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11-Jun-09 RETAIL
Don’t really know what will be impacting the most, the tube strike in London, or the US Retail Sales data out today. Might be both
with some possible over reaction due to a clear lack of trading activity. Most economists are sceptical about the Retail Sales possible
rebound betting that the government stimulus has not been impacting anymore in May. Admittedly the latest sales figures from most US
retailers last month were not strong, mostly suffering from a base effect with the long eastern weekend belonging to the previous month.
It makes no doubt anymore that confidence is back, but we need to see it switched into higher spending. The suspense will remain
especially now that Home Depot upgraded its guidance and GAP reaffirmed its forecast yesterday.
On one hand the energy prices collapse combined to lower mortgage rates managed to keep the consumer spending steady
during the deep part of the recession, which should remain strong when looking at the brighter confidence data, on the other hand the
higher employment rates is challenging this positive factors. In between, the latest equity market rise is increasing households effects
making the coming Retail sales data a pure bet in term of forecast. Whatever, it will be another indicator for players to try and make an
opinion about the sustainability of the latest rally and if any of the coming economic recovery.
Already after denying the slight economic improvement and non Great Depression, most players are looking at the bear view in
the latest sharp rising 10 year yields, which reached 3.9% on the T notes yesterday, up 0.8% in a month as well as some rebounding oil
prices. Once again, this is just a fair normalization of financial markets which have been artificially supported, and might still be if needed,
by the Fed and other US officials, who managed to make the economy breathe again after its post Lehman 3 months heart attack. Yields
are still on historically low levels or close to it, while oil prices rise should not impact households purchasing power as much as in the past
because of the switch to renewable energies and a new mind developing of a green planet now that Bush has gone (being elected by oil
lobby he could not let them down). The latest equity rally in addition to very low mortgage yields and banks slightly more keen on lending
are much more important bullish supports, not even talking about the huge hedge fund deleverage selling pressure which sent equity
indices in the abyss, which now short fund managers will send on highs
Once more this morning good news came from China’s fixed-asset investment which came in above expectations for the first five
months of the year, while exports and imports fell by a wider margin. Investment in urban factories, real estate and other fixed assets rose
32.9% in the January-May period compared to a year earlier. The result was above expectations for a 31% rise in fixed asset
investments. Infrastructure investment showed the biggest gain, spurred by government's efforts to boost the economy by spending more
on bridges, rail links and other mega-projects. Signs of reviving investment flows in areas beyond infrastructure were encouraging,
analysts said. Investment in real estate was up 6.8% in the first five months of the year, accelerating from a 4.9% rise in the first four
months of the year. "Investment growth is becoming more evident in other categories of FAI, real estate and manufacturing FAI have
begun to show early signs of recovery. China is increasing its dependence on internal spending.
Latest levels are spoiling the trading activity. Although positive in term of business for the coming months, trading has become difficult
as the trend is a creeping up one, while fund managers can not really feel safe to reduce their underweight exposure at a time when now
the equity indices are up for the year. Option quarterly expiry due next week is not providing the usual impact it used to in the past
because of lower positions from option gamma players, and reduced need to cover their delta, playing on strikes which were not expected
to be seen just a few weeks ago.
The latest 2549 seen on the Eurostoxx cash index should gradually be broken, as we are heading into the end of Q2 with the
possible window dressing or the anticipation from decent Q2 earnings and a need to refuel in equity from fundamental fund managers.
Summer will be a welcome rendezvous between bear and bull guys finding hopefully an answer through the data and the H2 forecasts
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 72,1 1,4049 97,82 3,92 3,69 -0,10 0,87 -1,31 -0,43 -0,12 0,30 -0,42 1,50 0,20 -0,35 -0,38 -0,27 US
Perf 1d % 1,75 0,46 0,31 -2,97 bp 5,2 bp -0,71 0,71 -0,60 -0,28 -0,82 0,37 -0,94 1,27 -1,20 -0,29 -0,98 -0,13 Europe
ECONOMIC DATA with impact
US Retail Sales (13h30 UK time) expected +0.5% from previous –0.4% / ex autos +0.2% from previous –0.5% / the focus this week in
the US. Indeed latest Retailers sales report from May were gloomy, while economists expect the increasing confidence to switch into
higher spending instead of higher savings which is a healthy move but not very economically supportive. But Home Depot’s guidance
upgrade yesterday is making anticipation more complicated.
Jobless Claims (13h30 gmt) expected 614k from previous 621k / interesting although weekly and volatile data which minor the impact
Business Inventories (15h gmt) expected –1% from previous –1% / minor as story behind the figure hard to read
POSITIVE IMPACTS
EADS : Airbus denied a press report that it is considering grounding the fleet of almost 1K jets & order airlines to change speed sensor
RIO TINTO offered a share in a planned iron ore alliance with BHP Billiton to Chinalco as a peace offering (Australian Financial Review)
ASTRAZENECA : 3 widely used antipsychotic medications, including Seroquel, appear safe and effective overall in treating children and
teenagers with schizophrenia or bipolar disorder (U.S. advisory panel)
IBERDROLA will soon supply liquefied natural gas to the US market under a deal signed with Chevron (Waterborne Energy consultants)
ITV offered holders of its €500 m fixed rate notes the chance to exchange them for a mix of 30% cash & 70%new €-denominated bonds
HOME RETAIL : Argos and Homebase each enjoyed better than expected sales in the quarter and grew market share = Argos Q1 like-
for-like change sales down 2.8% / Homebase Q1 like-for-like sales +3.8%
BBVA : Mexico's biggest banks bolstered their balance sheets in April (Mexico’s bank regulator) / Bancomer had a capital adequacy ratio
of 14.81% in April, up marginally from March.
STM may reached its sales targets in 6 to 12 months (Le Figaro citing CEO) / STM sees “encouraging” signs in Asia, excluding Japan,
and a “stabilization” in the US & Europe
FORTIS (Minor) : According to Fortis's website, UBS took a 3.66% stake in early April & cut that back to zero by the middle of the month
NEGATIVE IMPACTS
ANHEUSER-BUSCH INBEV’s shareholder BRC is selling 11m shares between €24 1 €24.2, reducing its 23.5% stake (Bloomberg)
SANOFI denied it presented a major US acquisition plan to its board / Les Echos said major shareholders rejected the planned
acquisition, judging it too risky / AMGEN ($51bn capitalization) is cited as the main target / Separately, Sanofi is seen as possible suitor
for Ratiopharm (world's 4th-largest generics supplier) / Total cut its stake to 9.99% from more 10% in May & 11.4% end of 2008 (AMF)
BAE-FINMECCANICA-EADS : Britain is unlikely to buy all of the remaining 48 Eurofighter Typhoon jets it has signed up for (Reuters)
RBS-LLOYDS : The company managing Britain's stakes in both Cos could sell an "exchangeable bond" in the 2 banks (Daily Telegraph)
UKFI could raise £5bn or more through issuing the bonds. / However, a deal was unlikely before the end of the year
STANDARD CHARTERED has hired 4 banks to lead manage the sale of dollar-denominated perpetual hybrid bonds (Reuters)
GIVAUDAN announced a SFR420m rights issue to de-lever balance sheet + strengthen operational flexibility / It confirmed its fin. targets
SOLVAY said generic producer Perrigo Israel Pharma had applied for approval from U.S. authorities to sell a generic version of Solvay's
treatment for testosterone deficiency, Androgel
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11-Jun-09 RETAIL
EDF said that strikes by workers at nuclear installations could cost the company as much as €250m
HSBC’s Mexican unit earned a failing grade in a recent study looking at credit card transparency (Consumer watchdog)
RESULTS DIVIDENDS EVENTS
Theolia AGM / OZ Minerals AGM / Iberdrola Renovables / Mastercard at UBS Secyrutues
Today National Semiconductor Bureau Veritas (€0.72) / Vallourec (€6.00)
Electronic payments summit
Friday Club Med /
Monday Vtech Holdings
Tuesday Tesco / Adobe / Best Buy Thomson AGM
Arkema (€0.60) / Imperial Tobacco (GBp
Wednesday FedEx 23,33333) / Land Securities (GBp 7.00) /
Raiffeisen internat Bk (€0.93) /
TRADING IDEAS
BUY MUNICH RE / ALLIANZ / GENERALI to play insurance sector higher beta
BUY L OREAL / PERNOD / AHOLD / CARREFOUR to play Retail Sales data which might impact the sector
BUY ALSTOM / BOUYGUES / FRANCE TEL / DEUTSCHE TEL on double bottom possibility

