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22-Jun-09 FLY AWAY

Very interesting week ahead, not only because the Fed meeting might provide some inside regarding its rate policy and the quantitative
easing policy (Wednesday), but because the June heavy option expiry is now behind us, with a lot names closing on fighting strategic
strikes levels, meaning some players might have to deal with position they did not choose, but more mid term fund managers will be even
more underweight equity as they lost their protection on both the downside and the upside. Last week started with some fear that inflation
would spoil a still fragile economic recovery, and ended on another confirmation thanks to the bunch of data that the economic recovery in
the US is well on track, and inflation fears are not justified at this stage thanks (or because) of a deflation current which tempered the
commodity prices rise.
As such, fund managers are gradually getting embarrassed with their long cash position, and should soon need to go shopping in
equity or else through option purchases. September maturity positions are small compared to June ones, reflecting a short term view and
mostly the need to cover (or invest) in case of a brutal upside move, which might soon happen in July once the earnings releases will
confirm the improving macro data following the top-bottom logic.
Beside the Fed meeting, additional macro data should confirm the improving economic background. The existing home sales
tomorrow should add to the idea that the housing sector has been bottoming, same for the new home sales which will be the
Wednesday’s focus alongside the durable orders just ahead of the FOMC issue. Personal consumption on Thursday will be glanced as
well as the jobless claims, as well as the consumer spending, the PCE and the Michigan index on Friday.
The economic calendar doesn't feature an abundance of companies, but there are some widely-held names set to report their latest
quarterly results, including Monsanto (MON), Nike (NKE), Oracle (ORCL) and Walgreen (WAG).
Indeed, this week kicks off with Tuesday’s existing home sales data. The surge in the pending home sales index in April suggests
that existing home sales could move out of the 4.50m to 4.80m range they have occupied over the past six months. At face value, it points
to a jump from 4.68m in April to 5.10m in May. This would return the number of existing home sales back to the level seen before the
collapse of Lehman Brothers last September. The pending home sales index has been a less reliable lead indicator of existing sales in
recent months. This would provide yet more evidence that housing activity has reached a floor. Despite the modest fall in June, the NAHB
index is still consistent with a fairly strong rebound in new home sales (figures out on Wednesday). Indeed, it is pointing to a jump from
352,000 in April to around 480,000. That seems a bit excessive, expect a more modest increase to around 380,000 in May. But these
housing data should show the housing sector has been bottoming, while the banking sector is gradually getting better with some US
banks soon giving the government money back (most of US banks release earnings between July 13th and 17th). Housing and banking
were the initial trouble makers from the financial and then economic crisis, in getting better we have more chance in succeeding the
recovery which is taking place, which by the way the Fed should keep on monitoring, such as they will say on Wednesday on providing
more inside.
The GAIM conference confirmed the very bearish consensus still which should send us higher as time is passing by and
conditions appear better through July earnings. For the look ahead, a survey of attendees by conference organizers revealed that
65% of those polled expect the crisis to "rumble on," with just 17% saying it was over and that same amount expecting the crisis to
diminish significantly. "The second half of the year has built in very high expectations and if they're not met, we're going to see
