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23-Mar-09 WATCHMAN
Wall Street is likely to remain focused on Washington in the coming week , with President Obama scheduled to speak on the budget
and his economic recovery plan in a prime-time news conference Tuesday night . Earlier in the day Treasury Secretary Geithner and Fed
Chairman Bernanke will testify before the House Financial Services Committee regarding AIG (AIG). In addition, an update on the
troubled auto industry is expected. Members of President Obama's auto task force recently told Michigan lawmakers they are likely to
make a "significant" statement on the direction the automakers need to go to remain viable. While the statement is not expected to be the
final word on the fate of the automakers, various media reports indicate that the auto task force is hinting that something "very
illuminative" is expected. General Motors (GM) and privately-held Chrysler face a March 31 deadline to submit updated restructuring
plans. Similarly, it is believed Treasury Secretary Geithner will be providing more specific details on the Public-Private Investment Fund in
the coming week (the FT said it was due out last Thursday already, should be anytime, maybe tonight)
The financial sector will so remain the main driver this week again, and should be friendly. Indeed, last Sunday through an
interview Bernanke said the Fed was ready to print money, and banks clean balance sheet was key to the success of an economic
recovery. Which means the price of the bad loans to be bought to the banks should be a nice one, and tax payers won't have to suffer
from it. The FOMC showed it still has a number of tricks up its sleeve to help stimulate the flow of credit and resuscitate economic activity.
The key macro data include Existing Home Sales today, Durable Goods Orders on Wednesday and the February Personal Income &
Spending report on Friday. The final reading for Q4 GDP will also be released, but given that we are just a couple of weeks away from the
close of the first quarter, the news is unlikely to have any market impact. The earnings calendar is light, but includes big names Walgreen
(WAG), Best Buy (BBY) and Accenture (ACN).
A Wall Street Journal article gave some info on Saturday. The Treasury's hope is that introducing private investors will help create
market prices. Earlier attempts to have the government set the prices foundered because too high a price would have hurt taxpayers and
too low a price would have hurt banks. Private investors, by contrast, could set a market price because they are unlikely to overpay and
banks are unlikely to undersell. To target troubled securities, such as mortgage-backed securities, the government will create several
investment funds. Treasury will act as a co-investor, in most cases contributing $1 for every $1 contributed by the private sector and
sharing in the first-loss position. To target troubled loans, the government will create a Disposition Finance Program with the FDIC. In that
case, the government will be a co-investor, but could also agree in some cases to contribute 80% of the financing, with the government
putting up $4 for every $1 in private financing. As part of that program, the FDIC would provide guarantees against losses on a pool of
loans that a bank wants to sell. The program could guarantee as much as $500 billion in loan investments. To beef up the amount of
government funding, the Treasury is relying on the Fed and the FDIC to provide backing for these programs. For example, under the
newly launched TALF, the Fed provides inexpensive and low-risk financing for investors to buy loans backed by consumer credit.
Whether these programs will work as anticipated depends in part on how Wall Street investors react to the AIG furore this week.
Congress is moving to clamp down on anyone receiving financial aid by severely taxing bonus payments. More broadly, investors have
become leery about signing on to government programs for fear Congress will abruptly change the rules.
A major bottom has been made and the market is just taking a breath below important key chartists levels bringing doubts to
everyone and suspense intense . Indeed on a macro view, it's been 2 years the US economy is hit by a heavy crisis, 6 months since the
Lehman collapse and the worldwide economies stalled, and both the Treasury and Fed big and reactive efforts are at last reaching the
real economy now (stabilization of economic indicators such as ISMs and housing data, mortgage rates dropping heavily, resiliency of
Retail Sales, no deflation through PPI and CPIs gradually erasing the parallel with the Great Depression), while at the same time the Fed
is increasing its actions with somehow an unlimited budget to succeed. It will have been a tough crisis, very harmful, but behind us now,
which hopefully and probably employment data will start showing in the next few months. The focus is no longer whether the crisis has
been solved, but rather the double side effect of the measures taken, and the speed of the recovery. Adding a friendly factor, which is that
hedge funds redemptions impact on the equity indices are soon over, with most of the money to be given back to investors now at hand,
thanks to tremendous sales on indices which we could attend through monthly outflows (75 bn in January just for hedge funds). As to the
so expected huge deflation, the only sharp prices drop we attend are rather consumer supportive, being mostly focused on energy and
food prices . Prechter timing, our Elliottist guru might have been the right one once more, once again whenever there is a trend Elliott
