WWW.GLOBAL-EQUITIES.

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27-May-09 THE HALF FULL GLASS

Nice finish from the US session, boosted by Retailers (up 4%) on higher confidence survey, Apple (up 6% on upgrade), GM (+0.7%)
that would receive a nice $50bn help from the government and financials up 4%.
US house prices are now undervalued, possibly quite significantly, but that doesn’t mean they won’t still fall further. The 7.5% q/q
decline in the Case-Shiller national index in Q1 means that prices have fallen by 18.7% over the past year and have fallen by a total of
32% since peaking in 2006. According to economists, in nominal terms, prices are now back to levels last seen in 2002. In real terms,
they are at 2000 levels. In other words, most of the boom in housing has now been reversed – 6 years of appreciation wiped out in 2
years of sharp declines. The unprecedented decline in house prices means that housing is now under-valued, possibly quite substantially.
Based on the long-term average of the house price-to-disposable income per capita ratio, housing is now 18% below fair-value. This is
the lowest valuation recorded since the Case-Shiller series began in 1987. Based on the long-term average of the house price-to-rent
ratio, housing is now 9% below fair-value, the lowest since 1999. To put this into context, three years ago at the height of the boom, prices
were 35% overvalued versus incomes and 45% overvalued versus rents.
The jump in US consumer confidence in May is encouraging and increases the chances that consumers will soon start spending
more freely. The increase in the Conference Board’s measure of confidence, from 40.8 to 54.9, probably reflects the fading of fears of an
outright financial meltdown and the associated rebound in equity prices. The current conditions index rose from 25.5 to 28.9 while the
expectations index shot up from 51.0 to 72.3. On the face of it, the expectations index is consistent with consumption rising by around 1%
compared to a year ago. It remains to be seen whether the surge in confidence will actually translate into extra spending. "Expectations
are that business conditions, the labor market and incomes will improve in the coming months," said Lynn Franco, director of the
Conference Board's Consumer Research Center. "While confidence is still weak by historical standards, as far as consumers are
concerned, the worst is now behind us." There was also a confidence surge in April.
Treasury two-year notes were little changed after a record-tying $40 billion auction of the securities drew the most demand from
a group of investors that includes foreign central banks since November 2006. The sale helped to ease concern that international
investors will begin to shy away from Treasuries as U.S. borrowing surges to fund bank bailouts, fiscal stimulus spending and a record
budget deficit. Indirect bidders, the class of investors that includes foreign central banks, bought 54.4 percent of the notes, compared with
an average of 34.6 percent in the last 10 auctions. “This auction result will keep people calm about yields for now because so much
demand showed up,” said a chief bond-market strategist. “The worries about the U.S.’s ability to finance its debt are likely to fade now.”
The Treasury plans to sell $35 billion in five-year notes today and $26 billion in seven-year notes May 28, The Fed is scheduled to
purchase nominal Treasuries maturing from May 2012 to August 2013 tomorrow, the central bank’s Web site said. Ten-year yields have
risen nearly 92 basis points since the Fed announced on March 18 it would buy as much as $300 billion of government securities over six
months in an effort to cap borrowing costs. The increase in yields is bolstering speculation the central bank will boost purchases. Some
Fed officials judged last month that the central bank may need to increase its purchases, to secure a stronger recovery.
Today’s Existing Home sales should add to the half full glass optimistic landscape, and trigger some further run from fund manager
