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20-May-09 FREE
Upside rally well on track, and no one would dear speaking about a bear market rally anymore seen the improvement of the macro
indicators Yes at first this improvement is just reflecting a no longer faller economy, but as time is passing by and equity markets showing
resiliency, macro data keep on getting better, and might sometime soon reflect some growing economy. Technically we should head
toward 2608 which has become now a minimum target, while the vicious circle seem to have switched to a virtuous one.
The fall in the number of US housing starts, from 525k annualized in March to a low of 458k in April, is not as bad as it looks. In
fact, after digging a little deeper, the data look fairly positive. The fall was driven by a huge 46.1% m/m drop in multi-family starts. This
series bounces all over the place. Given the historical volatility, such a big fall will probably be reversed in May. The more stable series of
single-family starts actually rose, by 2.8% from 358k to 368k. Single-family starts have now been above their post-Lehman’s low for two
months. Similarly, single-family building permits also rose, from 360k to 373k. Permits are now above starts, suggesting that the latter
may soon rise further. The recent rise in the NAHB index is also consistent with a decent rebound in starts.
Not only housing activity is close to a floor but the banks are showing strength to such a point that they may well start repaying
TARP’s money to the government. Indeed in the next weeks we should know that Goldman, JP, Amex are giving the money back and get
their freedom back … In the meantime UK Financial Investments could start selling tranches in LOYDS (43% stake) and RBS (70% stake)
within a year. Sovereign funds and others investors would be interested. In the chip sector (very good leading indicator) we were happy to
hear earlier this year Tawain semi conductor saying they were in shortage of stocks, which sooner or later would drive the chip prices on
the upside, we now hear Hinix yesterday telling that prices of computer memory chips would increase in H2 for the same reason, adding
that they were aiming at break even earlier than planned. And last but not least, after Dexia a few weeks ago, now Fortis gets its S&P’s
long term and short term rating upgraded.
The “cash is king” rules will do the rest. It is gradually becoming more clear that the recession will soon be ending, which the equity
rise is helping even more being nowadays a real economic components in term of wealth effect for households so much hurt before the
crisis through higher energy prices and fast rising rates. The next problem will be to let the economy run on its own, with no more TARP
or stimulus boost, and deal with a creeping up inflation due to the heavy amount of money that has been printed, and the rising tax levels
to clean domestic deficits. Again, cross that bridge when you come to it. This question is no longer worth a 2608 target, but more the 3000
area as we are talking about growth this time and increasing earnings, and fund managers will drive us to these targets when rushing to
invest some 2 trillions cash sleeping in monetary funds.
The Nikkei reacted positively to the bad Q1 GDP which shrank a record 4% as consensus was expecting a –4.3%, due to a plunging
global demand which drove its export-driven economy further in the red. That said, Japan is likely to return to positive quarterly growth as
early as Q2. Indeed, depending on the breakdown, a sharper fall in the first quarter could increase the chances of an early recovery. In
particular, a larger drag from destocking in Q1 should mean that the inventory correction is now closer to completion. The focus is already
shifting to the signs of a recovery in the monthly survey data. The further pick-up in the Eco Watchers Survey in April was particularly
impressive, while there has been somewhat of an improvement in consumer confidence too since the beginning of the year. Overall then,
the Q1 GDP data is a severe test of the markets’ recent optimism, but seen as largely old news.
Volumes will be light in the coming days due to a long weekend in most countries, and what an ideal scenario than the light volume
to increase the volatility and break upside key chartists levels. Tomorrow will be closed in Switzerland, Finland, Denmark, Sweden,
Norway, Austria, on Friday Denmark and forget about Monday … as both the US and UK will be closed. Dax cash index broke its latest
highs yesterday, although closing lower. There is a downside gap to be closed left between 2422/2433 on the cash Eurostoxx which might
before breaking the 2488 and head toward 2604. Should be a sideways session today.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 60,6 1,3613 95,64 3,24 3,44 1,68 0,51 -2,71 -0,47 0,74 0,15 0,26 1,79 2,01 -0,17 0,13 -0,34 US
Perf 1d % 2,08 -0,13 0,35 -0,37 bp 8 bp 1,82 0,75 -0,49 -0,42 0,48 0,47 0,60 1,99 0,94 0,29 0,01 0,12 Europe
ECONOMIC DATA with impact
Mortgage Applications (11h gmt) / the higher the better / minor as weekly data and always up lately
Geithner testifying about the TARP (13h30 gmt)
Oil inventories (15h35 gmt)
Minutes of April 29 FOMC meeting (18h gmt) / minor for today
POSITIVE IMPACTS
PORSCHE-VOW said that they will pursue the goal of forging an integrated company, just 2 days after VOW announced that negotiations
had stopped / Chairmen of both companies confirmed that combining both automaker remains the goal of their efforts…
CONTINENTAL : Schaeffler, loaded with debt, could merge with Continental under a plan under study (Handelsblatt)
AIR FRANCE : Q4 sales €5.01bn (5.21bn e) / Current Ebit loss €574m (-648m e) / As exp, no div. / Since 6 to 8 weeks ago, has seen
some stabilisation in passenger & cargo, but no sign of recovery yet / Lifted its FY09-10 target for cost savings to €600m from €400 m
RIO TINTO is talking to institutional shareholders about possibly replacing the convertible bond issue that forms part of the deal with
Chinalco, with a capital raising underwritten by the Chinese company (The Australian)
NOKIA : Research firm Gartner said global sales of handsets fell 9.4% in Q1 yoy but smartphone sales increased 12.7% / IT sees some
signs of a recovery in NorthAm & Chinese / Biggest market share still for Nokia at 36.2% / Number 2 Samsung with 19.1%
LUFTHANSA could walk away from takeover of British Midland unless BMI's majority investor provides it with more capital (FT)
NOVARTIS : Sandoz agreed to buy the specialty generics injectables biz of Austria's Ebewe for €925 m in cash to boost its cancer biz
JULIUS BAER said it will split its private banking and asset management units into 2 separate, pure-play entities
BANCO POPULAR agreed to acquire the nearly 20% of Banco de Andalucia it doesn't already own by offering 6 of its own shares for
every 1 of its unit = "Significant synergies will be produced from cost savings " Popular said
SOC GEN post AGM : “The banking sector would emerge from the crisis with lower risk profile & lower profitability leading to possible
banking sector conso / SG could examine acquisition opportunities in retail + continue with development in central & eastern Europe with
promissing Russia / Reiterates bank has means to absord new writedowns / Q1 will probably be the toughest quarter
SNAM RETE GAS said the rights issue launched to help acquire gas assets from ENI was 99.75% subscribed for €3.462 bn
CLARIANT acquired XL Performance Chemicals to expand its global reach in the defoamer products market / No price details
MERCK reiterated that it sees an adjusted return on sales of as much as 25% for 2009 and added that it may be able to start selling its
Claribin drug at the beginning of 2010 in the US and in Europe at the end of 2010
LLOYDS : Placing & compensatory open… / Reminder = Offer price 38.43p / 0.6213 new shares for evry ordinary share held…
NEGATIVE IMPACTS
METRO : Metro is ready to make "bigger concessions" to Arcandor for a merger between Karstadt and Kaufhof (Die Welt)
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20-May-09 FREE
TELECOM ITALIA : The long-awaited report from an Italian govt’s adviser on TIT’s fixed-line network’s fate, does not address a spinoff of
fixed-line network directly, but says 1 option could be to create an integrated fibre-optic national network, which could mean choosing
between various levels of separating the network from the company… This option would require investment of €10 bn over 5 years
LLOYDS may issue a warning today that it still faces the threat of legal action from the EU over the U.K.’s banking bailout plan (Times)
SPANISH BANKS : Moody's is putting its bank financial strength ratings for 36 Spanish banks under review for a possible downgrade due
to expectations of further deterioration in their asset quality.