BUY ALLIANZ & MUNICH RE / SELL AXA // BUY ROCHE / SELL SANOFI // BUY IBERDROLA / SELL VEOLIA // BUY BOUYGUES / SELL ST
GOBAIN // BUY FTE / SELL DTE // BUY CAP / SELL SAP // BUY DAIMLER / SELL PEUGEOT
BROKER METEOROLOGY
CAPITAL GOODS ..................................... RAISED TO ATTRACTIVE FROM NEUTRAL .................................. BY GOLDMAN SACHS
BANK OF AMERICA-ML........................... RAISED TO OUTPERFORM .................................................................................... BY KBW
SANDVIK................................................... ADDED TO CONVICTION BUY LIST................................................ BY GOLDMAN SACHS
ELECTROLUX........................................... ADDED TO CONVICTION BUY LIST................................................ BY GOLDMAN SACHS
TOMKINS .................................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS
SCHNEIDER.............................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS
GLAXO SMITH KLINE .............................. RAISED TO EQUALWEIGHT FROM UNDER................................. BY MORGAN STANLEY
VALEO ...................................................... RAISED TO BUY FROM NEUTRAL .........................................BY BANK OF AMERICA-ML
INVENSYS................................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS
NEXANS .................................................... RAISED TO NEUTRAL FROM SELL................................................ BY GOLDMAN SACHS
EUROPEAN PHARMA SECTOR .............. RAISED TO ATTRACTIVE FROM IN LINE..................................... BY MORGAN STANLEY