after the equity indices. 2499 should be broken anytime on the cash Eurostoxx to head toward the 2608 level. Roland Garros might be a
dangerous competition to our equity markets focus…, Champion’s league final being after market close …
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 62,5 1,3967 95,44 3,53 3,62 2,34 2,15 4,11 1,62 3,32 3,21 3,29 2,88 3,74 2,63 3,45 2,37 US
Perf 1d % 2,43 -0,12 -0,44 -1,71 bp 1,7 bp 1,33 0,90 2,29 1,38 2,96 2,68 2,81 1,97 3,29 1,95 2,75 1,96 Europe
ECONOMIC DATA with impact
Mortgage Applications (11h gmt) / previous was up 2.3% / the higher the better / minor as volatile and weekly data
Existing Home Sales (14h gmt) expected 4.66 mn from previous 4.57 mn / should provide further evidence that housing market activity
has found a floor, albeit at a very low level. The surge in affordability will have prompted an increase in existing home sales in April
House Price Index (14h gmt) expected +0.2% from previous +0.7% / will likely show a fall of around 0.5% m/m in March, reversing some
of the increases in January and February. For Q1 as a whole, however, house prices are likely to have risen by 0.5%. House prices are
modestly undervalued against incomes and remain overvalued against rents on the FHFA measure. But valuations are much more
favourable than three years ago.
POSITIVE IMPACTS
SEADRILL : Q1 sales $696m (719.7m exp) / Ebitda $347m (317.9m exp) / Sees cash generation increasing over next quarters
EDF plans to launch an €1 bn 4-5 years bond issue (for French households only…) to refinance part of its debt (Les Echos) probably at a
competitive rate such as 4 to 4.5% according to media
PERNOD : CEO said that it had better sales in April compared to March
BP isn't planning any major spending cuts this year in response to lower oil prices (the Anchorage Daily News)
RIO TINTO (not new) : Chinalco is considering adjusting its $19.5 bn investment in Rio Tinto (Caijing magazine)
NOVARTIS said it will enter the Japanese vaccines market thanks to an agreement with local firm Takeda Pharmaceuticals
BANK OF IRELAND may not need a fresh injection of capital when the state creates its "bad bank" scheme in July (Finance Minister)
SANTANDER has reached a settlement with the trustee seeking to recover money for Madoff’s victims, agreeing to pay $235m to resolve
claims against 2 of its hedge funds managed by its Optimal investment arm
AUTOMAKERS : Nippon Steel agreed with Toyota to lower the price of automotive steel for 2009 by 10% (1st price cut in 7 years)
NEGATIVE IMPACTS
DANONE may be interested in buying PARMALAT & GRANAROLO (Il Sole 24 Ore)
EADS has shown interest in Korea Aerospace stake
BHP’s CEO voiced doubts about the durability of recent strong Chinese demand for commodities = He said the global demand picture
was still unclear & should take 6 months to resolve / He added that China's current build-up of stocks did not entirely reflect underlying
demand and was tied to China's massive economic stimulus package announced late last year.
MINERS : Chinese steelmakers will reject a 33% cut in iron ore prices agreed by Rio Tinto and Nippon Steel / Chinese steelmakers have
said they wanted iron ore price cuts of 40% or more / POSCO will accept a 33% cut (Reuters)
SIEMENS : CFO said that he would look at Areva’s T&D unit if it were for sale / He added that the book-to-bill ratio in energy unit will be
below 1 in H1 2010 / Said that industry unit has not bottomed out yet & expects recovery in H2 2010
ALLIANZ's new Allianz-Bank will start with 350k customers, which is significantly less that expected (Die Welt)
AIR BERLIN : Q1 revenue €661.2m (644m exp) / Ebit loss €87.3m (-92m exp) / Net loss €88.4m (-101m exp)
AREVA : Niger's president dissolved parliament after the constitutional court blocked moves designed to allow him a 3rd term in office /
Areva runs 2 mines and is developing a project expected to be the biggest in Africa…
GAMESA… : Europe should halt the construction of wind farms until it has further examined their impact on wildlife, landscapes and the
value of nearby houses, a new anti-wind farm group said
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

