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15-Jun-09 THE AFTER

The G8 meeting from world's most powerful finance ministers aimed at calming down the rising interest rates which threaten to
undermine any potential economic recovery. They had to convince bond traders that they will put the brakes on massive stimulus
measures before inflation becomes a threat. The G8 included the United States, Japan, Germany, France, Italy, Great Britain, Canada
and Russia. The meeting did not include central bankers. Currency issues were not on the agenda.
It is true that the rising long term yields might not be helping, but they are far from being a threat at this stage. The focus is more
turned on the banks and their ability to lend on friendly levels. Bear guys will tell you that the market may be getting ahead of itself, given
that the global economy appears to still be in the midst of a deep recession, even if some data have started to moderate. If left
unchecked, rising interest rates could cause any potential economic rebound to come undone. although we disagree, this question might
be solve for now as the rising yields seemed to be more due to the worsening balance sheets from governments and the fear to attend
huge inflation data in a soon future rather than a boosting economic recovery . Governments around the globe have increased their debt
to finance a variety of plans, including bank bailouts, and many central banks have slashed interest rates to ease strains in the credit
markets. G8 ministers acknowledged the need to reverse those measures to prevent government bond yields from rising and undermining
a recovery. Noting a recovery in stock markets, rising consumer and business confidence and improvement in financial markets, the
group "discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the
crisis once the recovery is assured," the finance ministers said in a statement. "These 'exit strategies', which may vary from country to
country, are essential to promote a sustainable recovery over the long term ," they said.
Already the US markets reacted positively on Friday with the 10-year Note advancing 18 ticks , which has pushed its yield down to
3.78% after being near 4.0% just a couple of days ago. Treasuries found continued support, even as The Wall Street Journal reported
that the Fed is unlikely to significantly boost purchases of Treasuries. Increasing U.S. debt has also weakened the dollar, threatening
other's nation's recoveries by strengthening their currencies and potentially making exports less competitive. While currencies were not
formally addressed at the G8 meeting, the Journal noted remarks from Russian Finance Minister Alexei Kudrin late Friday that should
support the U.S. dollar, after the country's central bank said earlier this week it may reduce its holdings of U.S. debt. Over the next year or
more, Kudrin said he "does not see any significant changes in our policy with regards to dollar-denominated paper". So for now, the next
long term yield rising move we should attend will be focusing on the economic recovery pace and its inflation potential, which would be
then celebrated for sure by equity indices along the news flow.
The Economic calendar features several important reports , including PPI (tomorrow) and CPI (Wednesday) and the latest reads on
Housing Starts and Industrial Production. Market participants will also check the Leading Indicators report (Thursday) for May to see if the
"green shoots" seen in recent economic data have taken root. Biggest focus being the important option quarterly expiry on Friday. Indeed
long gamma players might be locking the indices within a range hedging their delta and trying to pay for the teta loss. In the meantime
data keep on showing improvements, preventing any correction especially as fund managers are still hoping for a downside move to
happen. Might be waiting a long time when looking at last week events. McDonald's reported another strong month of sales in May
although said that volatile foreign currency exchange rates will likely negatively impact results. Texas Instruments significantly raised its
outlook for the second quarter, saying all of its major product lines are growing. Home Depot provided better eps guidance than previously
forecasted. The May retail sales numbers posted a moderate increase of 0.5% for both total sales and excluding autos, which bear
players were expecting to be flat or negative thinking the oil prices and long term yields rise would have spoil the consumer spending.
Foreclosure filings were down in May although still posted the third highest total on record
The Bank of Japan’s two-day policy meeting, which concludes tomorrow, will be market friendly. Indeed it is likely to be the first in
the post-Lehman era to end without the announcement of some new measure to help the financial system. The improvements in the latest
data should be sufficient to prompt the Bank to upgrade its assessment of the economy for the second month running.
Volumes were extremely thin last week, and hopefully should not stay so as things will get more clear as time is passing by and
we are ending the Q2 period with still a "bear market rally" not so bear after all. Remember that the after 2000-2001 recession saw an
equity index bottom in March 2003 and steady job gains did not recur until October 2003. It was a classic "jobless recovery" that led to
doubts as to whether it was actually a recovery at all. Same as in the past, the market did rebound while macro backgrounds were still
gloomy, catching the momentum from officials which sent this possibly dramatic recession into a classic one which the ending will be as
predictable as in the past, unlike its beginning... look for 2549 to be broken on the Eurostoxx much before Friday's option expiry (very
classic lately to start the move just before the expiry), and the upside rally to resume heavily once the protections will be out dated.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 71,2 1,3946 98,40 3,78 3,63 -1,77 -1,06 0,57 0,46 -0,12 0,74 -0,05 1,28 -1,77 0,14 -0,19 0,32 US
Perf 1d % -1,64 -0,50 0,03 -1,56 bp -6,4 bp -2,09 -1,61 0,01 1,01 -1,16 0,55 -0,99 0,26 -2,96 -0,42 -1,16 -0,07 Europe
ECONOMIC DATA with impact
NY Empire State Manufacturing index (13h30 UK time) / being a June data makes it interesting and same as the Michigan survey last
Friday should be better / minor
Fed Governor Tarullo speaks on banking (13h45 UK time) / interesting to see the comments from Fed presidents ahead of next week
June 23 and 24th meeting.
Chicago Fed President Evans on economic outlook (14h30 UK time)
Net Foreign Purchase US Securities (15h UK time) / the highest the better / minor
June NAHB Housing Market Index (18h UK time) / interesting as should validate the idea that the housing sector is stabilizing
Fed Governor Duke on financial crisis response (23h UK time)
POSITIVE IMPACTS
XSTRATA’s CEO is facing pressure from shareholders Black Rock and Capital Group to engineer a merger with ANGLO-AMERICAN
(Sunday Times) / The Times is reporting The same kind of pressure on Anglo-American’s CEO…
PORSCHE : A majority of members in 2families controlling Porsche back a deal for the Qatar to acquire a 25% stake in the company (Der
Spiegel) / Separately, Focus reported that KfW will decide on a €1.75-bn loan application, early this week…
VOLKSWAGEN expects new car registrations to rise more than 13% to over 3.5 m in 2009 (WirtschaftsWoche)
SALZGITTER expects an upward movement in the steel sector until the end of the year (WirtschaftsWoche)
ANHEUSER-BUSCH has put its central and eastern European operations up for auction as a way of reducing its debt (The Times)
EADS : The 48th biennial International Paris Air Show kicks off at Le Bourget… / The CEO said that he will not sell planes at bargain
prices just to keep its order books filled…
ENI will soon boost its natural gas imports from Libya to at least 10 bn cubic meters a year from the current 8bn (Il Sole) / Separately,
ENI would have hired Rothschild to sell most of its North Sea oil assets for more than $1 bn (Sunday Times)
NOKIA launched 3 new handsets Today, including a new touch-screen model / Nokia said its 5530 Xpressmusic phone would start
shipping in the Q3 and sell for €199 euros before subsidies and taxes.
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15-Jun-09 THE AFTER