ALSTOM.................................................... CUT TO NEUTRAL FROM BUY.......................................................... BY GOLDMAN SACH

INDITEX..................................................... CUT TO NEUTRAL FROM OVERWEIGHT............................................................. BY HSBC

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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11-Jun-09 RETAIL

CHART OF THE DAY

France Industrial production and GDP % YoY
Since 1990
a/a, % a/a, %
5
9
7 4
5
3 3

1
2
-1
-3 1
-5
0
-7
-9 -1
v -11
-13 -2
-15
T1 09 -3
-17
Avril
-19 -4
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Production industrielle française- G - PIB français- D -

Source : Bloomberg

Despite the encouraging release of the last INSEE survey, France’s industrial production after plunging during four consecutive
quarters dropped by 1.4% in April and by 18.6% from a year ago a new historical high. As showed on the above graph French GDP
should follow the same trend. Nevertheless its important to notice that French manufacturing production accounted only for 17% of the
GDP.

Time Country Indicator Period GE forecasts Consensus Previous

0.50 GMT Japan Gross Domestic Product (final) First quarter -4,0%QoQ -4,0%QoQ
0.50 GMT Japan Gross Domestic Product annualized (final) First quarter -15,0% -15,2%
China Trade balance May $ 14,9 bn $ 13,14 bn
13.30 GMT United-States Advance retail sales May + 0,3% + 0,5% -0,4%
United-States Retail sales less autos May + 0,4% + 0,2% -0,5%
13.30 GMT United-States Initial jobless claims June 6 th 614 000 621 000
13.30 GMT United-States Continuing claims May 30 th 6 780 000 6 735 000
15.00 GMT United-States Business inventories April -1,0% -1,0%

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

DJIA 8739,0 0,87% - 0,43% EUR/USD 1,4036 -1,03% 0,46%
S&P 500 939,2 0,85% 3,98% EUR/JPY 137,46 -0,36% 7,82%
Nas daq 1853,1 1,50% 17,50% USD/JPY 97,94 -1,38% 7,44%
CA C 40 3315,3 0,23% 3,02% Oil Price % 5 Days Ytd
DA X 5051,2 - 0,07% 5,01% Brent $/b 71,0 4,04% 70,14%
Eur os tox x 50 2500,9 0,74% 2,18% Gold Price % 5 Days Ytd
DJ 600 212,8 1,37% 7,27% Gold $/oz 956,7 -2,41% 8,46%
FTSE 100 4436,8 1,22% 0,06% Rates USA Euro Japan
Nikkei 9996,9 2,56% 12,84% Central Banks* 0,25 1,00 0,10
Shanghai Comp 2808,2 1,68% 54,23% Overnight 0,10 0,78 0,10
Sens ex ( India) 15437,0 4,15% 60,01% 3 Months 0,17 0,83 0,20
MICEX ( Rus s ia) 1133,7 2,21% 82,99% 10 Y ears** 3,92 3,69 1,57
Bov es pa ( Bras il) 53410,9 2,54% 42,24% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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11-Jun-09 RETAIL
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the Advance retail sales for May due at 13.30 GMT. Led by the rise of incomes (+0.5% in
April) boosted by the checks distribution, by the rise of consumer confidence and by the drop of job destructions , American advanced
retail sales are expected to rise by 0.5% in May after dropping by 0.4% in April. Less autos U.S. retails sales should rise by 0.4%.
Keep an eye on the weekly release of initial jobless claims and continuing claims due at 13.30 GMT. Initial jobless claims are
expected to decrease confirming the improvement of the labour market, but continuing claims should increase showing that
companies are not ready to hire yet.

