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1-Apr-09 KING Q2
The high leveraged US and the UK have been good in reacting promptly, which might be the reason why already some
indicators are showing positive signs. Too easy to look for the bad news, precisely reason why most strategists are still believing in a
bear market rally, we attend everyday some interesting and positive news, at least when taking the environment and the indices levels
into account. The recent rise in UK consumer confidence offers tentative hopes of a recovery further ahead. Although we need far more
evidence than this before we can conclude that an end to the recession is in sight, it is a good reason for the market to kick start as, same
as every other recession, the market is taking off 6/9 months before the economic recovery . The composite measure of the GfK/NOP
survey released yesterday rose from -35 to -30 in March, taking it to its highest level since May 2008. Most of the sub-components
showed an improvement, including consumers’ optimism about their own personal finances over the next 12 months. The Ipsos MORI
measure of consumer confidence in the economy has risen even more sharply in the past few months. The Economic Optimism Index
rose from -40 to -29 in March, the highest level since August 2007. The relationship between consumer confidence and consumer
spending is so loose that we would certainly not conclude from it that a consumer recovery is on the way. Nonetheless, when looking at
previous downturns you will find that there were clear turning points in a number of economic variables well before GDP began to rise.
And consumer confidence tended to be the first of these. Again, a recovery has to start somewhere. The rise in consumer confidence
(especially together with the pick-up in mortgage approvals revealed on Monday) is a tentative indication that there might be some light at
the end of the tunnel, better explaining the market rally, which might be far from a bear one ...
In the US the rise in the US Conference Board measure of consumer confidence was shy but welcome. Accordingly, confidence
would need to recover much further to herald a sustained consumer recovery. Nevertheless, at least confidence no longer appears to be
in freefall. Note the University of Michigan measure has also stabilised in recent months. Meanwhile, consumers’ inflation expectations for
12 months ahead remained stable at 5.9%, suggesting that deflation is still not on the radar of most households.
Today marks a new starting Quarter, and with it some friendly hopes. The selling flows from hedge funds should be minor now,
although might be some left until June, as they had to fulfil their obligations in giving the money back along the time, due to the heavy
redemptions they had to face on the last two quarters last year following both Lehmnan and Madoff stories. The Obama team is more
than ever putting all its energy and money in solving the crisis and getting the real economy back on track, which, they agreed, goes with
a healthy financial sector, and a rebounding employment data. The timing is now right to play a recovery with the lagging time from all the
stimuli deployed right after Lehman (and even before) now efficient and reaching the real economy (better Retail Sales, rebounding
mortgage applications, lower mortgage rates, housing data showing stability, banks fine for lending back etc...). April will, by the way, be
the end of the Stress Test from the government working inside banks' balance sheets, with a few of them already thinking of giving the
money back to the government so they can keep on working on their own. Whether they provide the money on their own or not, the latest
rebound makes it easier to find money or investors. And last but not least, fund managers were rather not active since mid March, and
given the poor visibility, most of them are highly invested in the "king cash ", which the increasing positive signs out on a macro front once
in a while is making not that much king anymore ...
No deflation, no 29 crisis, some trillion dollars worldwide stimuli, some zero yields and historically low long ones, some lower food and oil
prices, new actors back to business and old ones disappearance impact no longer weighting, what are we doing here ?
In the Bank of Japan's March tankan, the headline diffusion index showed conditions among large manufacturers plunged to minus 58
in March from minus 24 in the December survey, worse than the minus 55 forecast. Still, some players pointed to the capital spending
figure, forecast down 6.6% for the new fiscal year, not as bad as the 10.95% decline expected. Car makers were higher in Korea with
Hyundai Motor up 6.1% and Kia Motors up 4.8% on hopes for potential expansion of market share in the U.S. during a period of
restructuring for U.S. carmakers.