chartist theory proves to be very efficient, and i believe we just had a trend ...
One should not pay to much attention about the volatile finish from the US on Friday due to an heavy option expiry, Geithner
comments to the Wall Street Journal tonight should be market supportive today (more details of the bad loans purchase) as well as
tomorrow's testimonies from Bernanke and Geithner again tomorrow about AIG. Down on opening we should recover all day long. Some
left over from option expiries might keep impacting a few names for the first tow trading hours.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 52,8 1,3661 96,24 2,66 2,97 -2,42 -3,78 4,11 0,06 -1,85 -1,82 -3,13 -0,73 -3,49 -1,98 -1,77 -1,65 US
Perf 1d % 3,33 0,58 -0,30 2,69 bp -7,1 bp -0,66 -0,14 4,11 1,10 0,07 0,41 -1,40 1,35 -1,30 -0,04 -0,07 0,40 Europe
ECONOMIC DATA with impact
Existing Home sales (15h gmt) expected 4.45 mn from previous 4.49 / interesting, looking for a housing bottom
Treasury Secretary Geithner gives keynote speech at The Wall Street Journal Future of Finance Initiative (22h UK time) / important as
might provide details regarding the prices of the bad loans purchase to banks
POSITIVE IMPACTS
DAIMLER will cede a 9.1% stake to an Abu Dhabi investment firm / The deal, worth €1.95 bn, will set Aabar Investments PJSC as the
largest single stakeholder in Daimler, after the Kuwait, with a stake of about 7.6%
ALSTOM plans to combine its Alstom Power and Alstom Systems divisions (German press)
CENTRICA will meet executives of Venture Production today to discuss a takeover of the company / On Wed., Centrica, spent £240m on
a 22% stake / VP’s executives are exp. to ask for a better price than the £1.1 bn implied by the price paid by Centrica last week
BARCLAYS : Hellman & Friedman, a U.K. private investment firm, has bid £3.5bn for iShares (the Times)
HYPO REAL ESTATE : German states may delay a law that would pave the way for the nationalization of the Co (Der Spiegel)
EDF : The Champsaur commission would be recommanding the end of the temporary electricity tariffs for industrial customers (the
TARTAM) / The commission should return its report to the French Govt Apr. 3rd / Not sur the Frech Govt will follow its recommandation…
ERICSSON will sell its TEMS network planning & optimising unit to Swiss Ascom for SFR190m to focus more on its services business
NOBEL BIOCARE received a positive ruling in the US litigation with Materialise Dental in connection with a patent relating to NobelGuide
SAIPEM : Sonatrach and Canadian partner First Calgary Petroleum signed an energy infrastructure deal worth $1.85 bn with Saipem
nd
OIL SECTOR : SUNCOR, the world 2 largest oil-sands producer, agreed to buy Petro-Canada for about US$13.7bn (all-share deal)
SNAM RETE GAS sees revenue topping €3bn in 2009, with core earnings at about €2.3 bn (Il Sole 24-Ore) (after Eni agreed to sell its
Italian gas storage company, Stogit SpA, and its distributor, Italgas SpA, to Snam Rete Gas for about €4.72bn)
SOLARWORLD said solar energy may be competitive with other household electricity sources by 2012 / Reducing costs by 8%-12%/Y
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23-Mar-09 WATCHMAN
NEGATIVE IMPACTS
VALEO : CEO is to resign (Le Figaro) / The decision was taken as he refused a change in governance & opposed a revision of strategy
CASINO named Antoine Giscard d'Estaing, new to replace Michel Favre, who will move to another French company
E.ON : The EC might rule against E.ON in long-running probes into suspicions of abuse of its dominance in the gas market (Der Spiegel)
TELECOM ITALIA : 3 Italia, owned by Hutchison Whampoa, denied in a report in Corriere della Sera that it could be broken up / Corriere
said Telecom Italia could offer Hutchison Whampoa shares in return for a slice of 3 Italia.
AXA had its Insurer Financial Strength Rating cut to AA- from AA by Fitch
EADS : Germany and its European partners have rejected demands from Airbus to change the terms of a purchase agreement relating to
the A440M military transporter (Der Spiegel)
THYSSENKRUPP : S&P's placed the German steelmaker's 'BBB' long-term corporate and debt ratings on CreditWatch negative
BNP : The Paris prosecutor's office has launched an investigation to see if BNP provided misleading information about investments in a
fund buying Madoff-related products
MARKS & SPENCER : Shareholders are set to revolt over concerns that MKS’ head Stuart Rose holds too much power… (ST)
RESULTS DIVIDENDS EVENTS
Today Synthes (CHF 1.10) /
Tuesday Banco Popolare / Deutsche Bank / Metro AG / Swiss Life
Hochtief / TUI Travel / TUI AG / Inditex / Scottish & Southern Aviva (GBp 22,12222) / B Sky B
DSM AGM / UK real estate conf at Merrill Lynch / Ciena
Wednesday Energy trading statement / Sainsbury trading statement / (GBp 8,333333) / Intercontinental
AGM / Small and mid cap conference at Deutsche Bank
Nizhnekamskneftekhim / A2a / Legal & General Hotel Group (GBp 22,44444)
Cimport cimentos / H&M / Kingfisher / Premier Oil / Salzgitter / Geithner testify of rules revamp / Fiat AGM / Vestas Wind
Thursday
Man Group trading statement AGM / ASML AGM / Givaudan AGM
Friday Wendel / DSM (€ 0.80) Portugla Telekom AGM
TRADING IDEAS
Upside gap to be closed on the Eurostoxx cash 2098/2107 & 2176/2193 for info
BUY FINANCIALS as BBVA / AGRICOLE / ING / AEGON / BNP to play Geithner’s comments
BUY L OREAL / METRO / EON / ROCHE / STM / ACCOR / AIR FRANCE / LAFARGE on reversal Head & Shoulder
BUY UNILEVER / PERNOD / THYSSEN / ARCELOR on double bottom possibility