Watch in China the release of the Trade balance for May. Chinese trade surplus is expected to increase despite the sharp drop of
exportations as imports should fell sharply.

ECONOMY
UNITED-STATES : FED’S BEIGE BOOK
Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during
the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating.
Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in
economic activity through the end of the year. The Manufacturing activity declined or remained at a low level but the outlook by
manufacturers has improved. Demand for nonfinancial services contracted. Retail spending remained soft as consumers focused on
purchasing less expensive necessities and shied away from buying luxury goods. Consumer spending remained soft as households
focused on purchasing less expensive necessities. New car purchases remained depressed indicating that tight credit conditions were
hampering auto sales. Labor market conditions continued to be weak across the country. The notable exception to the downward
pressure on prices was the widely-reported increase in oil prices.

UNITED-STATES : THE TRADE DEFICIT WIDENED IN APRIL

After dropping for seven consecutive months and after reaching a lowest since November 1999 at $26 billions the U.S. trade deficit
widened in March to reach $28.5 billions. April trade balance revealed another increase of the trade deficit reaching the level of $29.2
billions. Despite the drop of the dollar, the global economic downturn is cutting demand for American’s goods abroad. Consequently
exports fell by 2.3% in April. Looking to the breakdown industry capital goods fell by 3.4%, supplies fell by 5.6 (prior +0.8%), consumer
goods fell by 3.9% (prior -3.2%) and automotive fell by 2.7% (prior +0.5%). Meanwhile imports dropped by 2.3% and the slight rise of the
barrel in April(+3%) increased the U.S. energetic bill, widening the trade deficit. Nevertheless the recent rebound of the ISM new order
balance suggest that exports will drop at a slower pace in the coming months. More generally the U.S. trade deficit seems to have
passed the worst.

GERMANY : CONSUMER PRICE INDEX REMAINED VERY CLOSE TO A DEFLATION SITUATION IN MAY
German’s consumer price index final confirm the previous release (-0.1%,0.0%YoY). If we look to the inflation breakdown from a year
ago we see a drop of 3.7% in transports prices (prior -2.7%), a drop of 1.3% in consumer goods prices (prior -0.6%) and a drop of 2.4%
of non durable goods (prior -1.2%). With a 0.0% YoY inflation in may we have the confirmation that German’s inflation will shortly
reached negative territory confirming the upcoming deflation situation. Deflation is the worst economic scenario as it reflected a sharp
spread between global demand and global offer and adjustments will be made by a rise of unemployment and of bankruptcies
increasing the weak demand and the deflation. This risk is increasing the pressure on the European Central Bank to cut its refi rate as
the strong euro currency is penalizing exports.

FRANCE : INDUSTRIAL PRODUCTION PLUNGED IN APRIL

Despite the encouraging release of the last INSEE survey, France’s industrial production after plunging during four consecutive quarters
dropped 1.4% in April and by 18.6% from a year ago a new historical high. Manufacturing production by itself dropped by 19.5% in April
an historical low as well. Looking at the breakdown all sectors are hit starting by the leaders of French industry : capital goods and
transport goods respectively dropping by 23.1% and by 29.3% from a year ago during the three last months. Even if French industrial
production rebounded in May and June, a fifth quarterly drop seems unavoidable. As showed on the above graph French GDP should
follow the same trend. Nevertheless its important to notice that French manufacturing production accounted only for 17% of the
GDP./JB
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11-Jun-09 RETAIL

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
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
Source : Bloomberg Source : Bloomberg

United States : 10-year Treasury yield 1,2 10-year Treasury spread USA-Euro zone
5,5 1
5,25
0,8
5
4,75 0,6
4,5 0,4
4,25
0,2
4
3,75 0
3,5 -0,2
3,25
-0,4
3
-0,6
2,75
2,5 -0,8
2,25 -1
2 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
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
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
Source : Bloomberg Source : Bloomberg