-cutting programme is progressing well.
CARPHONE WAREHOUSE : FY revenue £1.38bn, in line / PTP £133m (118m exp) / FY dividend +2% to 4.35p / Reiterates guidance
for 2009-10 / To complete demerger by July 2010 at the latest
GSZ - TOTAL : The UAE will likely award a contract for the construction of 2 nuclear reactors in H2 2009 (Total’s senior executive)
BG GROUP said that another well in the pre-salt Santos Basin, offshore Brazil has encountered hydrocarbons
HYPO REAL ESTATE : Fitch upgraded HRX's short-term issuer default rating to 'F1+' from 'F1' and affirmed the Long-term IDR at 'A-'
SWEDBANK : The CEO said the bank was ready to deal with any fallout from the situation in the Baltic
UNICREDITO should return to a policy of paying a cash dividend this year (Fondazione)
GERMAN BANKS : Germany plans to give banks the opportunity to offload entire problematic business operations (Reuters)

TRAVELERS raised its 2009 operating earnings outlook to $4.55-4.95 from $4.50-4.90 (largely reflecting share buybacks)
but outlook remained below analysts expectations… ($5.12) / It said it was benefiting from the troubles of AIG and other
competitors
NEGATIVE IMPACTS
PUBLICIS : S&P placed its 'BBB+' long-term corporate credit and senior unsecured debt ratings on Publicis on CreditWatch with negative
implications following GM filing for Chapter 11 bankruptcy / Publicis is evaluating to €55m its maximum exposure to GM
GAS NAT-FENOSA : ENI has taken an appeal of Spanish anti-trust approval of GAS' takeover of UNF to Spain's High Court (Expansion)
DEUTSCHE BANK’s CEO has yet to see any normalization of the situation in the financial markets. "A lot is being mentioned of green
shoots of a recovery, but until now we have merely seen evidence of a stabilization of the situation at a lower level.
ROCHE-GSK-BAYER : The FDA listed 2 dozen drugs that are in early stage of reviewing for potential safety problems = Among others,
the FDA is checking Orlistat, a weight-loss drug sold by Roche as the prescription product Xenical and by GSK as the OTC drug Alli /
The FDA also is probing pancreatitis with Bayer's contraceptive Yasmin
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5-Jun-09 HI…RE
NOVARTIS : Data from a mid-stage trial showed Novartis' Tasigna achieved a rapid and deep reduction of the abnormal proteins that
cause a life threatening type of leukaemia
VALLOUREC's chief executive said he has very little visibility for 2009 / Forecasts falling sales & profit in coming quarters as clients
reduce inventories / Said that de-stocking may result in demand bottoming out by year-end
SOC GEN : SPE (French state fund) holds 7.2% (from less than 5%) of the capital after SPE subscribed to the Capital Increase (AMF)
BNP : SPE (French state fund) holds 17% of the capital after SPE subscribed to the Capital Increase (AMF)
NATIXIS : Union members at main shareholder Caisses d'Epargne, set to merge with Banque Populaire, threatened to block the merger
RENEWABLE ENERGY said that the weakening of the market has continued… / Provision will be made in Q2
RESULTS DIVIDENDS EVENTS
Today Carephone Wharehouse Lloyds AGM / Wal Mart AGM / Wendel AGM
Cisco and Travelers replace GM and Citi in the Dow Jones Industrial Average Index / Apple expected to
Monday Texas Instruments mid-quarter ADP (€1.38)
reveal new iPhone at Worldwide Developers Conferenc
Tuesday Tesco trading statement Dassault Systemes AGM / Aegon investor conf / Publicis AGM / Mastercard AGM / Valeo AGM
Aegon investor conf / Home Depot investor conf / Antofagasta AGM / Global Transportation conf at
Wednesday Inditex Saint Gobain (€1.00)
Merrill Lynch / SAP at UBS technologies and services conf
Bureau Veritas (€0.72) /
Thursday Theolia
Vallourec (€6.00)
TRADING IDEAS
BUY the dollar to play dollar recovery (double top vs euro)
BUY FRANCE TEL / L OREAL / PERNOD / AHOLD / ENEL / SUEZ ENV / GSZ / PHILIPS / VIVENDI / ACCOR looking good
BUY MUNICH RE / DANONE / GLAXO / NOVARTIS / EON to play eco recovery

