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27-Feb-09 HAT TRICK

The “Capital Assistance Program”, Obama’s 2010 budget proposal and good prospects for the U.S. housing market pave the
way for a strong equity market recovery. The S&P 500 bank index (S5DBNK) rose 59 % in the last five sessions!
1) Ben Bernanke and Tim Geithner gave a boost to the markets last Tuesday when they suggested that nationalisation of the
banking sector was a wrong strategy for the country, that this kind of action could occur only in case of an immediate risk of loss due to
“toxic assets” after the stress test, that U.S. government ownership was not an objective, and that while the government may take
“substantial” stakes in Citigroup and other banks it didn’t plan a full scale nationalisation that wipes stockholders out. Under the “Capital
Assistance Program”, which includes stress tests (to be completed by the end of April) aimed at measuring how the banks would hold
up under both baseline and extreme economic situations, institutions would have 6 months to raise private capital before getting a
government-issued capital buffer. Estimated future losses and the resources to absorb them will be estimated over a 2-year period. The
baseline economic scenario is made of a GDP estimated fall of 2 % in 2009 and an upturn of 2.1 % in 2010. The worst case scenario
assumes a 2010 unemployment rate of 10.3 %, a Case-Shiller home price decline of 22 % in 2009 and 7 % in 2010 and GDP contractions
of 3.3 % in 2009 and 0.5 % in 2010. Any capital provided to the institutions would be preferred securities convertible into common equity
at a 10 % discount to the prevailing price as of Feb. 9th, coming with a 9 % dividend. They would be convertible at the issuer’s request, but
if not converted or redeemed within 7 years, the securities would automatically be converted into common stocks. Banks that have
already issued preferred shares to the U.S. Treasury under the TARP ($196bn in more than 400 institutions) would be able to convert
those shares to the new convertible instruments. The new government investment requires banks to submit plans for their use of
government capital. Dividend payments, share repurchases and acquisitions will be restricted. Credit allowance would be controlled. The
upshot of it all is that there will be only few banks to be nationalized, on their request, let’s say those with low Tier one ratio
after stress test (below 4 %?). Those with high Tier one ratio (above 8?) won’t get state capital support. The majority (Tier one
ratio between 4 % and 8 %?) will get state capital support, but we can imagine that this won’t last long (much less than the 7
years after which the convertible preferred securities would be converted to common stocks) because of the drastic conditions
of these convertible preferred securities, mainly a 9 % yearly dividend. Urgently, bank will have to find private capital support
and, so, they will avoid nationalisation.
2) The “Capital Assistance Program” doesn’t specify any potential limit on the amount of money involved. On Feb. 24th, Obama
signalled that the administration would seek more money from Congress for the effort to break the back of the credit crisis. And yesterday
Obama unveiled his first budget which includes as much as $750bn in new aid for the financial industry. And some funding could be found
in the Financial Stability Program (the “Geithner” plan, which is no more than the second tranche of the TARP): initially, $100bn were
allocated to a “bad bank” devoted to buying “toxic assets”, with the target of reaching $1trn after the private sector joined state funding in
the institution. $100bn more were devoted to capital injections.
3) The housing market is certainly facing bottoming data after existing home sales and new home sales hit record low in January.
The housing market will soon get a lift from very favourable buying conditions – not only from improved affordability, but also from the
stimulus of a $8 000 first-time home buyers tax credit (if the buyer keeps his home at least there years), and higher conforming loan limits
that will allow more people to tap into 50-year low mortgage rates. The National Association of Realtors estimates the impact of the
stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to
conditions before the stimulus package. Inventory is expected to fall below an 8-month supply by the year end, which would be consistent
with home price stabilization.
This morning, economic data confirmed that Japan is back into deflation (national CPI ex-food and energy down 0.2 % YoY) and that
activity is weaker and weaker (industrial production -30.8 % YoY in January). In the U.S., 10-year Treasury is close to 3.0 %, which
means a 100 bp rise since the beginning of the year.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 44,6 1,2727 97,63 2,99 3,13 -0,87 -0,07 0,99 -4,85 -1,19 0,20 -1,51 -1,59 -1,76 -1,58 -2,38 -1,22 US
Perf 1d % 4,19 -0,14 0,91 -0,17 bp 13,5 bp 2,15 2,16 4,58 -1,37 1,22 1,04 0,86 -0,02 2,71 1,02 0,46 1,02 Europe
ECONOMIC DATA with impact
US Q4 GDP revision (13h30 gmt) expected –5.4% from previous –3.8% / minor as wherever was the US economy cruising last quarter,
it has stalled after Lehman US officials and this is what the US officials are working on
Chicago PMI (15h45 gmt) expected 33 from previous 33.3 / minor
Michigan Index (15h gmt) expected 56 from previous 56.2 / minor
POSITIVE IMPACTS
DEUTSCHE TEL: Q4 Rev €16.1bn (15.83e) /Q4 EBITDA €4.7bn (4.6 e) / Q4 Adj net pft €861M (693 e) / DIV €0.78 (in line)
THALES: 08 Rev €12.665bn (12.7e ) / 08 EBIT €877M (876 e) / 08 Net €650M (547 e) / Sees 09 org. rev +3-5%
DAIMLER has won approval to offer vehicle leases in China a sign that China plans to help auto makers use financing tools to stimulate
demand for cars
GENERALI said it successfully completed a €750m issue of bonds due November 2014.“Due to strong demand the order book grew to
€3bn , more than four times the total issue size,” Generali said
COMMERZBANK : Brazilian investor Luiz Cezar Fernandes he is in advanced talks to buy Dresdner Bank's Brazil operations.
The deal is expected to close early next week. The transaction is valued at $90-100 million (Rtrs)
ERSTE BANK: Q4 NII €1.34bn / Q4 net loss €603.4M / to raise €2.7bn (from inverstor & 1.9bn by Gov) / DIV €0.65 (0.5e) / No outlook
WERELDHAVE : 08 direct results €109.4M (101.8e) / Indirect result €-100.6M (-140.6 e) / DIV €4.65 (in line)
ITALIAN BANKS & INSU : Consob has extended the short-selling ban until May 31
NORWAY’s BANKS : Norwegian Prime Minister said the country’s major banks will probably participate in the government plan to inject
capital into lenders. Reminder : The Norwegian govt plans to inject as much as $15bn into banks and other companies to boost growth
ACIONA : FY sales €12.67bn ( 12.2e) / FY net pft €464M (507.5 e)
EIFFAGE 2008 Sales €13.226bn (in linish) / Operating profit €1.104bn (in linish) / Net Profit €301m (€367m exp) / keeps DIV at €1.2 /
Sees FY09 sales of €13.7bn (€13.5bn consensus)
REPSOL says sees SACYR keeping stake in Co in mid to long term

