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4-Jun-09 CAAAAAALLMM
Healthy and needed correction yesterday on equity indices ahead of the Employment report tomorrow. In the US, the decline was
limited by a strong finish reflecting the intraday short covering as well as the underweight stance from fund managers which brings a
protection to any downside move. The sharp drop in commodity prices weighed heavily on materials and energy stocks, which led losses
among stocks for nearly the entire session. Weakness in the energy sector was exacerbated by Valero Energy's (VLO 18.40, -3.98)
disappointing forecast.
Official interest rates in the UK and the euro-zone are set to remain on hold today. Nor are the MPC or the ECB expected to
announce further unconventional policy measures. Amid all the excitement about the green shoots of economic recovery, markets have
not altered their expectations for the path of monetary policy much in recent months. Interest rates are only forecast to creep up slightly by
the end of 2010. It is now granted that the worst of the economic downturn and financial crisis is behind us, which might suggest less of a
need for a very prolonged period of exceptionally loose monetary policy. Growing risk appetite is causing commodity prices to surge
again. But the large amount of spare capacity will act as a powerful deflationary force, limiting inflationary pressures.
Growth will appear sooner rather than later, but the speed might not be as high as in the latest years such as the one the
commodity rally anticipated in 2003. However, the current levels seen on the equity indices are just a reward from a 29 crisis issue
avoided, and a soon growing economic period ending the recession one. As to the speed of the recovery, it is too soon to get excited and
predict a fast one. After a heart attack, if you survive, you go in intensive care, and certainly don’t run the 100 m a few months after at the
same speed … but you can run … The bottom line is that even if the recovery builds momentum, don’t expect official interest rates to rise
any time soon. With yield curves already exceptionally steep, that should provide support for government bonds.
The warnings of Fed chairman Ben Bernanke in his congressional testimony today that "the recovery will only gradually gain
momentum" and "the rate of growth... is likely to remain below its longer-run potential for a while" is just fair. Bernanke's prepared
remarks on economic conditions were relatively unsurprising. The Fed thinks that the recession is easing, but that any actual recovery
won't start until "later this year". However, in discussing financial conditions, he did argue that the recent surge in Treasury yields "appear
to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of
flight-to-quality flows, and technical factors related to the hedging of mortgage holdings." Since the Fed won't want to be seen as
monetising those deficits and should view the greater economic optimism as a positive development, Bernanke's comments don't suggest
the Fed is preparing to raise the speed and size of its long-term asset purchases, at least not by any major degree.
Labour market conditions are improving, but only at a very gradual rate, suggesting that there is a risk the US could suffer yet
another jobless recovery. The ADP payroll survey yesterday indicates that private sector employment fell by a slightly more modest
532,000 in May, compared to a 545,000 decline in April and a 736,000 drop in March. The moderation is encouraging, but the bottom line
is that the economy is still losing a staggering half million jobs each month. Those figures probably won't change market expectations for
the official May payroll figures, due out on tomorrow. As it stands, the consensus forecast is for a 520,000 decline. Once again, the
employment is a lagging indicator, which will get better once things are economically back on track. Any earlier improvement would just
be a plus to the current economic recovery and upside equity rally.
Opening slightly up we should be sideways up today. The Employment report out before the US cash opening tomorrow should cap
the upside possibility for today’s session
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 66,0 1,4153 96,18 3,56 3,57 -4,19 -3,60 -1,26 -0,30 -0,60 -1,43 -1,95 -1,89 -2,21 -1,37 -0,59 -0,75 US
Perf 1d % -4,00 -0,07 -0,20 1,54 bp -8,6 bp -3,46 -3,53 -0,94 -0,29 -0,82 -0,82 -1,75 -1,86 -2,22 -1,32 -0,65 -0,87 Europe
ECONOMIC DATA with impact
Bank of England meeting (12 UK time) / rates should remain unchanged / the focus will be on whether the BoE announces any new
unconventional policy arrangements. It should not alter the current course of asset purchases under its quantitative easing programme. It
was only last month that it extended the programme by £50bn to a total of £125bn / minor then
ECB meeting (12h45 UK time) / rates should remain unchanged / however, the focus has now shifted to developments surrounding
unconventional policies. The Bank is expected to provide more details of the plan it announced at the May meeting to start buying small
amounts of covered bonds. The ECB should not announce anything new this month / minor
Cleveland Fed President Pianalto conference (11h50 gmt)
NY Fed President (12h gmt)
Jobless Claims (12h30 gmt) expected 620k from previous 623k / interesting ahead of the Employment report tomorrow
US Q1 Productivity revision (12h30 gmt) expected +1.2% from +0.8% / minor as old story
Fed Chairman Bernanke (12h45 gmt) giving opening remarks at Fed Conference in Washington
ICSC Chain Store Sales expected 0.6% from 0.7% / with unemployment up and no fiscal stimulus checks in the mail, retailers are to face
difficult same-store sales comparisons in coming month, but things to get better in H2 according to Bernanke / interesting
POSITIVE IMPACTS
REPSOL : Sacyr is no longer interested in selling its 20% stake in Repsol (CEO in El Pais)
ARCANDOR : METRO is certain that it can take over 60 of the 90 department stores of Arcandor's Karstadt stores and integrate them
into its Galeria Kaufhof concept / Separately, the Social Democrats are examining a €300m bridging loan directly from KfW
WM MORRISON : Q1 like-for-like sales ex-fuel and vat +8.2% (+7.5% exp) / Financial outlook for the year remains unchanged
WH SMITH : Trading in line with views / Like-for-like sales down 4% compared to the same period last year.
TOTAL announced the discovery of a significant gas condensate field in the Niscota block of the Andes foothills, Colombia.
BANKINTER said its €361.4m capital hike, decided to fund the announced €426m purchase of Linea Directa has been fully subscribed
NOVARTIS said a 1-year Phase III study confirms Ilaris offers LT remission in patients with a severe lifelong auto-inflammatory disease
KBC said that “a positive turn” in its commercial performance continued into in the Q2
PREMIERE said its CEO has over the past week bought shares in the company worth €1.86 m (about 0.14% of issued shares)
ENEL’s CEO subscribed to 248k newly issued shares for a total consideration of €715k as part of the rights offering