BUY CAP / SELL SAP // BUY PHILIPS / SELL SIEMENS // BUY DANONE / SELL UNILEVER // BUY DAIMLER / SELL PEUGEOT
BROKER METEOROLOGY
LAFARGE ...................... RAISED TO BUY FROM NEUTRAL AND ADDED TO CONVICTION BUY LIST ..... BY GOLDMAN SAHCS
GAZPROM NEFT ........... RAISED TO BUY FROM NEUTRAL ............................................................................ BY GOLDMAN SACHS
DIAGEO.......................... RAISED TO BUY FROM ENUTRAL ............................................................................ BY GOLDMAN SACHS
ITALEMENTI ................. RAISED TO NEUTRAL FROM SELL .......................................................................... BY GOLDMAN SACHS
NOVONOZYMES ........... RAISED TO NEUTRAL FROM SELL .......................................................................... BY GOLDMAN SACHS
PERNOD......................... RAISED TO NEUTRAL FROM SELL .......................................................................... BY GOLDMAN SAHCS
DEUTSCHE BANK ........ RAISED TO HOLD FROM SELL ...........................................................................................................BY ING
CENTRICA .................... RAISED TO OVERWEIGHT FROM NEUTRAL ................................................................................. BY HSBC
GDF SUEZ ..................... RAISED TO OVERWEIGHT FROM UNDERWEIGHT ....................................................................... BY HSBC
STATOILHYDRO ........... RAISED TO BUY FROM NEUTRAL ........................................................................... BY GOLDMAN SACHS
SYNGENTA ................... RAISED TO BUY FROM NEUTRAL ............................................................................................ BY MERRILL
HENKEL ........................ RAISED TO NEUTRAL FROM SELL .......................................................................... BY GOLDMAN SACHS

BEIERSDORF ................ CUT TO NEUTRAL FROM BUY .................................................................................. BY GOLDMAN SACHS

ENI ................................. CUT TO NEUTRAL FROM BUY ................................................................................. BY GOLDMAN SAHCS
GALP ............................. CUT TO NEUTRAL FROM BUY .................................................................................. BY GOLDMAN SACHS
AMG ............................... CUT TO UNDERWEIGHT ........................................................................................................ BY BARCLAYS
FORTIS .......................... CUT TO SELL FROM HOLD ................................................................................................... BY CITIGROUP
FORTUM ........................ CUT TO NEUTRAL FROM OVERWEIGHT ....................................................................................... BY HSBC
NESTLE.......................... CUT TO NEUTRAL FROM CONVICTION BUY .......................................................... BY GOLDMAN SACHS
ST GOBAIN ................... CUT TO BUY FROM CONVICTION BUY .................................................................... BY GOLDMAN SACHS
ACCIONA ...................... RATED NEW EQUAL WEIGHT ............................................................................................... BY BARCLAYS
ABENGOA ..................... RATED NEW EQUAL WEIGHT................................................................................................ BY BARCLAYS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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5-Jun-09 HI…RE
CHART OF THE DAY
Euro zone consumer price index and European Central Bank refi rate
since 2000
a/a, %
4,5 5,0

4,0 4,5

3,5 4,0

3,0 3,5

2,5 3,0

2,0 2,5

1,5 2,0

1,0 1,5

0,5 1,0
Mai
0,0 0,5
00 01 02 03 04 05 06 07 08 09

Prix à la consommation - G - Taux refi de la BCE - D -

Source : Bloomberg
Despite an historical drop of the Euro area GDP at the first quarter 2009 (-2.5% and -4.6% YoY), despite the sharp appreciation of the
euro currency and despite the upcoming deflation situation the European Central Bank left unchanged its refi rate in June at 1.0%.

Time Country Indicator Period GE forecasts Consensus Previous

0.50 GMT Japan Official Reserve Assets May $ 1011,5 bn
9.30 GMT United Kingdom Production price index Ouput May 0,4%,-0,4% YoY 0,6%,+1,2% YoY
United Kingdom Production price index Ouput core May 0,3%,+1,2% YoY 0,4%,+2,4% YoY
13.30 GMT United-States Employment report May
Unemployment rate May 9% 9,2% 8,9%
Change in nonfarm payrolls May - 500 000 - 520 000 - 539 000
Change in manufacturing payrolls May - 150 000 - 149 000
Average hourly eanings May 0,2% MoM 0,1%,+3,1% YoY 0,1%,+3,2% YoY
Average weekly hours May 33,2 33,2 33,2
20.00 GMT United-States Consumer credit April -$ 6,0 bn - $ 11,1 bn