BANCA POPOLARE DI MILANO is studying an insurance agreement with France's Credit Mutuel, which owns 4.84% of Popolare di
Milano / BPM does not plan to list its AM operations, which it intends to merge by year-end with an international player (Borsa & Finanza)
THOMSON would get more time to talk to its creditors on a debt restructuring deal (La Tribune)
NEGATIVE IMPACTS
HOLCIM is going to buy Cemex Australia for A$2.02 bn (SFR1.77bn) + raise around SFR2 bn from a capital increase with a rights issue /
Moreover, Holcim affirmed its strategic partnership in China through the participation in the planned private placement of Huaxin Cement
RYANAIR has opened talks with Boeing and Airbus about ordering up to 300 more aircraft in a deal that would make it more than double
the size of British Airways (The Guardian)
METRO denied a report in the Boersen-Zeitung newspaper that it is seeking a €200-m loan from KfW to finance the takeover of Karstadt
LANXESS doesn't see a recovery in the economy yet (Euro am Sonntag citing CEO)
BAYER-SCHERING : The price pressure in the pharmaceuticals sector is rising (Tagesspiegel citing Bayer Schering Pharma CEO)
GSK has started cutting prices on some of its drugs in some Asian countries, in an effort to increase its business (WSJ)
SIEMENS’ CEO does not see an end to the global economic crisis (The Times)
LLOYDS will have to take a £450 m write-down on loans made to Admiral Taverns (The Sunday Times) / Lloyds' Bank of Scotland arm,
which lent more than £850 m to Admiral, is sounding out potential buyers of the debt…
GDF SUEZ : Belgian competition authorities should probe the wholesale prices of Electrabel (Belgian Energy Minister)
TOMTOM plans to raise €430m via a rights issue and private placement.
ALSTOM-SCHNEIDER (Not new) : AREVA may be forced by the govt to sell its Transmission & Distribution unit in a bid to raise capital
(FT) / Areva may raise €3-€5bn from the sale / ALSTOM & SCHNEIDER are frequently cited as potential bidders…
FIAT's rating remains on CreditWatch negative (S&P)
SANTANDER is targeting bank acquisitions in the US in the next 5 years (CEO in Expansion)
STANDARD CHARTERED set guidance for its benchmark sale of $-denominated perpetual tier 1 bonds at about 9.75% (Reuters)
CINTRA’s €3.4bn deal to upgrade two Texan highways has been suspended after a dispute over public funding (El Economista)