CITIGROUP&the U.S. govt have reached a deal to convert up to $25bn in govt-held prfd shares in the bank to common equity (Source).
NEGATIVE IMPACTS
GAMESA :FY Rev €3.65bn (in line) / FY EBITDA €531M (497 e) / FY Net pft €322M (334 e) /Sees 09 EBIT margin of 6-7% (8.6%e)
LLOYDS FY08 revenus £9.9bn (£11.1bn exp) / NII £7.7bn / Net Income £819m / Tier1 6.4% end 2008 / Approved a cap issue of 1 for 40
shares heldtalks on scheme are advanced / Short-term outlook is challenging / Conf Call at 9:30 UKT
ENEL is set to launch a capital increase for €5-7 bn to help it maintain its dividend policy (Il Sole 24 Ore)
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27-Feb-09 HAT TRICK

TF1: Long term credit rating cut to BBB from S&P on concern that weaker advertising may hurt profitability.
FINMECCANICA : Boeing dropped plans to help Finmeccanica build new cargo planes for the U.S. Army and Air Force.
NOVARTIS : The batches meningitis C, vaccine containing a total of 17,000 doses have been recalled in UK due to contamination fears.
FORTIS canceled the shareholders meeting scheduled to take place on March 6. The one item on the agenda will be put to vote at the
April 29 meeting / Separately de Tijd newspaper said “Talks Going in Right Direction” with BNP
EADS: Thales ruled out making any financial contribution to help Airbus reduce its exposure to the troubled A400M
RESULTS DIVIDENDS EVENTS
Acerinox / Aviva / Deutsche Tel / Telecom Italia / Gruppo Ferovial /Gamesa
Today Novartis (CHF 2.00) / Haliliburton ($0.09)
/ Holcim
Vivendi / HSBC / Havas sales / Ahold / Aguas de Barcelona / Allied Irish Morgan Stanley tech conf /
Monday
Banks / Vallehermoso Deutsche Bank Telecom conf
US car sales / Vinci / Bayer / Bouygues / Mun Re / Standard Chartered /
Tuesday Xstrata rights Issue (2 per 1) TMT conf at Chevreux
Beiersdorf / Xilinx
British Land rights Issue 2 per 3 / Diageo (GBp
Credit Agricole/ Adecco / Adidas / France Tel / Suez Environnement /
Wednesday 15.4444) / Thomas Cook (GBp 7,222222) / Bank of
Arkema / Scor / Swisscom / Holcim / Old Mutual
America ($0.01) / Pepsi ($0.425)
British Airways investor / France
Thursday Carrefour / Casino / Essilor / GDF Suez / Aviva / Salzitter Nike ($0.25) /
Tel investor day
TRADING IDEAS
BUY Eurostoxx, CAC and Dax to play double bottom / sell the Bund very toppish
BUY the dollar to play US will manage a recovery sooner than Europe (and obvioulsy S&P and Dow building round bottom)
BUY SAP / DEUTSCHE TEL / EON / AEGON / DAIMLER / LUFTHANSA / AIR FRANCE / METRO / L OREAL / VEOLIA on double bottom possibility
BUY DEUTSCHE BANK / ING / RENAULT to play recovery + charts looking good now
BUY CARREFOUR on reversal Head & Shoulder possibility