HEWLETT PACKARD : Q2 sales $27.35bn (27.4bn e) / EPS $0.86, in line / Sees Q3 EPS $0.88-0.90 (0.89 e) with revenue flat to -2%
(flat exp.) / Said it will lay off another 2% of its workforce as consumers and businesses cut spending on computers, printers and services
BANK OF AMERICA is offering 825 m shares at $10 a share in an attempt to raise $8.25 bn (CNBC)
RESULTS DIVIDENDS EVENTS
Fiat presents its plan for Opel / Telefonica AGM /
Accor (€1.65) / BNP Paribas (€1.00) / Groupo Ferrovial (€1.50) / Rhodia AGM / EDF AGM / Rexel AGM / Deutsche
Home Retail (€ GBp 11.11111) / LVMH (€1.25) / SAP (€0.50) / Boers AGM / Gas Natural AGM / GlaxoSmithKline
Today London Stock Exchange
Statoil Hydro (NOK 4.40) / Swatch (CHF 4.25) / Unilever (GBp AGM / Zurich Financial investor day / Telekom
44.65556) Austria AGM / Intel AGM / Northrop Grumman AGM
/ Altria shareholders meeting
British Land / Cable & Wireless / Gap / Henkel AG (€0.53) / L'Oreal (€1.44) / Portugal Telecom (€0.575) / Telefonica AGM / Gas Natural AGM / Logitech
Thursday
Lenovo Premier Oil Rights issue 4 for 9 investor day / Boeing investor conf / Xerox AGM
Friday Aegis / British Airways / Campbell Soup Arcelor Mittal ($0,1875) / Vinci (€1.10) / Michelin (€1.00) Aegis AGM / China Petroleum AGM / HSBC AGM
Monday Gazprom
Tuesday Aveva Telekom Austria (€0.75)
TRADING IDEAS
Not much to do for today, but look for a an upside escape during the long weekend, while a closure of the downside gap 2422-2433 would make
it more clean and sustainable on a technical view