EU INDUSTRY commissioner sees the recession to continue for some time yet + doubts the worst is over + said he sees "no light at the
end of the tunnel" (Die Welt) / Separately, Der Spiegel reported that credit conditions for large German companies are deteriorating…
RESULTS DIVIDENDS EVENTS
Today Vtech Holdings Gecina AGM / Arkema AGM
Tuesday Tesco / Adobe / Best Buy Thomson AGM / Vallehermoso AGM
Arkema (€0.60) / Imperial Tobacco (GBp 23,33333) / Land Securities
Arcelor Mittal EGM / Nokia Exhibition to launch
Wednesday Zodiac sales / Sainsbury / FedEx (GBp 7.00) / Raiffeisen internat Bk (€0.93) / Rio Tinto 21 per 40 / Severn
new phone
Trent (GBp 45.61111) / United Utilities (GBp 24,47778)
Thursday RIM / Cadbury trading statement conf Gecina (€1.98) Banco Santander AGM / Maurel & Prom AGM
Friday Sony AGM / Sumitomo AGM
TRADING IDEAS
BUY CARREFOUR / L OREAL / ALSTOM / BOUYGUES / FRANCE TEL / DEUTSCHE TEL on double bottom possibility
BUY DANONE / PERNOD on reversal Head & Shoulder possibility
BUY MUNICH RE / ALLIANZ / GENERALI to play insurance sector higher beta
SELL BMW / UNILEVER to play double top possibility

BUY ALLIANZ & MUNICH RE / SELL AXA // BUY BBVA / SELL SANTANTER // BUY IBERDROLA / SELL VEOLIA // BUY BOUYGUES / SELL ST
GOBAIN
BROKER METEOROLOGY
METRO .................................................................RAISED TO OUTPERFORM FROM NEUTRAL ..........................BY CREDIT SUISSE
ARCELOR MITTAL ..............................................RAISED TO BUY FROM HOLD............................................... BY DEUTSCHE BANK
VESTAS WIND .....................................................RAISED TO OVERWEIGHT FROM EQUAL ........................ BY MORGAN STANLEY
ASTRAZENECA...................................................RAISED TO BUY FROM HOLD.......................................................... BY CITIGROUP
SAIPEM ................................................................RAISED TO NEUTRAL FROM CONVICTION SELL LIST ..... BY GOLDMAN SACHS
OIL SERVICES.....................................................RAISED TO NEUTRAL........................................................... BY GOLDMAN SACHS
TECHNIP ..............................................................RAISED CONVICTION BUY FROM NEUTRAL ..................... BY GOLDMAN SACHS

SAIPEM ................................................................CUT TO NEUTRAL FROM OUTPERFORM ................................BY CREDIT SUISSE

SAIPEM ................................................................CUT TO EQUALWEIGHT FROM OVERWEIGHT .............................. BY BARCLAYS
PETROFAC ..........................................................CUT TO EQUALWEIGHT FROM OVERWEIGHT .............................. BY BARCLAYS
BANK OF IRLAND ...............................................CUT TO HOLD FROM BUY..................................................... BY DEUTSCHE BANK
AIR FRANCE........................................................CUT TO HOLD FROM BUY................................................................ BY CITIGROUP
SBM OFFSHORE .................................................CUT TO SELL FROM NEUTRAL ........................................... BY GOLDMAN SACHS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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15-Jun-09 THE AFTER

CHART OF THE DAY
France consumer price index and Gross Domestic Product % YoY
Since 1991
a/a, % a/a, %
5 4
4,5
4 3,5
3,5
3
3
2,5 2,5
2
1,5 2
1
1,5
0,5
0 1
v -0,5
-1 0,5
-1,5
0
-2
Mai
-2,5 -0,5
-3 T1 09
-3,5 -1
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

PIB - G - Prix à la consommation - G -

Source : Bloomberg

For the first time of its history France’s consumer price index reached negative territory in May at-0.3% YoY. Nevertheless the
situation is not as bad as it looks. Indeed core inflation (excluding food and energy) remained positive at +1.6%. Meaning that as the
energetic inflation did not generate a core inflation a year ago, the deflation of commodities do not generate a global deflation. In
addition the drop of prices increase household purchase power in the short term. But its important to notice that deflation as only
positive impacts in the short term and if it’s a temporary situation.