BUY NOKIA / SELL ERICSSON // BUY TOTAL / SELL ENI // BUY SIEMENS / SELL ALSTOM // BUY DANONE / SELL UNILEVER
BROKER METEOROLOGY
ANGLO AMERICAN ....................RAISED TO BUY FROM NEUTRAL .............................................................. BY GOLDMAN SACHS
CGG VERITAS ............................RAISED TO NEUTRAL FROM SELL .................................................................................... BY UBS
EDF...............................................RAISED TO OVERWEIGHT FROM NEUTRAL ................................................................... BY HSBC

DANSKE BANK ..........................CUT TO SELL FROM NEUTRAL ................................................................... BY GOLDMAN SACHS

RIO TINTO ...................................CUT TO SELL FROM NEUTRAL ................................................................... BY GOLDMAN SACHS
NORSK HYDRO ..........................CUT TO SELL FROM NEUTRAL ................................................................... BY GOLDMAN SACHS
RBS ..............................................CUT TO SELL FROM HOLD ..................................................................................................BY S&P
BRITISH AMERICAN TOBACCO CUT TO BUY FROM STTRONG BUY ....................................................................................BY S&P

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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27-Feb-09 HAT TRICK

CHART OF THE DAY
US New one family houses sold annual total
since 1963

1400

1200

1000

800

600

400

200
63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08

Source : US Census Bureau

US new homes sales plunged to a new record low in January as soaring unemployment and mounting foreclosures drove buyers
away. The US home sales dropped from 344 000 in December to an annual pace of 309 000 or 10% in January. Theses figures that
came after yesterday's existing home sales that fell also to a lowest level, underline that housing activity remains in freefall...

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
11.30 GMT Japan Jobless rate January 4,6 % 4,6% 4,4%
11.30 GMT Japan Household spending (YoY) January -5,5 % YoY -4,6% YoY
11.30 GMT Japan Tokyo consumer price index (YoY) February 0,3% YoY 0,5% YoY
11.30 GMT Japan National consumer price index January 0,0% YoY 0,4% YoY
11.30 GMT Japan Industrial production (préliminary) January -10,0%,-30,7% YoY -9,8%,-20,8% YoY
00.01 GMT United Kingdom GfK consumer confidence February -39 -37
04.00 GMT Japan Vehicle production (YoY) January -25,2%YoY
05.00 GMT Japan Housing starts (YoY) January -14,9% YoY -5,8 % YoY
10.00 GMT Euro zone Consumer price index January -0,9%,+1,1% YoY -0,8%,+1,1% YoY -0,1%,+1,6% YoY
10.00 GMT Euro zone Consumer price index core (ex food and energy) January 1,8% YoY 1,8% YoY 1,8% YoY
10.00 GMT Euro zone Unemployment rate January 8,1% 8.0%
13.30 GMT United-States GDP QoQ (annualyzed) preliminary fourth quarter -4,4% QoQ -5,4% QoQ -3,8% QoQ
13.30 GMT United-States Personal consumption fourth quarter -3,7% -3,5%
13.30 GMT United-States Personal consumption core (ex food and energy) fourth quarter 0,6% 0,6%
14.45 GMT United-States Chicago purchasing manager February 33,0 33,3
15.00 GMT United-States University of Michigan confidence (final) February 56,0 56,2
15.00 GMT United-States NAPM - Milwaukee February 35,0 33,0