BUY HEWLETT-PACKARD / SELL DELL // BUY EXXON / SELL CHEVRON // BUY SWISS RE / SELL MUNICH RE // BUY ROCHE / SELL SANOFI //
BUY LVMH / SELL PPR
BROKER METEOROLOGY
HEINEKEN ..................................ADDED TO EUROPE 1ST LIST .................................................................... BY BANK OF AMERICA
DANONE ......................................RAISED TO NEUTRAL FROM SELL ............................................................. BY GOLDMAN SACHS
RENAULT ....................................RAISED TO NEUTRAL FROM SELL ........................................................... BY GOLDMAN SACHS
SCANIA .......................................RAISED TO NEUTRAL FROM SELL ............................................................ BY GOLDMAN SACHS

INTESA ........................................CUT TO SELL FROM HOLD ................................................................................................. BY RBS

BRITISH LAND.............................CUT TO NEUTRAL FROM BUY ............................................................................................ BY UBS
FERROVIAL ................................CUT TO EQUALWEIGHT ............................................................................ BY MORGAN STANLEY
WPP..............................................CUT TO HOLD FROM HOLD .................................................................................... BY CITIGROUP
BHP BILLITON ............................CUT TO UNDERPERFORM ................................................................................BY CREDIT SUISSE
NOVOZYMES ..............................CUT TO NEUTRAL FROM SELL ................................................................... BY GOLDMAN SACHS
AKZO NOBEL .............................CUT TO HOLD FROM BUY ....................................................................................................BY S&P
LVMH ...........................................CUT TO NEUTRAL FROM OVERWEIGHT ......................................................................... BY HSBC
PPR ..............................................CUT TO NEUTRAL FROM OVERWEIGHT ......................................................................... BY HSBC
SWATCH GROUP .......................CUT TO UNDERWEIGHT FROM NEUTRAL ....................................................................... BY HSBC
VALEO .........................................REMOVED TO CONVICTION SELL LIST ..................................................... BY GOLDMAN SACHS
MEDIASET ..................................CUT TO SELL FROM HOLD ......................................................................................BY UNICREDIT
PEUGEOT ...................................CUT TO SELL FROM NEUTRAL ................................................................... BY GOLDMAN SACHS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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23-Mar-09 WATCHMAN
CHART OF THE DAY
Raw sugar –ISO daily price (c/lb)
Since 1990