Time Country Indicator Period GE forecasts Consensus Previous

9.00 GMT Italy Labor costs First quarter 1,0%
10.00 GMT Euro zone Employment First quarter -0,3%,0,0% YoY
13.30 GMT United -States Empire manufacturing June - 5,10% - 4,55
18.00 GMT United -States NAHB housing market index June 17 16

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

DJIA 8799,3 0,50% 0,26% EUR/USD 1,3924 0,17% -0,34%
S&P 500 946,2 0,71% 4,76% EUR/JPY 137,14 -0,13% 7,56%
Nas daq 1858,8 0,53% 17,87% USD/JPY 98,50 0,05% 7,92%
CA C 40 3326,1 - 0,27% 3,36% Oil Price % 5 Days Ytd
DA X 5069,2 - 0,15% 5,39% Brent $/b 70,1 2,92% 67,91%
Eur os tox x 50 2509,2 0,27% 2,52% Gold Price % 5 Days Ytd
DJ 600 214,4 1,73% 8,06% Gold $/oz 934,3 -1,82% 5,95%
FTSE 100 4442,0 0,08% 0,18% Rates USA Euro Japan
Nikkei 10066,9 3,77% 13,63% Central Banks* 0,25 1,00 0,11
Shanghai Comp 2749,0 - 0,24% 50,98% Overnight 0,15 0,78 0,11
Sens ex ( India) 15212,7 1,12% 57,69% 3 Months 0,17 0,72 0,20
MICEX ( Rus s ia) 1138,5 1,61% 83,77% 10 Y ears** 3,77 3,63 1,52
Bov es pa ( Bras il) 53558,2 0,18% 42,63% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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15-Jun-09 THE AFTER

ECONOMIC DATA PREVIEW
Watch in The United-States the release of the NAHB housing market index for June, due at 18.00 GMT expected to increase for the
third consecutive month, confirming that the housing market reached a ground floor and is slowly recovering./JB

ECONOMY
FRANCE : CONSUMER PRICE INDEX REACHED NEGATIVE TERRITORY FROM A YEAR AGO FOR THE FIRST TIME OF ITS HISTORY IN MAY
For the first time of its history France’s consumer price index reached negative territory in May at-0.3% YoY. Even if prices rise by 0.2%
in June (meaning at the same rhythm than last month) the year on year inflation will reach-0.5% as prices rose by 0.4% in June 2008.
This is called a “base effects”. Nevertheless the situation is not as bad as it looks. Indeed core inflation (excluding food and energy)
remained positive at +1.6%. Meaning that as the energetic inflation did not generate a core inflation a year ago, the deflation of
commodities do not generate a global deflation. In addition the drop of prices increase household purchase power in the short term. But
its important to notice that deflation as only positive impacts in the short term and if it’s a temporary situation. At the opposite if the
deflation last companies will see their turnover dropping meaning their margins felling and will face losses forcing them to lay off. Then
we enter a vicious circle as unemployment rise , wages drop and companies have even more financial difficulties creating new lay off
wave.

EURO ZONE : INDUSTRIAL PRODUCTION DECLINED BY RECORD IN APRIL

European industrial production fell from -19.3% YoY in March to -21.6% YoYin April, the sharpest drop on record. This plunge is mainly
the consequence of the global economic downturn and the collapse in global trade humping industrial production. At least the monthly
pace of contraction is slowing from -1.4% in March to -1.9% in April. If we look to the breakdown we see a sharp fall in capital goods (-
2.7%) reflecting the drop of investments and a drop of 1.7% in intermediate goods while energy production dropped by 1.1%.
Nevertheless the industrial production at the second quarter should drop less significantly than the first quarterly fall of 7.8% and will
consequently have less impact on the GDP. Its important to remember that industry account for around 20% of the euro zone GDP
versus 13% in the United-States./JB
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15-Jun-09 THE AFTER

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
15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009 15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009
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 15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009
15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009
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
15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009 15/06/2007 15/12/2007 15/06/2008 15/12/2008 15/06/2009
Source : Bloomberg Source : Bloomberg