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9-Mar-09 LONGER RUN

As a lagging indicator, U.S. employment data for February show that the recession, that officially started in December 2007 according to
the National Bureau of Economic Research, has been historical and deeper than the two former ones (July 1990 to March 1991, 8
months, and March 2001 to November 2001, 8 months), so far. But the worst could be behind us in terms of non-farm payrolls
decline: after revisions, February’s 651k job cuts was at least the smallest in three months. The new estimates suggest that the
contraction in employment peaked in December (681k), followed by a 655k loss in January. Manufacturing employment fell by 168k in
February compared with 257k the month before. The number of transportation production workers on payrolls fell by only 5k in February
compared with 76k in January. The drop in services payrolls was bigger, but at least the rate in decline in retail employment has halved in
the past two months compared with the final two months of last year. That suggests retail sales may be stabilizing. In addition to that, the
ISM non-manufacturing index employment component was sharply up in February with real estate, rental & leasing, and utilities reporting
an increase in employment. Average hourly earnings increased by another 0.2 % and, at 3.6 %, the annual growth rate is still very high.
However the unemployment rate continued to soar, jumping to a 25-year high of 8.1 % from 7.6 % and the average duration of
joblessness has increased to roughly 20 weeks. The participation rate is dwindling: delayed entries and a discouragement effect are
leading to withdrawals from the labour force. Anyway, despite a widening output gap and still weak lagging employment data, there is a
hope that growth returns at the fall of 2009.
th
The FOMC (see the Minutes of the January 27/28 meeting) provided projections for economic growth, the unemployment rate, and
consumer price inflation for each year from 2009 through 2011. The central tendency for real GDP is –0.5 % to –1.3 % in 2009, +2.5 % to
+3.3 % in 2010 and +3.8 % to +5.0 % in 2011. Average unemployment rate is expected at 8.5 % to 8.8 % in 2009, 8.0 % to 8.3 % in
2010 and 6.7 % to 7.5 % in 2011. The central tendency for PCE inflation is 0.3 % to 1.0 % in 2009, 1.0 % to 1.5 % in 2010 and 0.9 % to
1.7 % in 2011. For the first time, the FOMC gave projection for the “longer run” (5 to 6 years) which, in terms of price inflation might be
the harbinger of an “inflation targeting” policy set up by the Fed. These “longer run” projections are +2.5 % to +2.7 % for the real GDP,
4.8 % to 5.0 % for the average unemployment rate and +1.7 % to +2.0 % for the PCE inflation (roughly +2.0 % to +2.5 % for the
overall CPI).
This rosy picture of a strong economic recovery in 2010 may occur, but we see some key problems to be addressed rapidly
before the best-case scenario takes place: 1) governments and central banks should fight against the roots of the financial crisis
(addressing the problem of toxic assets’ valuation at mark-to-market or not, cleaning banks and SPV balance sheets, regulating Hedge
Funds...) better than trying to erase the consequences of the crisis (nationalisation and/or regulation of the financial sector, fiscal stimuli
nd
and accommodating monetary policies). The G20 meeting in London (April 2 ) appears to be the last opportunity to give the markets
some clues about the willingness of officials to cope with the financial crisis 2) international organisations (WTO, OECD, IMF, G8, G20)
should go in that direction 3) rapidly widening budget deficit in the U.S. should not lead to a sharp rise in long term interest rates that
could hamper investment and the overall economy. In other words, the Quantitative Easing of the Fed should be stronger than the
markets… 4) nationalism and protectionist measures should be avoided 5) the scenario that a sharp drop of the dollar (that would trigger
a global change and trade war at a time when the U.S. economy needs foreign savings to finance a huge budget deficit, 12 to 15 % of
GDP, with net debt growing from 40 to 60 or 70 % of GDP), as investors consider that the Fed’s policy is focused on printing money on a
large scale, will prevail (Quantitative Easing and inflation targeting) should not occur 6) A global reform of rating agencies should be
rapidly undertaken in order to restore confidence in financial markets. The emergence of European rating agencies would trigger a more
intense activity in the commercial paper and corporate bond markets.