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

DJIA 7182,1 - 3,70% - 18,17% EUR/USD 1,2732 -0,80% -8,93%
S&P 500 752,8 - 3,28% - 16,65% EUR/JPY 124,59 -3,74% -1,91%
Nas daq 1391,5 - 3,53% - 11,77% USD/JPY 97,86 -4,47% 7,24%
CA C 40 2744,8 - 4,42% - 14,70% Oil Price % 5 Days Ytd
DA X 3942,6 - 6,47% - 18,04% Brent $/b 45,4 9,96% 8,36%
Eur os tox x 50 2021,1 - 4,42% - 17,42% Gold Price % 5 Days Ytd
DJ 600 176,1 - 3,91% - 11,20% Gold $/oz 941,6 -5,08% 6,85%
FTSE 100 3915,6 - 2,44% - 11,69% Rates USA Euro Japan
Nikkei 7568,4 - 1,25% - 14,57% Central Banks* 0,25 2,00 0,10
Shanghai Comp 2074,1 - 4,75% 13,91% Overnight 0,25 1,20 0,10
Sens ex ( India) 8748,5 - 0,67% - 9,32% 3 Months 0,27 0,91 0,26
MICEX ( Rus s ia) 672,3 7,06% 8,52% 10 Y ears** 3,00 3,13 1,28
Bov es pa ( Bras il) 38180,2 - 4,18% 1,68% *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-Feb-09 HAT TRICK

Economic data preview

Watch in the United-States the release of the preliminary release of the Gross Domestic Product for the fourth quarter due at 13.30 GMT
expected be worst that the advanced released as the trade deficit higher than expected will not impacted the GDP as it was forecast.

Watch in the Euro Area the release of the consumer price index for January due at 10.00 GMT and expected to decrease as energy
and commodity prices are dropping and as the global economic downturn boost prices down, the core price index will remain positive but
below 2%, watch as well the release of the unemployment rate for January expected to increase as the area is facing its worst recession
ever forcing companies to cut jobs ./JB

ate

ECONOMY
UNITED-STATES : DURABLE GOODS ORDER DROPPED IN JANUARY AND INITIAL JOBLESS CLAIMS SHARPLY ROSE LAST WEEK
Orders for durable goods fell for a record sixth consecutive month in January at -5.2% almost twice as expected (-2.5%). This drop
underline the magnitude of the current slump in investment as domestic demand ( 71% of the GDP) is hit by the rise of the unemployment
and by the credit crunch and as exports are down due to the global economic downturn reducing sharply demand for American goods
abroad. Nevertheless January decline was not as bad as it looks because some of it was due to a drop back in defence orders. Excluding
defence durable orders fell more modestly of 2.3%. Demand for capital goods have been particularly hit with core non defence capital
goods dropping by more than 5% a month in December and in January. In the mean time claims for U.S. unemployment benefits rose
more than expected at 667 000 (forecast 625 000 and continuing claims reached 5112000 (forecast 5 025 000). The January increase of
initial jobless claims (+ 36 000) is the highest since 1982. The Unites states are facing a vicious circle as job losses are crippling the
consumer spending , reducing the companies sells which are reducing investments and cutting jobs again.

GERMANY : UNEMPLOYMENT RATE RISE IN FEBRUARY

As forecast German unemployment rose for a fourth month in February at 7.9% (prior 7.8%). This increase of unemployment underline the
deepening recession in Germany strongly hit by the global economic downturn hampering demand for German’s goods abroad . As a
matter of fact exports the main asset of German growth are falling (-5.28% in December) and the domestic consumption is not taking over.
Companies are indeed facing a major lack of demand and are cutting jobs consequently. As the united-States Germany will shortly face a
deflation situation which will increase the unemployment and cut the domestic demand as a vicious circle. Until now German
unemployment has not risen as sharply as elsewhere in the Euro zone but this should change very shortly. This situation add to a lasting
drop of inflation is putting more pressure on the European Central Bank to cut its leading rate next week.

EURO ZONE : ECONOMIC CONFIDENCE REACHED NEW RECORD LOW IN FEBRUARY

After dropping to an historical low in January at 67.2, economic confidence in the Euro area break a new record low at 65.4 in February.
Unfortunately this is not a surprise as the Euro area is facing its deepest recession since 1993, indeed all economic indicator are down,
companies are cutting jobs humping household purchase power and increasing the cut of the demand. As a matter of fact the circle
investment, employment, consumption is broken and the euro area will shortly face a deflation situation which will slash again the
household demand. The downturn is broadly based and industrial and service sectors are declining pushing down the consumer
confidence. The only way to get out of this terrible recession is to coordinate revival plans in the area and to have a deep cut of the
European central Bank leading rate. Nevertheless as all economic policy action take 6 to 9 month to impact the activity the six next month
will be terrible for the Euro area humping again the economic confidence./JB
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27-Feb-09 HAT TRICK

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
27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009 27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009
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
27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009 27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009
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
27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009 27/02/2007 27/08/2007 27/02/2008 27/08/2008 27/02/2009
Source : Bloomberg Source : Bloomberg
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27-Feb-09 HAT TRICK