Will be interesting to see if , same as in Asia, the mood has changed or not on this first day of a quarter (first day of the year in Asia)
with some resisting indices playing some brighter days instead of a gloomy past. The G20 is impacting heavily the volume in Europe, with
some recommendations inside investment banks to be cautious in the coming days due to possible demonstrations
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 48,5 1,3202 98,51 2,68 2,99 1,04 -0,54 6,21 0,54 1,93 0,32 1,09 1,54 0,64 1,31 1,78 1,16 US
Perf 1d % -1,30 -0,37 0,48 1,62 bp -3,2 bp 1,01 0,87 3,80 0,96 2,06 1,01 0,81 1,51 0,73 1,30 1,58 1,37 Europe
ECONOMIC DATA with impact
Mortgage Applications (11h gmt) / the highest the better / minor though as volatile weekly data
ADP Employment Change (12h15 gmt) / will be watched ahead of the important and bad employment report due out on Friday / minor
Construction Spending (14h gmt) expected –1.9% from previous –3.3% / minor
ISM Manufacturing Index (14h gmt) expected 36 from previous 35.8 / interesting as stops falling down / interesting
Pending Home Sales (14h gmt) / expected flat from previous –7.7% / will provide further indications regarding a possible housing
stabilization or rebound / minor
Weekly Crude Inventories (14h30 gmt) / minor
Cleveland Fed President Pianalto on issues in banking (18h gmt)
Auto & Truck Sales (March) expected Total sales 9.2 mn from previous 9.1 / domestic sales 6.5 from 6.4 mn
POSITIVE IMPACTS
VIVENDI’s tax treatment, which allows the company to write off losses in foreign subsidiaries against the profits generated by domestic
units, has been extended to end 2011 by the French finance Ministry
GERMAN UTILITIES : Germany’s Federal Network Agency this year will allow E.ON, RWE, VATTENFALL and Energie BWG to raise
the fees they charge for their ultra-high-voltage power grids (Handelsblatt)
FRENCH CAR MARKET : Car registrations in France would have grown 5% in March thanks to incentives with RNO performing better
but PEUGEOT’s sales would still be down (French radio) / Final figures to be released this morning by the French carmakers association
BANKINTER : Cartival has been authorized by the Bank of Spain to raise its stake in Bankinter to 29.99% from 16% within one year
ING won temporary EU approval for a Dutch govt aid package, which includes a transfer of the risk on 80% of Its Alt-A MBS portfolio
ACCOR raised its stake in French casino company Lucien Barriere to 49%, purchasing the 15% stake held by Colony Capital for €153 m
SUEZ ENVIRONNEMENT said it succeeded in the placement of a €1.8bn bond. / Over subscribed more than 5 times
RIO TINTO expects a shareholder vote at the end of the Q2 or the beginning of the Q3 on a deal for Chinalco to invest $19.5 bn in RIO
FAURECIA said the decline of the auto industry seems to be stabilizing, but the road to recovery will be very slow (Les Echos)
NEGATIVE IMPACTS
LAFARGE launched its planned €1.5 bn capital increase = The subscription price will be €16.65 per share, on the basis of 6 new shares
for 13 existing shares / The subscription period runs from April 2 until April 15 / Largest shareholders, Bruxelles Lambert and NNS
Holding, have each committed to subscribe their pro rata shares of the rights issue, representing approximately €500 m
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1-Apr-09 KING Q2
ABB's order situation remains "difficult" after a 19% drop in Q4 orders / Should H1 orders fall between 15%-20%, ABB would intervene by
redoubling existing measures such as cost cuts (CEO)
BNP : The govt agreed to a 2nd equity stake in BNP worth €5.1 bn in preferred core Tier-1 shares without voting rights / The shares will
be paid a floor rate of 7.65% for 2009, & this will increase annually by 25 bp until 2014 / The issue will help to strengthen its K & will take
its Tier 1 & "equity Tier 1" ratios to respectively 8.4% & 6.5% / Separately, yesterday, a Belgian court ruled that only shareholders who
owned shares before Oct. 14 should be allowed to vote at a meeting in April, to approve or reject a deal to sell some Fortis assets to BNP
RENAULT : Renault Samsung March sales down 44.8%
RESULTS DIVIDENDS EVENTS
Adobe AGM / Volvo AGM / Stora Enso AGM / TeliaSonera
Today US car sales
AGM / FedEx investor meeting
Thursday RIM / Monsanto / Micron Tech / Bombardier Volvo (SEK 2.00) / Telia Sonera (SEK 1.80) / Nordea Bank AGM /
Acerinox ( €0.10) / Nordea Bank ( €0.20) / Svenska Neste Oil AGM / Merck KGaA AGM / TIM AGM / MAN AG
Friday Givaudan sales
Cellulosa AB (SEK 3.50) AGM
Vallourec to discuss dividend / Telecom Italia EGM / HSBC end
Monday
of Rights Issue
Tuesday Lukoil / Alcoa (AMC) / BB&B Skanska (SEK 5.25) / Zurich Fi (CHF 11.00)
TRADING IDEAS
Buy the dollar to play US recovery still
Buy a house to take opportunity of artificially low long term yields and lowering mortgage rates
Buy equity indices, with a strong confirmation whenever the gap on the Eurostoxx is closed and passed (2176/2193 on the cash index)