NIPPON STEEL may see its earnings bottom out in the April-June quarter and nearly break even in the July-September period, having
extracted concessions from major buyers of products in the latest round of price negotiations (The Nikkei)
NEGATIVE IMPACTS
EADS : United Airlines has asked Boeing and Airbus to propose competing bids for up to 150 new airliners / The deal could be worth
more than $10 bn for the 2 aircraft makers (WSJ) / By asking for competing bids, UAL is hoping to obtain better terms …
SANTANDER is planning to issue €2 bn to €2.5 bn in preferred stock (Cinco Dias) / Shares may pay an interest rate of 5.75% for
the first year and more than 4% the 2nd year
EDF-TOTAL-GDF : The construction of a third generation nuclear plan in France will not happen before 2010 (French Govt)
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4-Jun-09 CAAAAAALLMM
PORSCHE will seek €1.75 bn from Germany's development agency KfW in order to refinance (FT)
DEUTSCHE BANK : The SEC completed settlements with DBK, BofA & RBC to resolve SEC charges the companies misled investors
about the liquidity risks of ARS that they underwrote, marketed or sold last year = Under those deals, BofA will pay about $4.5bn, DBK
nearly $1.3bn and RBC some $800m to about 9,600 customers who invested in ARS before the market froze in Feb. 2008
JULIUS BAER said that it is canceling an ongoing SFR2 bn share buyback program in connection with a planned separation of its asset
management and private banking businesses / The share buyback program runs from 2008 to 2010.
SANOFI-NOVARTIS-BAYER : Merck US has started contacting potential buyers for 2 assets put up for sale : its 50% stake in the Merial
JV, (valued at about $5 bn) + Schering-Plough's animal health biz ($6 bn to $8 bn) / Possible buyers of 1 of the biz include Sanofi, Bayer,
Novartis … Merck will decide which of the biz to sell based on the levels of interest they generate…
VOESTALPINE : FY sales €11.6bn (11.7bn exp) / Ebitda €1.72bn (1.71bn exp) / Says demand stabilization unrealistic until H2 2010
BANCO PASTOR expects its bad loans ratio to reach a maximum of 6% by year-end, up from 4.1% at end-March (CFO)
CORIO announced ordinary shares and treasury shares issue = Plans to place up to 7,9m ordinary shares / Net proceeds of the offering
will be used for acquisition opportunities in Corio's home markets, to strengthen the balance sheet and for general corporate purposes
AIR BERLIN plans to issue approximately 6 million new shares / Said it increased its revenue per available seat kilometer by 9.3% /
Added that number of passengers transported in may was 7.7% lower than in the corresponding month of the previous year
RESULTS DIVIDENDS EVENTS
Vallourec AGM / Acciona AGM / Saint-Gobain AGM / Home Depot analyst meeting / Power, Gas &
Today Johnson Matthey / Voestalpine Hermes (€1.03) /
Utilities conf at Citigroup
Friday Carephone Wharehouse Lloyds AGM / Wal Mart AGM / Wendel AGM
Cisco and Travelers replace GM and Citi in the Dow Jones Industrial Average Index / Apple expected to
Monday Texas Instruments mid-quarter ADP (€1.38)
reveal new iPhone at Worldwide Developers Conferenc
Tuesday Tesco trading statement Dassault Systemes AGM / Aegon investor conf / Publicis AGM / Mastercard AGM / Valeo AGM
Wednesday Inditex Saint Gobain (€1.00) Home Depot investor conf / Antofagasta AGM / Global Transportation conf at Merrill Lynch
TRADING IDEAS
BUY the dollar to play dollar recovery (double top vs euro)
BUY PERNOD / AHOLD / ENEL / GSZ / PHILIPS / VIVENDI / ACCOR looking good
BUY DANONE / GLAXO / NOVARTIS / MUNICH RE / EON / to play eco recovery