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

DJIA 8750,2 4,21% - 0,30% EUR/USD 1,4186 0,20% 1,53%
S&P 500 942,5 3,97% 4,34% EUR/JPY 137,19 -1,65% 7,66%
Nas daq 1850,0 5,62% 17,31% USD/JPY 96,71 -1,43% 6,29%
CA C 40 3312,0 1,82% 2,92% Oil Price % 5 Days Ytd
DA X 5064,8 2,67% 5,29% Brent $/b 68,5 5,65% 64,39%
Eur os tox x 50 2487,1 1,50% 1,61% Gold Price % 5 Days Ytd
DJ 600 209,5 0,93% 5,60% Gold $/oz 977,3 -0,12% 10,88%
FTSE 100 4386,9 0,38% - 1,07% Rates USA Euro Japan
Nikkei 9742,4 2,30% 9,96% Central Banks* 0,25 1,00 0,11
Shanghai Comp 2778,5 7,44% 52,60% Overnight 0,15 0,50 0,11
Sens ex ( India) 15122,8 5,05% 56,76% 3 Months 0,14 0,80 0,20
MICEX ( Rus s ia) 1120,5 4,23% 80,86% 10 Y ears** 3,73 3,64 1,51
Bov es pa ( Bras il) 53463,9 0,80% 42,38% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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5-Jun-09 HI…RE

ECONOMIC DATA PREVIEW

Watch in the United-States the Employment Report due at 13.30 GMT. Change in nonfarm payrolls are expected to decrease but
will remained at a high level around 500 000 and unemployment rate should reached its highest level since 1983. Meanwhile average
hourly earnings are expected to increase which will boost the retail sales released next week./JB

ECONOMY
UNITED-STATES : INITIAL JOBLESS CLAIMS DECLINED AND CONTINUING CLAIMS STOP RISING
Initial jobless claims dropped for the third consecutive week from 625 000 to 621 000 and for the fourth time in five months. Even if the
level of initial jobless claims remained high its seems that the labour market is slowly improving following the recent positive economic
indicators as the consumer confidence of the Conference Board, the durable goods orders and the ISM services and manufacturing.
th
Meanwhile after rising constantly since the beginning of the year and reaching an historical high at 6 750 000 May 15 continuing claims
stop rising to reach 6 735 000 last week. This data remained high but is encouraging, nevertheless its important to wait the release of
the employment report today to have a global picture of the labour market in May.

EURO ZONE : THE EUROPEAN CENTRAL BANK REFI RATE REMAINED UNCHANGED IN JUNE
After cutting its refi rate of only 0.25% in April despite the expectation of the economist consensus which was forecasting a drop of 50bp
the European Central Bank which was again answering to an extraordinary situation by an ordinary action cuts its leading rate of only 25
bp in May bringing its refi rate to 1.0%. Today one more time the ECB did not take a position in accordance to the gravity of the
situation. Indeed despite an historical drop of the Euro area GDP at the first quarter 2009 (-2.5% and -4.6% YoY), despite the sharp and
dangerous appreciation of the euro currency and despite the upcoming deflation situation the European Central Bank left unchanged its
refi rate in June at 1.0%. Even if the ECB cut its refi rate of 25 bp next month its important to notice that all monetary policy decision is
taking between six to nine months to impact the economy which mean that the waste of time is very important. Unfortunately today’s
status quo on the refi rate will make the recession lasting longer at the opposite of the united-States of the United Kingdom which took
the appropriate action by bringing their leading rates between 0% and 0.5%.

EURO ZONE : RETAIL SALES RISE FOR THE FIRST TIME IN 7 MONTHS IN JUNE
European retail sales increased from -0.1% in March to 0.2% in April. This first increase in seven months was mainly led by the rise in
consumer spending on food and drinks(+1.1%). Even if the monthly figures are volatile and frequently revised this can be seen as
another sign that the worst of the financial crisis might have passed. Nevertheless retails sales are still falling from a year ago underlying
that the consumer sector remained weak and fragile. Indeed even if the drop of prices (0.0% YoY in May) will boost the household
purchase power the deterioration of the labour market as unemployment is rising is showing us that household will continue to suffer in
the coming months.
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5-Jun-09 HI…RE

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
05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009 05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009
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
05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009 05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009
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
1,4
80
70 1,35
60
1,3
50
40
1,25

30 1,2
05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009 05/06/2007 05/12/2007 05/06/2008 05/12/2008 05/06/2009
Source : Bloomberg Source : Bloomberg