BUY EON / BAYER / SANOFI / GLAXO / DANONE to play eco recovery + looking good
BUY ST GOBAIN / EDF / FTE / DTE / NESTLE on reversal Head & Shoulder possibility

BUY CARREFOUR / SELL L OREAL // BUY IBERDROLA / SELL VEOLIA // BUY EON / SELL RWE // BUY BOUYGUES / SELL VINCI
BROKER METEOROLOGY
BANK OF IRLAND ..................... RAISED TO BUY FROM HOLD ........................................................................ BY DEUTSCHE BANK
BANK OF IRLAND ..................... RAISED TO NEUTRAL FROM REDUCE......................................................................... BY NOMURA
FIAT ........................................... RAISED TO BUY FROM NEUTRAL ................................................................ BY GOLDMAN SACHS
CONTINENTAL .......................... RAISED TO BUY FROM NEUTRAL ................................................................ BY GOLDMAN SACHS
VOLKSWAGEN ......................... RAISED TO BUY FROM NEUTRAL ................................................................ BY GOLDMAN SACHS
NOKIA ........................................ RAISED TO BUY FROM HOLD ........................................................................ BY DEUTSCHE BANK
MARKS & SPENCER ................. RAISED TO HOLD FROM SELL ...................................................................... BY DEUTSCHE BANK
STATOIL..................................... STARTED AT BUY .......................................................................................................... BY NOMURA
OMV............................................ STARTED AT BUY .......................................................................................................... BY NOMURA
BP............................................... STARTED AT BUY .......................................................................................................... BY NOMURA
ANHEUSSER BUSCHE INBEV . STARTED AT OUTPERFORM....................................................................... BY MORGAN STANLEY
CREDIT AGRICOLE................... RAISED TO HOLD FROM SELL ...............................................................................................BY ING
MEDIOBANCA ........................... RAISED TO OUTPERFORM FROM MARKETPERFORM ..................................................... BY KBW
ASML.......................................... RAISED TO BUY FROM HOLD ............................................................................................... BY RBS

MAN AG .................................... CUT TO SELL FROM NEUTRAL.................................................................... BY GOLDMAN SACHS

SCANIA ...................................... CUT TO SELL FROM NEUTRAL..................................................................... BY GOLDMAN SACHS
ALLIANZ..................................... CUT T O REDUCE FROM NEUTRAL.............................................................................. BY NOMURA
TOTAL ........................................ STARTED AT REDUCE ................................................................................................... BY NOMURA
ROYAL DUTCH SHELL ............. CUT TO UNDERWEIGHT FROM NEUTRAL............................................................. BY JP MORGAN
ROYAL DUTCH SHELL ............. STARTED AT REDUCE ................................................................................................... BY NOMURA
ENI.............................................. STARTED AT REDUCE ................................................................................................... BY NOMURA
HEINEKEN ................................. STARTED AT UNDERWEIGHT ................................................................................. BY JP MORGAN

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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20-May-09 FREE
CHART OF THE DAY
ZEW Germany Expectation of Economic growth
Since 2005

80

60

40

20

-20

-40

-60

-80
2005 2006 2007 2008 2009

Source : ZEW Zentrum fuer Europaeische

After reaching a lowest in July 2008 at 63.9, the ZEW index aiming to predict economic development six month ahead, rose for the
seven consecutive time in May to reach 31.1 (forecast 20.0), its highest level in near than three years.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
0.50 GMT Japan Gross Domestic Product (preliminary) 1st quarter -4,3%QoQ -4,3%QoQ -3,2%QoQ
0.50 GMT Japan Gross Domestic Product annualized (preliminary) 1st quarter -16,1% -16,1% -12,1%
7.00 GMT Germany Producer prices April 0,0%,-1,3%YoY -0,7%,-0,5%YoY
9.00 GMT Italy Industrial orders March -2,5%,-30,3%YoY -1,5%,-32,7%YoY
9.00 GMT Italy Industrial sales March -1,6%MoM -3,1%,-23,9%YoY
9.30 GMT United Kingdom Bank of England Minutes (7th may monetary policy meeting)
10.00 GMT Italy Current account March -3,8 bn
12.00 GMT United-Sates MBA mortgage applications May 15 th
14.30 GMT United-Sates U.S. Treasury's Geithner at Senate hearing on TARP
19.00 GMT United States Fed release Minutes fromApril 28-29 FOMCmeeting