BUY PHILIPS / SELL SIEMENS // BUY NESTLE / SELL UNILEVER // BUY DAIMLER / SELL PEUGEOT // BUY GLAXO / SELL ASTRAZENCA
BROKER METEOROLOGY
SAINSBURY .............................. RAISED TO OVERWEIGHT .......................................................................... BY MORGAN STANLEY
THYSSENKRUPP ...................... RAISED TO BUY FROM NEUTRAL ............................................................................... BY MERRILL
KINGFISHER ............................. RAISED TO OUTPERFORM FROM NEUTRAL ..................................................BY CREDIT SUISSE

RENEWABLE ENERGY ............ CUT TO SELL FROM NEUTRAL ............................................................................................ BY UBS

ORASCOM TELECOM............... CUT TO UNDERWEIGHT ............................................................................. BY MORGAN STANLEY
NOVATEK ................................. CUT TO HOLD FROM BUY ......................................................... BY ROYAL BANK OF SCOTLAND
METRO AG ................................ CUT TO HOLD FROM BUY .................................................................................................... BY RBS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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4-Jun-09 CAAAAAALLMM
CHART OF THE DAY
ADP national employment report private nonfarm level change (value/thousand)
since 2001

400

200

-200

-400

-600

-800
2001 2002 2003 2004 2005 2006 2007 2008 2009

Source : ADP
U.S. companies cut an estimated 532 000 workers (forecast 525 000) in May down from an estimate of -545 000 (revised from 491
000) in April. Despite the fact that the labour market is deteriorating at a slower pace , its important to bear in mind that the economy
is still losing half million jobs each month. Indeed the global economic downturn is hitting demand for American goods abroad and
despite a good resistance at the first quarter last economic data showed that domestic demand is not taking over (-0.3% in March and
-0.1% in April).

Time Country Indicator Period GE forecasts Consensus Previous

0.50 GMT Japan Capital spending First quarter -30,0% -17,3%
7.45 GMT France ILO unemployment rate First quarter 8,6% 8,2%
10.00 GMT Euro zone Retail sales April 0,2%,-2,9% YoY -0,6%,-4,2% YoY
12.00 GMT United Kingdom Bank of England annouces rate June 4 0,50% 0,50% 0,50%
12.45 GMT Euro zone European Central Bank annouces rates June 4 0,75 % 1,00% 1,00%
13.30 GMT United-States Non farm productivity (final) First quarter 1,2% 0,8%
13.30 GMT United-States Unit labor costs (final) First quarter 2,9% 3,3%
13.30 GMT United-States Initial jobless claims May 30 620 000 623 000
13.30 GMT United-States Continuing claims May 23 6 855 000 6 788 000
United-States ICSC chain store sales May 0,5% YoY 0,7% YoY

Indexes Price % 5 Days Ytd Forex Price % 5 Days Ytd

DJIA 8675,3 4,52% -1,15% EUR/USD 1,4167 1,61% 1,40%
S&P 500 931,8 4,38% 3,16% EUR/JPY 136,19 -0,86% 6,97%
Nasdaq 1825,9 5,49% 15,78% USD/JPY 96,14 0,74% 5,72%
CAC 40 3309,7 0,79% 2,85% Oil Price % 5 Days Ytd
DAX 5054,5 1,08% 5,08% Brent $/b 65,5 3,55% 57,06%
Eurostoxx 50 2483,4 0,27% 1,46% Gold Price % 5 Days Ytd
DJ 600 209,9 -0,03% 5,84% Gold $/oz 967,0 0,83% 9,68%
FTSE 100 4383,4 -0,36% -1,15% Rates USA Euro Japan
Nikkei 9691,1 3,21% 9,39% Central Banks* 0,25 1,00 0,10
Shanghai Com p 2751,0 6,70% 51,09% Overnight 0,10 0,68 0,10
Sensex (India) 14723,7 5,40% 52,62% 3 Months 0,13 0,75 0,20
MICEX (Russia) 1109,2 4,68% 79,04% 10 Years** 3,56 3,57 1,52
Bovespa (Brasil) 52086,6 0,57% 38,71% *US: Fed Funds; Jap: Overnight; Euro: Refi
** Euro: German Bund rate Source : Bloomberg
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4-Jun-09 CAAAAAALLMM

ECONOMIC DATA PREVIEW

Watch in the United-States the initial jobless claims and the continuing claims due at 13.30 GMT. Initial jobless claims are expected
to remained at a high level but should continue to decrease as the US economy seems to have reached a bottom. Meanwhile
continuing claims should reached another historical high underlining the freezing situation of the hiring process.