BUY RENAULT to play Nissan possible market shares gain in the US

BUY BAYER / ROCHE / MUNICH RE / L OREAL / EON / LAFARGE on reversal Head & Shoulder
BUY FTE / PHILIPS / ACCOR / AIR FRANCE on double bottom possibility
BUY BBVA / SANTANDER / BNP / AXA to play gap closure above soon

BUY AT&T / SELL VERIZON // BUY FTE / SELL DTE // BUY RIMM / SELL APPLE // BUY PFIZER / SELL SCHERING // BUY BNP / SELL DBK
BROKER METEOROLOGY
BELGACOM ........................... RAISED TO NEUTRAL FROM SELL ................................................................... BY GOLDMAN SACHS
ENI.......................................... RAISED TO BUY FROM HOLD............................................................................ BY GOLDMAN SACHS
TELECOM ITALIA.................. RAISED TO BUY FROM NEUTRAL..................................................................... BY GOLDMAN SACHS
PORTUGAL TELECOM ......... RAISED TO NEUTRAL FROM SELL ................................................................... BY GOLDMAN SACHS
VODAFONE............................ RAISED TO OVERWEIGHT FROM EQUAL ...................................................... BY MORGAN STANLEY
VODAFONE............................ ADDED TO CONVICTION BUY LIST................................................................... BY GOLDMAN SACHS
DEUTSCHE TELEKOM .........STARTED AT BUY ..............................................................................................................BY SOC GEN
BANCO ESPIRITO SANTO.... RAISED TO BUY FROM NEUTRAL............................................................................................. BY UBS
SOLVAY ................................. RAISED TO BUY FROM HOLD.................................................................................................... BY RBS
BASF ...................................... RATED NEW BUY ........................................................................................................................ BY RBS
MERCK KgaA ........................ STARTED AT BUY ............................................................................................................... BY NOMURA
PENON ................................... RAISED TO NEUTRAL FROM UNDERPERFORM............................................ BY BANC OF AMERICA

BP.........................................CUT TO SELL FROM NEUTRAL ........................................................................... BY GOLDMAN SACHS

TELIASONERA ....................CUT TO SELL FROM NEUTRAL ........................................................................... BY GOLDMAN SACHS
TELEKOM AUSTRIA ..........CUT TO NEUTRAL FROM BUY ............................................................................. BY GOLDMAN SACHS
TELEFONICA .......................ADDED TO CONVICTION SELL LIST.................................................................... BY GOLDMAN SACHS
BT GROUP ...........................CUT TO SELL FROM NEUTRAL ........................................................................... BY GOLDMAN SACHS
KPN ......................................REMOVED TO CONVICTION BUY LIST................................................................ BY GOLDMAN SACHS
ANTOFAGASA.....................CUT TO EQUALWEIGHT FROM OVER............................................................... BY MORGAN STANLEY
BHP ......................................CUT TO UNERWEIGHT FROM EQUAL............................................................... BY MORGAN STANLEY
BANCO SANTANDER .........CUT TO HOLD FROM BUY ..................................................................................... BY DEUTSCHE BANK
SEVERSTAL ........................CUT TO UNDERPERFORM² .......................................................................................BY CREDIT SUISSE
DSM ......................................CUT TO HOLD FROM BUY ............................................................................................................ BY RBS
AKZONOBEL .......................CUT TO HOLD FROM NEUTRAL .................................................................................................. BY RBS
THOMAS COOK...................CUT TO EQUAL WEIGHT FROM OVER.............................................................. BY MORGAN STANLEY

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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1-Apr-09 KING Q2

CHART OF THE DAY

Japan Tankan Survey Business Conditions Large Enterprises Manufacturing
since 1974

60

40

20

-20

-40

-60

-80
74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Source : Bank of Japan

Japan ‘s slide into its worst postwar recession drove manufacturer confidence to a record low at -58 and prompted
executives to signal more spending and job cuts.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
0.50 GMT Japan Tankan large manufacturers 1st quarter -55 -24
01-07 April Japan Official reserve assets March $ 1009,4 billion
8.50 GMT France PMI manufacturing (final) March 36,3 36,3 36,3
8.55 GMT Germany PMI manufacturing (final) March 32,4 32,4 32,4
9.00 GMT Euro area PMI manufacturing (final) March 34,0 34,0 34,0
9.30 GMT United Kingdom PMI manufacturing March 35,0 34,7
10.00 GMT Euro area Unemployment rate February 8,4% 8,3% 8,2%
12.00 GMT United - States MBA Mortgage applications March 27 32,2%
12.30 GMT United - States Challenger Job Cuts March 158,4% YoY
15.00 GMT United - States ISM manufacturing March 37,5 36,0 35,8
15.00 GMT United - States Pending home sales February 0,0% MoM -7,7% MoM
15.00 GMT United - States Construction spending February -1,9% MoM -3,3 % MoM
United - States Total vehicle sales March 9,2 million 9,1 million
United - States Domestic vehicle sales March 6,5 million 6,4 million