So, the way to an economic recovery in 2010 seems to be narrow and bumpy, but not unrealistic...
On Friday, U.S. equity markets achieved to end slightly higher after a see-saw session (with the exception of the Nasdaq) after a
sharp drop on Thursday. Markets had to cope with weak U.S. employment data and the disappointment about China’s fresh stimulus
package that appears to be a mirage. In addition to that, the adoption of Quantitative Easing in the U.K. increased fears of a surge in
inflation. Banks were still broadly on the downside (JP Morgan –4.04 %, Goldman Sachs –7.43 %, Morgan Stanley –4.45 %) while
Wells Fargo (+6.03 %) rose after slashing its dividend as the economy's woes worsen, reducing the quarterly payout by 85% and
announcing another $2 billion in cost cuts for 2009 while the company had strong operating results in January and February amid
continued growth in lending, deposits and mortgage volumes. Mortgage originations for the two months of $59 billion topped the
exceptionally strong figures from all of the Q4. Industrials (General Electric +6.01 %), consumer stocks (Coca-Cola +3.30 %, on
increased investments in China, Mac Donald’s +2.48 %) and the energy sector (ExxonMobil +2.91 %, Schlumberger +1.58 %) rose
while techs were down (Apple –3.98 %) such as home builders: Pulte Homes -6.42 %, Toll Bros –1.11 %.
This week, markets will be focused on the release of February’s U.S. retail sales figures (Thursday) to assess whether the rebound
in January was just a blip in the downward trend or the start of a turnaround. In Germany, industrial production (Thursday) probably
continued to decline in January
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 46,5 1,2657 98,27 2,86 2,93 1,01 1,33 -1,26 1,45 -0,91 -0,78 -0,27 0,35 -1,14 0,12 -0,44 0,49 US
Perf 1d % 5,08 0,03 0,01 -0,73 bp -9,2 bp -0,07 0,96 -2,17 -0,05 -2,17 -1,37 -0,70 0,88 -2,89 -0,57 -1,45 -0,30 Europe
ECONOMIC DATA with impact
No major data today
POSITIVE IMPACTS
VOLVO : Chinese auto maker Geely Automotive is preparing a bid for Volvo (Times) (Renault owns 20% of Volvo…)
VOLKSWAGEN : Porsche will receive a loan in March > €12.5 bn, which it will use to raise its stake in VOW to 75% from 51% (Focus)
DAIMLER & BMW have been considering a cross-shareholding arrangement of 7% respectively + plan to reveal a far-reaching
purchasing cooperation shortly (Der Spiegel) / The Quandt family, which controls more than 46% of BMW shares, has opposed the plan
DEUTSCHE BANK has experienced a good start to the year (CEO in Handelsblatt) / “DBK has earned through the end of January €2.8bn
in revenues & February went in the same direction" …
ROCHE raised its bid to buy out the minority shareholders of Genentech by 7.5% to $93 a share and extended its tender offer by a week
(until March 20) / Roche is hoping to complete the deal ahead of a study due in April on Avastin, that if positive could boost DNA’s price
CAP GEMINI, ATOS… : Infosys Technologies is looking for acquisitions in France, Germany & Japan in the consulting, business process
outsourcing and other sectors (The Hindu)
RIO TINTO : China is shoring up support for its investment in Rio Tinto by promising to invest up to $5 bn in the firm's expansion (ST)
COMMERZBANK might not have to pay interest on its total govt silent participation of €16.4 bn if it reports a loss (Focus) / Cbk ‘s CEO
suggested with Finance Minister that the bank would pay around €1.5 bn in interest per year for the state's silent participation
UBS-CREDIT SUISSE are to receive a loan through the launch of a covered-bond in a deal facilitated by the central bk (NZZ am S.)