20

1 7,5

15

1 2,5

10

7,5

2,5
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source : Datastream

Raw sugar should skyrocket but seems tight in a range between 11 cents to 14 cents/ lb on the contract for May delivery
(ICE Futures US Soft). This technical consideration is blocking its growth despite good economic fundamentals. Indeed the
drop of the $ and the rise of oil should push it up but despite of this raw sugar dropped 7% since the beginning of 2009.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
5.00 GMT Japan Supermarket sales February -2,7%YoY
United Kingdom Nat'wide house prices March -1,5%,-18,1%YoY -1,8%,-17,6%YoY
10.00 GMT Euro area Trade Balance January - € 9,0 billion - € 700 million
10.00 GMT Euro area Construction output January -2,2%,-10,1%YoY
14.00 GMT United States Existing home sales February -0,9%MoM -5,3%MoM
14.00 GMT United States Existing home sales February 4,45 million 4,49 million

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

DJIA 7278,4 0,75% - 17,07% EUR/USD 1,3694 5,44% -2,14%
S&P 500 768,5 1,59% - 14,91% EUR/JPY 131,73 -3,22% 3,68%
Nas daq 1457,3 1,81% - 7,59% USD/JPY 96,20 2,05% 5,78%
CA C 40 2791,1 3,16% - 13,26% Oil Price % 5 Days Ytd
DA X 4068,7 2,91% - 15,41% Brent $/b 50,6 13,45% 21,22%
Eur os tox x 50 2051,0 4,14% - 16,21% Gold Price % 5 Days Ytd
DJ 600 172,6 2,53% - 13,00% Gold $/oz 955,2 3,45% 8,27%
FTSE 100 3842,9 2,51% - 13,34% Rates USA Euro Japan
Nikkei 8215,5 10,39% - 7,27% Central Banks* 0,25 1,50 0,10
Shanghai Comp 2312,2 7,15% 26,99% Overnight 0,15 0,70 0,10
Sens ex ( India) 9238,4 2,40% - 4,24% 3 Months 0,21 0,61 0,26
MICEX ( Rus s ia) 792,1 5,71% 27,85% 10 Y ears** 2,66 2,97 1,28
Bov es pa ( Bras il) 40076,4 2,72% 6,73% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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23-Mar-09 WATCHMAN
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the existing home sales for February due at 14.00 GMT, expected to decrease as the real
estate market still hit by the credit crunch and by the rise of unemployment did not recover yet.

Watch in Euro area the release of the trade balance for January due at 11.00 GMT. The trade deficit is expected to sharply increase
as the global economic downturn is humping the demand for European goods abroad. /JB

ECONOMY

EURO ZONE : INDUSTRIAL PRODUCTION DROPPED THE MOST ON RECORD IN JANUARY

Industrial production plunged by the most on record from -2.7% in December to -3.5% in January (forecast -4.0%) and dropped
17.3% from a year ago (forecast -15.5%). If we look to the breakdown capital goods fell sharply of 6% and durable consumer goods
fell 2.6%. This drop of industrial production is the logical consequence of the deepening recession as the economic downturn is
strongly hitting companies production and as the rise of unemployment add to the tight credit conditions are cutting households
demand. It is important to noticed that the industry account for 20% of the euro zone GDP versus 13% in the United-States. To boost
the European growth and the industrial production the European Central Bank must lower again its leading rate, the euro must
dropped to $1.10 as soon as possible and the euro zone member should coordinate their action to put together a common revival
plan.

GERMANY : PRODUCER PRICE INFLATION SLOWS IN FEBRUARY.

German producer price inflation slowed from - 1.2% in January to - 0.5% in February (forecast -0.2%) despite the slight rise of energy
prices in February. From a year ago producer prices dropped from 2.0% to 0.9% led by the drop of energy prices ( the barrel price has
been divided by five in five months from its peak at $147 in July). As energy and commodities prices should decline in the coming
month producer price inflation should pursue its drop trend. /JB
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23-Mar-09 WATCHMAN
VIXindex: impliedvolatility onthe S&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
23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009 23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009
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
23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009 23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009
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
23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009 23/03/2007 23/09/2007 23/03/2008 23/09/2008 23/03/2009
Source : Bloomberg Source : Bloomberg