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

DJIA 8474,9 0,25% - 3,44% EUR/USD 1,3597 -0,03% -2,69%
S&P 500 908,1 0,08% 0,54% EUR/JPY 129,92 -0,27% 2,51%
Nas daq 1734,5 1,15% 9,99% USD/JPY 95,56 -0,30% 5,18%
CA C 40 3275,0 2,00% 1,77% Oil Price % 5 Days Ytd
DA X 4959,6 2,17% 3,11% Brent $/b 58,6 2,65% 40,09%
Eur os tox x 50 2459,6 1,99% 0,49% Gold Price % 5 Days Ytd
DJ 600 210,8 2,57% 6,26% Gold $/oz 927,6 0,14% 5,17%
FTSE 100 4482,3 1,48% 1,08% Rates USA Euro Japan
Nikkei 9337,7 - 0,09% 5,40% Central Banks* 0,25 1,00 0,11
Shanghai Comp 2670,3 2,26% 46,66% Overnight 0,15 0,79 0,11
Sens ex ( India) 14335,1 17,63% 48,59% 3 Months 0,18 0,69 0,20
MICEX ( Rus s ia) 1041,8 - 1,43% 68,17% 10 Y ears** 3,24 3,44 1,43
Bov es pa ( Bras il) 51346,6 2,03% 36,74% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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20-May-09 FREE
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the MBA mortgage applications due at 12.00 GMT, expected to rebound after the sharp
drop of the last release.

Watch in Japan the preliminary release of the GDP for the first quarter due at 0.50 GMT expected to sharply drop as the global
economic downturn, the strong yen as well as the deflation are strongly hitting the economy. It will be the fourth consecutive drop of
the Japan’s GDP./JB

ECONOMY
UNITED-STATES :HOUSING STARTS AND BUILDING PERMITS DROPPED TO HISTORICAL LOW IN APRIL
After seven consecutive drop in a row since July 2008 housing starts rose by17% in February to reach 572 000 and building permits
rose by 6% to reach 564 000. Unfortunately this encouraging rebound did not last and housing starts and building permits dropped
respectively to 525 000 and 511 000 in March. As the NAHB rebounded in April as prices are easing an increase of housing starts and
building permits was expected in April. Surprisingly both housing starts and building permits dropped to historical low in April to 458 000
and 494 000 these declines were led by plunge in work on condominiums and apartments buildings. More specifically the 13% decrease
in housing start was led by a 46% decline in multifamily starts as well as the drop of 3% in building permits an advance indicator of
construction. These data are showing us that the real estate market crisis is not over yet. Nevertheless it must be said that the revival
plan did not impact yet the economy and it will more likely boost in the coming the housing market.

GERMANY : THE ZEW ECONOMIC SENTIMENT INDEX ROSE TO A THREE YEAR HIGH IN MAY
After reaching a lowest in July 2008 at 63.9, the ZEW index aiming to predict economic development six month ahead from investors an
analyst expectations, rose for the seven consecutive time in May to reach 31.1 (forecast 20.0), its highest level in near than three years.
This rise is concretely showing us that investors are expecting economic conditions to improve. This sharp increase happened as
European stocks have gained for the past two months on expectations that government and Central Banks actions to fight the economic
recession will succeed. Nevertheless this encouraging data must be putted into perspective as the level of the ZEW remained weak
despite its sharp progression and as the ZEW survey about current conditions slightly fell. Anyway after the historical drop of the
German’s GDP at the first quarter (-3.8%) there are now more and more evidences that economy is stabilizing. We will have a clearer
vision looking at the upcoming PMI surveys later on this week./JB
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20-May-09 FREE

VIX index : implied volatility on the S&P 500 $Libor -3-Month(InterbankRate)

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
21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009 21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009
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
21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009 21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009
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
1,4
80
70 1,35
60
1,3
50
40
1,25

30 1,2
21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009 21/05/2007 21/11/2007 21/05/2008 21/11/2008 21/05/2009
Source : Bloomberg Source : Bloomberg