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

DJIA 7608,9 - 0,67% - 13,30% EUR/USD 1,3192 -2,84% -5,55%
S&P 500 797,9 - 1,00% - 11,67% EUR/JPY 130,26 1,69% 2,74%
Nas daq 1528,6 0,81% - 3,07% USD/JPY 98,75 -1,20% 8,19%
CA C 40 2807,3 - 2,33% - 12,76% Oil Price % 5 Days Ytd
DA X 4084,8 - 2,45% - 15,08% Brent $/b 48,9 -5,11% 16,45%
Eur os tox x 50 2071,1 - 2,58% - 15,38% Gold Price % 5 Days Ytd
DJ 600 176,5 - 0,90% - 11,04% Gold $/oz 919,4 -1,54% 4,26%
FTSE 100 3926,1 0,46% - 11,46% Rates USA Euro Japan
Nikkei 8288,8 - 3,64% - 6,44% Central Banks* 0,25 1,50 0,90
Shanghai Comp 2401,8 1,49% 31,91% Overnight 0,15 0,90 0,90
Sens ex ( India) 9650,7 2,51% 0,04% 3 Months 0,20 0,68 0,24
MICEX ( Rus s ia) 772,9 - 5,25% 24,76% 10 Y ears** 2,69 2,99 1,34
Bov es pa ( Bras il) 40925,9 - 1,33% 8,99% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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1-Apr-09 KING Q2
ECONOMIC DATA PREVIEW
Watch in the United-States the ISM manufacturing due 15.00 GMT expected to slightly increase due to the drop of the interest rate,
the Obama revival plan and the recent rise of durables good. Nevertheless the ISM manufacturing will remained under the level of 50
revealing that the contraction of the industrial activity is not over.

Watch in the euro area the final release of the PMI manufacturing due at 9.00 GMT expected to remain stable at a low level as
recession is deepening in the euro area, watch as well the unemployment rate due 10.00 GMT expected to increase as the global
economic downturn is forcing companies to cut jobs and as a fear state a mind due to the gloomy economic outlook is increasing lays
off over than necessary./JB

ECONOMY

UNITED-STATES: CONFERENCE BOARD CONSUMER CONFIDENCE STOPPED FALLING BUT REMAINED VERY LOW IN MARCH
Despite the upcoming budgetary plan and the drop of interest rates, the rise of prices add to the rise of unemployment increased the
fears of American consumers and the apprehension about the outlook for the economy. Indeed after dropping to a record low in
February at 25.3 (revised) the consumer confidence (a survey based on representative 5 000 households) remained very low at the
level of 26. If we look to the breakdown the rise in the headline measure was driven by a pick up in the expectations balance from
27.3 to 28.9. If we have to see a positive point to this data we will say that at least confidence no longer appears to fell apart.

GERMANY: UNEMPLOYMENT ROSE MORE THAN FORECAST IN MARCH

German economy is strongly hit by the global economic recession cutting the demand for German goods abroad, humping
exportations which are the main growth asset of the country. Unfortunately domestic demand is not taking over and as a matter of fact
German unemployment rose of 8.1% in March its highest level since January 2008, which is slightly more than economist forecast
(8.0%). The number of people out of work rose a seasonally adjusted 69 000 to 3.4 millions. We can say the roughtly 50% of the
unemployment is due to the contraction of the global activity forcing companies to cut jobs but on the other hand the 50% remaing can
be explained by a fear state of mind due to the gloomy economic data in the euro area. Germany is now facing a vicious circle as the
slowdown of the activity is reducing companies investment contracting the household purchase power and humping the household
demand generating more cut in investments and a rise of unemployment. This situation put more pressure on the European Central
Bank to cut its leading rate next week.

EURO ZONE : INFLATION DROPPED TO LOW RECORD IN MARCH

European inflation dropped of 0.6% from a year ago its lowest level on record (forecast 0.7%). This drop was mainly led by the drop of
food and energy prices ( oil price has been divided by 3 since its peack at $ 147 in July 2008) and by the sharp decline of the activity
humping the demand and forcing companies to adjust their prices. This sharp drop of the European’s consumer price index is
confirming that inflation which should turn negative this summer is no more a threat in the euro area and reveal a deflation situation.
Deflation is much worst than inflation as there is no real economic policy tools to face it. Indeed as a deflation situation revealed
negative prices(YoY) an a demand way below the offer the adjustment is made by a rise of unemployment and of bankruptcies. As
recession is deepening and prices are falling down the European Central Bank must absolutely make a significant rate cut next
week./JB
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1-Apr-09 KING Q2
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
02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009 02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009
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
02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009 02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009
Source : Bloomberg Source : Bloomberg

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

150 1,65
140
1,6
130
120
1,55

110 1,5
100
1,45
90
80
1,4

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

30 1,2
02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009 02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009
Source : Bloomberg Source : Bloomberg