nervousness that is going to move very rapidly" said a fund managers. "The other catalyst that markets will be looking for is signs that
Federal Reserve Chairman Ben Bernanke may not be nominated for a second term. President Barack Obama has praised Bernanke for
his efforts in the financial crisis but has been mum on whether he'll reappoint the Fed chief. Investors can protect themselves the next
time around by understanding that they need a plan for when an event happens -- and need to stick to it". Their four funds did well
because "we know what we do if the stock market falls 5%. Our basic investment advice to anyone is if you don't know what you'll do if
the stock market falls 10%, you shouldn't be in the stock market". Everything is prepared to welcome a downside move, and this often
makes it simply not happen, especially as now the upside run is making performances hard to explain to investors, and fund managers
are not looking at the market, but rather at what could make the market fall down and fit their bear strategy choices.
Soon ending Q2, not much protections both ways should make the market boost to the upside, with some possible erratic flows
today for the first two hours due to positions coming from option players who might not hedge on Friday's close.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 69,3 1,3908 96,11 3,78 3,50 0,31 -0,87 1,53 0,53 1,26 -1,07 0,09 -1,14 1,23 0,31 1,09 -0,19 US
Perf 1d % -3,52 -0,21 0,17 0,02 bp -4,5 bp 1,64 -0,07 0,85 1,01 1,48 -0,43 0,81 -0,58 1,55 0,70 1,44 0,45 Europe
ECONOMIC DATA with impact
German IFO (9h UK time) expect 86 level / the Zew index came nicely on the upside last week / We should see a more marked
improvement in the Ifo measure of German business confidence this month. The index has risen for the past two months, but May’s half
point increase was much more modest than had been hoped / minor
POSITIVE IMPACTS
EDF: prices for households may rise in Aug after the govt allowed a 2-3% increase in electricity distribution rates from Aug. 1(La Tribune)
GDF SUEZ : prices will remain unchanged in July, as asked by the Company (Le Journal du Dimanche, citing no source)
ENEL : 99% of the group's €8Bn rights issue which closed on Friday has been subscribed.
VEOLIA plans to sell its airport management & maritime servicing activities in North Europe (La Letrre de l’Expansion)
VINCI, BOUYGUES, ALSTOM, THALES, COLAS : signed contracts worth a total €420M to extend the third metro line in Cairo
SIEMENS : aims to generate €25 Bn in sales of environmental technology by 2011, up from €19Bn in 2008 (CEO in Focus)
FCC : will build 4 soccer stadiums in Poland worth €515M ( La Vanguardia citing no source)
LVMH : Diageo would be interested in raising its stake in Moet Hennessy if LVMH agrees (CEO in Finanz & Wirtschaft)
ITV : Citigroup agreed to underwrite a £500M capital-raising by ITV if the Co appoints Tony Ball as its CEO (Sunday Telegraph)
TELEFONICA has a good mix of fixed and wireless assets, excellent management and a consistent track record of dividend growth.
(Templeton CIO in Barrons)
METRO ‘s CEO says his firm is in a "position of strength" in a takeover battle for department store chain Karstadt. He would not bid at
any price and would bide his time, although being aware that an unresolved situation should not continue indefinitely
ANGLO AMERICAN : Following lobbying by major institutional stakeholders Black Rock & Capital Group, Xstrata has approached Anglo
American about possible merger.
MITTAL : Vale it cut prices for iron ore to ArcelorMittal…
VOLKSWAGEN : To end Q2 with positive result / would consider loan to Porsche (CFO)
PORSCHE : The investment fund of the Emirate of Qatar could take a stake of as much as 29.9% in Porsche (Focus)
SANOFI is set to announce a major restructuring of some of its business lines (union)
CLARIANT is set to cut 500 more jobs worldwide in reaction to lower sales levels in the chemicals industry (SonntagsBlick)
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22-Jun-09 FLY AWAY