27-May-09 THE HALF FULL GLASS

GM has failed to persuade enough bondholders to accept a debt-for-equity swap, setting the stage for its bankruptcy within days / WSJ
reports that the US Treasury will provide $50bn to GM’s reorganization, mostly in company equity
RESULTS DIVIDENDS EVENTS
Salzgitter AGM / Mc Do AGM / EADS AGM / Industrial conf at
Adecco ( CHF 1.50) / Credit Agricole (€0.45) / Deutsche Credit Suisse / Exxon Mobil AGM / Energy, Utilities and Power
Today Cimpor cimentos / Ubisoft / Suedzucker Bank (€0.50) / Soc Gen (€1.20) / Thales (€1.05) / Marks conf at Deutsche Bank / Legal & General AGM / EDF Energies
& Spencer (GBp 10,55556) nouvelles AGM / Boeing, Bristol Myers Squibb at Bernstein
conf
Cap Gemini investor day / ADP AGM / Time Warner AGM /
Ahold / / Man Group / Costco / Dell / Safran AGM / Delhaize AGM / Man Group analyst meeting /
Thursday Casino (€2.53) + Mercialys 1 per 8 / Salzgitter (€1.40)
Heinz Home Depot AGM / United Utilities analyst meeting / Mc Do,
HP at Bernstein conf / Amazon Shareholders Meeting
Ackermans & van Haaren (€1.39) / Nexans (€2.00) / Suez
Friday Arcandor Time Warner at Bernstein conf
Env (€0.65)
Monday Delhaize (€1.48) / Legrand (€0.70) / Dutsche Land : End of short selling ban
Tuesday Bouygues / Kingfisher / Car sales France Telecom (€0.80) ABB AGM / Hermes AGM / WPP AGM
TRADING IDEAS
BUY ALLIANZ / MUNICH RE / EON / BAYER / DANONE / SANOFI to play eco recovery
BUY VIVENDI / NOKIA / KPN / FTE / DTE / TOTAL / GSZ / EDF / ACCOR looking good

BUY ENI / SELL REPSOL // BUY GLAXO / SELL ASTRAZENCA // BUY LINDE / SELL BASF // BUY MUNICH RE / SELL AXA
BUY AHOLD / SELL METRO
BROKER METEOROLOGY
SANDVIK .................................. RAISED TO NEUTRAL FROM SELL ...................................................................................... BY UBS
ITV .............................................. RAISED TO BUY FROM SELL ........................................................................ BY GOLDMAN SACHS
NORTHHUMBRIAN WATER...... RAISED TO OUTPERFORM FROM NEUTRAL ...................................................BY CREDIT SUISSE

TELECINCO .............................. CUT TO CONVICTION SELL FROM NEUTRAL ............................................ BY GOLDMAN SACHS
KBC ........................................... CUT TO SELL FROM NEUTRAL ............................................................................................ BY UBS
ATLANTIA ................................. CUT TO EQUALWEIGHT FROM OVERWIEHGT .......................................BY MORGAN STANALEY
UNIPOL ...................................... CUT TO HOLD FROM BUY ..................................................................................................... BY DBK

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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27-May-09 THE HALF FULL GLASS

CHART OF THE DAY

Conference Board US Consumer Confidence SA 1985=100
Since 2002

120
110
100
90
80
70
60
50
40
30
20
2002 2003 2004 2005 2006 2007 2008 2009

Source : Conference Board

After rebounding in March the Conference Board Consumer Confidence jumped by 51.7% in April to reached 40.8. In May the US
consumer confidence jumped again by 34.5% to reach 54.9 the highest level since September 2008. This is a very encouraging data as
consumer spending represent around 70% of the U.S. GDP.

Time Country Indicator Period GE forecasts Consensus Previous

0.50 GMT Japan BoJ Monetary policy meeting minutes (28 April meeting)
0.50 GMT Japan Merchandise trade balance total April yen - 55,0 bn yen 10,3 bn
Germany Consume price index (preliminary) may 0,1%,+0,2%YoY 0,1%,+0,2%YoY 0,0%,+0,7%YoY
7.45 GMT France Consumer confidence indicator may -40 -40 -41
7.50 GMT France Business confidence indicator may 74 73 71
12.00 GMT United-States MBA mortgage applications May 22 2,3%
15.00 GMT United-States House price index march 0,2% 0,7%
15.00 GMT United-States Existing home sales April 4,66 million (2,0%) 4,57 million (-3,0%)