Watch in the Euro area the European Central Bank announces rate for June due at 12.45 GMT. Even if a status quo on the ECB refi
rate is expected, the historical drop of the GDP at the first quarter add to the high level of the euro currency and to the risk of deflation
could led the European Central Bank to decrease its leading rate of 0.25 bp to reach 0.75%. /JB

ECONOMY
UNITED-STATES : JOB DESTRUCTIONS DECREASED IN MAY AS PER ADP PRIVATE REPORT
U.S. companies cut an estimated 532 000 workers (forecast 525 000) in May down from an estimate of -545 000 (revised from 491 000)
in April. Despite the fact that the labour market is deteriorating at a slower pace , its important to bear in mind that the economy is still
losing half million jobs each month. Indeed the global economic downturn is hitting demand for American goods abroad and despite a
good resistance at the first quarter last economic data showed that domestic demand is not taking over (-0.3% in March and -0.1% in
April). As a matter of fact U.S. economy broke the virtuous circle employment, consumption, investment and get into the vicious circle
job destruction generate lake of purchase power forcing companies to cut jobs increasing again the unemployment. Nevertheless the
situation will improve in a near future as the rise of revenues add to the drop of interest rate and to the budgetary revival plan including
checks(tax rebate) will support American purchase power and will boost the demand (70% of the GDP) in the coming months. Of course
this will impact positively the labour market and job destructions should progressively continue to decrease in the coming months.

UNITED-STATES : ISM SERVICES ROSE IN MAY AND FACTORY ORDERS INCREASED IN APRIL
U.S. ISM services rose modestly from 43.7 in April to 44.0 in May (forecast 45.0) the highest level in seven months and the third
increase in fourth months. If we look to the breakdown main improvements are in supplier deliveries reaching the level of 50 and the
inventory changes rising from 43.0 to 47.0 as well as employment from 37.0 to 39.0. On the other hand the new order index fell back to
44.4 from 47.0 and the main ISM services index at 43.7 remained under the level of 50 showing a contraction of the activity. Its
important to bear in mind that non manufacturing business account for around 70% of the economy. Meanwhile factory orders rose from
-1.9% in March (revised from -0.9%) to 0.7% in April as demand for automobiles, electrical equipment and construction machinery
increased. Indeed ex transportation factory orders rose 0.1% only and ex defence by 0.3%. More generally capital goods rose from
-2.6% to 1.1% reinforcing the idea that investment has reached a ground floor and should slowly recover as showed as well by the
reading above 50 of the new order component of the ISM manufacturing.

EURO ZONE : GDP PRELIMINARY RELEASE CONFIRM THE HISTORICAL DROP AT THE FIRST QUARTER 2009
The preliminary release of the Euro area GDP confirm the historical drop of the advanced released at -2.5% and a slight revision of the
year on year data at -4.8% (prior -4.6%). The breakdown revealed that net exports, investment and inventories were the main factors
explaining the 2.5% quarterly contraction of the Euro area GDP. Meanwhile household consumption remained very weak at -0.5%
underlining the difficulties of European companies forcing to cut jobs and to adjust their prices down. The euro area will certainly face a
deflation situation in June which will mechanically increase the unemployment and the bankruptcies worsening the said deflation. Again
in regards to this gloomy economic situation and to the bleak outlook the European Central Bank must absolutely cut its leading rate
next tomorrow.

EURO ZONE : PMI SERVICES AND PMI COMPOSITE IMPROVED AGAIN IN MAY
Following the last Monday increase of the PMI manufacturing, Euro area PMI services and PMI composite final release revealed an
improvement of respectively 44.8(prior 43.8) and 44.0(prior 41.1). If we look to the breakdown by country all major Euro area countries
showed an improvement of the PMI services : Germany from 43.8 to 45.2, France from 46.5 to 48.3, and Italy from 42.0 to 13.1.Euro
area PMI services are slowly but surely moving to the level of 50 which represent the limit between an expansion and a contraction of
the activity. These encouraging data are showing that the recession is easing after the historical drop of the GDP at the first quarter.
Nevertheless the Euro area will recover at a slower pace than the United States as concrete signs of recovery should not occur before
the end of 2009. Indeed the euro currency remained way to high in regards to economic fundamentals and the European Central Bank
refi rate at 1% is as well penalizing the economy. JB
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4-Jun-09 CAAAAAALLMM

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
04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009 04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009
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
04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009 04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009
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
04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009 04/06/2007 04/12/2007 04/06/2008 04/12/2008 04/06/2009
Source : Bloomberg Source : Bloomberg