NOVARTIS is undervalued, the Co has a number of promising drugs in development and non-pharmaceutical revenues are forecast to
increase to 50% of company revenue from 30% in the next 5 years (Templeton CIO in Barrons)
POSTBANK doesn't want to set up a bad bank to hive off toxic securities (spokesman denying a report to be published in Monday's Der
Spiegel magazine) / Der Spiegel reported that DPB wanted to move around €5bn worth of toxic securities into a special purpose entity
LLOYDS may receive formal offers for £74bn worth of assets managed by Insight Investments (London Times)
UBS : U.S. authorities could be willing to make a deal in a legal case against UBS after the countries agreed a double taxation treaty last
week, Swiss President Hans-Rudolf Merz was quoted as saying in newspaper SonntagsZeitung
NEGATIVE IMPACTS
AIR FRANCE sees its target for a 2010 fiscal operating loss close to last year’s €129M loss compromised by the crisis (La Tribune)
RENAULT had its long-term corporate credit and debt ratings cut to the speculative-grade level of BB from BBB- by S&P
VIVENDI has no liquidity problems for the next 3 years & has no reason to raise funds for now. Vivendi’s Canal+ operating result
will progress less than forecast ( CEO in JDD)
INFINEON is seeking money from the European Investment Bank (EIB) on top of state loan guarantees of €300M (press)
SAP is in preliminary talks about an acquisition of as much as €1.5Bn (Welt am Sonntag)
TELEFONICA / TEL. ITALIA : There are no plans for any merger (Mediobanca board member Tarak Ben Ammar)
SUEZ ENV could purchase La Caixa’s 24.1% stake in AGBAR for €829.5M (Expansion citing no source)
NORSK HYDRO may bid “substantially higher” than the $297 already offered by its management for Asia Aluminum Holdings Ltd. (South
China Morning Post, citing no source)
PORSCHE : Daimler & Porsche dismissed a report about potential talks over a Daimler investment in Porsche as “speculation.”/ German
state-owned bank KfW is opposed to a massive loan request from Por. & its chances of obtaining any public aid are slim (eco Minister)
NESTLE is planning new acquisitions in Italy, country head Manuel Andres told Il Sole/24 Ore in an interview
NOVARTIS may spend as much as SFR1Bn expanding its biz in Shangai (Press)
BAYER sees lower demand for its contraceptive pills & has cut the number of shifts amid intensifying price pressure in the eco crisis
EADS : Germany will not see the first delivery of A400M before 2014.
RBS may break up its Asian business after attempts stalled to sell the operation as a single unit (Sunday Times)
SWISS BANKS : Leading members of the Swiss Private Bankers Association have recognised they may have to raise tax compliance
with clients and, if necessary, encourage them to declare previously hidden assets (FT)
SWISS RE is unofficially seeking to sell its British life assurance unit, Co is still examining alternative cash-raising plans for Admin Re,
after earlier fundraising plans failed (Sunday Times)
RESULTS DIVIDENDS EVENTS
Today Enel (€0.29) / Tenaris ($0.30) / Terna Rete Elettrica Nazionale(€0.0988) Telefonica AGM / Gazprom AGM
Carrefour strategy presentation / Alstom AGM /
Ciba AGM / Nippon oil AGM / Toyota AGM /
Tuesday Oracle / Jabil Circuit / The Kroger Co.
Honda Motor AGM / Sharp AGM / Mid cap
chemical conf at Merrill Lynch
Solvay investor morning / Mazda Motor AGM /
Colruyt / Wyeth / B B&B / Nike / Friend Provident (GBp 2.888889) / Invensys (GBp 1.666667) / Aveva
Wednesday Mitsui AGM / Nippon Steel AGM / Kobe Steel
Monsanto (GBp 7.22222)
AGM / Consumer conf at Credit Suisse
Standard Chartered trading statement /
China Shipping container lines AGM / Lukoil
Thursday Scania / H&M / Accenture / Palm / Tata Alstom (€1.12)
AGM / Panasonic AGM / Yahoo AGM
Steel
Hannover re investor day / Gazprom AGM /
Friday KB Home Cisco conference / Nitendo AGM / Gas Natural
AGM (27th June)
TRADING IDEAS
BUY FINANCIAL as BNP / AGRICOLE / DBK / SOC GEN / MUNICH RE on double bottom possibility
BUY ENERGY names as TOTAL / ENI / REPSOL / EDF / GSZ on recovery
BUY SAP / VINCI / CARREFOUR / DAIMLER / FRANCE TEL on double bottom
BUY DANONE / PERNOD on reversal Head & Shoulder