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

DJIA 8473,5 - 0,25% - 3,45% EUR/USD 1,3959 1,28% -0,11%
S&P 500 910,3 0,13% 0,78% EUR/JPY 133,24 -1,81% 4,87%
Nas daq 1750,4 1,10% 11,00% USD/JPY 95,46 -0,57% 5,01%
CA C 40 3270,1 0,26% 1,62% Oil Price % 5 Days Ytd
DA X 4985,6 0,52% 3,65% Brent $/b 60,3 3,24% 44,18%
Eur os tox x 50 2468,5 0,57% 0,85% Gold Price % 5 Days Ytd
DJ 600 209,0 - 0,70% 5,35% Gold $/oz 949,4 1,12% 7,61%
FTSE 100 4411,7 - 0,61% - 0,51% Rates USA Euro Japan
Nikkei 9425,4 0,23% 6,39% Central Banks* 0,25 1,00 0,09
Shanghai Comp 2632,2 - 3,27% 44,56% Overnight 0,15 1,18 0,09
Sens ex ( India) 13953,7 - 4,98% 44,64% 3 Months 0,17 0,74 0,20
MICEX ( Rus s ia) 1040,9 - 0,09% 68,01% 10 Y ears** 3,53 3,62 1,48
Bov es pa ( Bras il) 51840,8 0,96% 38,06% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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27-May-09 THE HALF FULL GLASS

ECONOMIC DATA PREVIEW

No major economic data are due in the United-States

Watch in France the release of the business confidence indicator for the May due at 7.50 GMT, expected to slightly increase as
France’s economy seems not as affected as its European partners, mainly due to the good resistance of the household consumption.
Watch in Germany the preliminary release of the consumer price index for the May, expected to slightly increase since last month but
which should get closer to negative territory from a year ago due to a base effects. As the Euro area, Germany will be very near to a
deflation situation which is the worst case in economy./JB

Economy
UNITED-STATES : CONFERENCE BOARD CONSUMER CONFIDENCE JUMPED IN MAY
After rebounding in March the Conference Board Consumer Confidence jumped by 51.7% in April to reached 40.8. In May the US
consumer confidence jumped again by 34.5% to reach 54.9 the highest level since September 2008. This jump was mainly led by the
effects of the interest’s rate drop, the fell of consumer prices and by the upcoming Obama’s stimulus plan. We can say that the recent
jumps in the stock market and the improvement of the labour market as jobs destruction are decreasing boosted as well consumer
confidence. If we look at the breakdown we see that current condition index rose from 25.5 to 28.9 while the expectations index jumped
from 51.0 to 72.3. This last data being very encouraging data as consumer spending represent around 70% of the U.S. GDP.

FRANCE : CONSUMER SPENDING ROSE AGAIN IN APRIL

Despite the rise of unemployment and despite a pessimistic environment France’s consumer spending rose again in April by 0.7%. It
must be said that March 1.1% first estimation has been revised to 0.6%. Since its low point in December and despite its February drop,
consumer spending increased by 0.9%. This good resistance of French consumption has been lead by the rebound of car sales
increasing by 3.7% in April and by 5.8% from a year ago, showing that French consumers are very reactive to constructors promotions
and to government measures. Household goods rose by 0.8% and after increasing by 3.8% in January and declining by 7.5% in
February, textile/leather consumption rose 3.6% in March and by 0.3% in April. The question is did this resistance of consumer spending
will last? Despite the rise of unemployment and the slight rebound of oil prices the drop of interest rates, the decline of inflation and the
high savings level will avoid a collapse of household spending in the coming months. This encouraging data should impact positively
the French GDP at the second quarter and avoid a sharp drop. Nevertheless the European Central Bank should pursue its refi rate cut
and hopefully the euro will quickly decrease otherwise the recession will last much longer./JB
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

27-May-09 THE HALF FULL GLASS

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
29/05/2007 29/11/2007 29/05/2008 29/11/2008 29/05/2009 28/05/2007 28/11/2007 28/05/2008 28/11/2008 28/05/2009
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
28/05/2007 28/11/2007 28/05/2008 28/11/2008 28/05/2009 28/05/2007 28/11/2007 28/05/2008 28/11/2008 28/05/2009
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
28/05/2007 28/11/2007 28/05/2008 28/11/2008 28/05/2009 28/05/2007 28/11/2007 28/05/2008 28/11/2008 28/05/2009
Source : Bloomberg Source : Bloomberg