BUY ROCHE & NOVARTIS / SELL MERCK // BUY GLAXO / SELL ASTRA // BUY LAFARGE / SELL HOLCIM // BUY ALLIANZ / SELL AXA // BUY
DAIMLER / SELL BMW
BROKER METEOROLOGY
SKF AB .......................... RAISED TO OVERWEIGHT FROM NEUTRAL ...................................................................... BY JPMORGAN
HOLCIM.......................... RESUMED BUY ........................................................................................................................... BY MERRILL
MORRISON .................... CUT TO NEUTRAL FROM OVERWEIGHT ........................................................................... BY JPMORGAN
LAFARGE ...................... RESUMED NEUTRAL ................................................................................................................. BY MERRILL

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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22-Jun-09 FLY AWAY

CHART OF THE DAY
Housing starts and residential investment in the United-States
Since 1991
0 milliers a/a,
2300 20
2200
2100 15
2000
1900 10
1800
1700 5
1600
1500
0
1400
1300
-5
1200
1100
v 1000 -10
900
800 -15
Mai
700
600 -20
500
T1 09
400 -25
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Mises en chantier de logements - G - Investissement résidentiel - D -

Source : Bloomberg

After reaching a ground floor in April, U.S. Housing starts rebounded in May. Despite gloomy indicators in 2006 forecasting bleak
outlook we can now expect a recovery of the real estate market in the United-States by the end of 2009.

Time Country Indicator Period GE forecasts Consensus Previous

0.01 GMT United Kingdom Rightmove house prices June + 2,4%, - 6,2% YoY
6.00 GMT Japan Supermarket sales May -3,7% YoY
8.00 GMT Japan Convenience store sales May + 4,3% YoY
9.00 GMT Germany IFO Business climate June 85 85 84,2
9.00 GMT Germany IFO Current assessment June 83,1 82,5
9.00 GMT Germany IFO expectations June 87,3 85,9
9.00 GMT Italy Industrial orders April -2,7%,- 26,0% YoY
9.00 GMT Italy Industrial sales April -0,8%,- 22,6% YoY

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

DJIA 8539,7 - 2,94% - 2,70% EUR/USD 1,3903 0,71% -0,50%
S&P 500 921,2 - 2,62% 1,99% EUR/JPY 133,55 1,10% 5,11%
Nas daq 1827,5 - 1,68% 15,88% USD/JPY 96,06 1,86% 5,63%
CA C 40 3221,3 - 3,15% 0,10% Oil Price % 5 Days Ytd
DA X 4839,5 - 4,53% 0,61% Brent $/b 68,3 -1,26% 63,46%
Eur os tox x 50 2434,8 - 2,97% - 0,53% Gold Price % 5 Days Ytd
DJ 600 208,3 - 2,81% 5,00% Gold $/oz 933,4 0,54% 5,82%
FTSE 100 4345,9 - 2,11% - 1,99% Rates USA Euro Japan
Nikkei 9859,9 - 3,45% 11,29% Central Banks* 0,25 1,00 0,10
Shanghai Comp 2914,1 5,09% 60,04% Overnight 0,20 0,70 0,10
Sens ex ( India) 14617,2 - 4,69% 51,52% 3 Months 0,17 0,69 0,20
MICEX ( Rus s ia) 1017,3 - 10,65% 64,20% 10 Y ears** 3,78 3,50 1,46
Bov es pa ( Bras il) 51373,8 - 4,08% 36,81% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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22-Jun-09 FLY AWAY

ECONOMIC DATA PREVIEW

No economic data are due today in the United-States

Watch in Germany the IFO business climate for June, due at 08.00 GMT, expected to rise for the third consecutive month. Indeed
despite the global economic downturn hitting German’s exportations its seems that after the sharp fell of the GDP at the second
quarter (-3,8%) the economy reached a ground floor. /JB

ECONOMY
NO MAJOR ECONOMIC DATA HAVE BEEN RELEASED FRIDAY 19TH JUNE
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22-Jun-09 FLY AWAY

VIXindex : impliedvolatility on the S&P 500 $Libor -3-Month(InterbankRate)

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
22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009 22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009
Source : Bloomberg Source : Bloomberg

UnitedStates : 10-year Treasury yield 1,2 10-year Treasury spreadUSA-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 22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009
22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009
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
22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009 22/06/2007 22/12/2007 22/06/2008 22/12/2008 22/06/2009
Source : Bloomberg Source : Bloomberg