CREDIT SUISSE said Hans-Ulrich Doerig was to be appointed its new chairman and that it had a good start to 2009
UBS : Czech foreign minister backed Switzerland in the row with other European countries over Swiss banking secrecy (NZZ am S.)
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9-Mar-09 LONGER RUN

PRUDENTIAL has pulled out of the auction for the Asian business of AIG (Sunday Times)
BANCO POPULAR’s CEO said POP is one of the best prepared Spanish banks to confront economic crisis, adding that its bad debt
levels were under control / Separately, Spain does not rule out using public funds to help strong banks merge with weaker rivals, to
maintain the health of the banking system (Spanish Treasury Secretary)
NEGATIVE IMPACTS
HSBC in Hong Kong hit a 13-year low, sliding more than 13% as the bank heads towards its deeply discounted rights issue this week
SOC GEN-CREDIT AGRICOLE received money from the U.S. public bailout of AIG / AIG owed Societe Generale $4.8 bn and Calyon
$1.8 bn / The beneficiaries of the U.S. government's bailout of AIG include at least 2 dozen financial institutions in the U.S. and elsewhere
that have been paid roughly $50 bn since the Federal Reserve first extended aid to AIG (WSJ)
BNP & Belgium reached the new agreement for FORTIS = BNP will buy 75% of Fortis Bank + gain control of the Luxemburg banking unit
for €2.88bn in stock / The deal also calls for Fortis Bank to take a 25% stake of the Fortis’ Belgian insurance unit for €1.375bn in cash,
with BNP guaranteeing the financing / BNP expects a “stable” impact on its capital / EPS accretive in 2010 ex-integration costs
LLOYDS and the U.K. govt have reached an agreement in which the govt's stake could increase to as much as 75% in exchange for its
insuring up to £260bn of the bank's risky assets (Press) / Co may cut as many as 20k jobs over the next 3 years (Sunday Telegraph)
BARCLAYS will come under scrutiny this week as it begins preliminary negotiations with the government over whether it will recieve
taxpayer guarantees for its toxic loans
SWEDBANK won’t pay a 2008 div. to strengthen capital by SEK2.9bn / It cited continued eco deterioration in countries where it operates
BRITISH AIRWAYS : S&P's cut its rating on British Airways to junk status and said it may cut the rating again…
HEIDELBERGCEMENT : S&P's lowered its LT corporate credit rating to 'B-' from 'B+' and kept its 'B' short-term credit rating
UBIBANCA : S&P revised the outlook to stable from positive
BANCO POPOLARE is among the 1st Italian banks to sign up to a government program aimed at boosting capital ratios (Il Messagero)
U.K. LIFE INSURERS have about £137 bn worth of investments in corporate bonds, with roughly 2/3 of the amount in banks & financial
companies (the Observer) / If the outlook on bond defaults deteriorates, then life insurers would have to set aside additional reserves…
TISCALI said it would ask banks to suspend interest payments after its talks on UK assets with BSkyB became "impossible" to continue

CITIGROUP : A report in the NY Times stated that 2 high profile Republican Senators had said on Sunday that the govt should allow big
US banks to go under if they are not performimg up to standard with suggestions that Citigroup might be on the list saying that the bank
has 'always been a problem child"
GM denied reports published over the weekend that its Opel unit is being readied for insolvency / However, Opel would have threatened
to close several plant in Germany if it does not get some help from the German Govt
RESULTS DIVIDENDS EVENTS
Fortis / Continental / Ciment Français / Acerinox / Texas Instruments Mid
Today RFedEx ($0.11) / HP ($0.08)
Quarter
Roche AGM / Walt Disney / Caterpillar analyst
Tuesday Bulgari / EADS / E.On / Finmeccanica / SBM Offshore / Metropole TV meeting / Hospitality & Gaming conf at Deutsche
Bank / Transportation conf at JP Morgan
Banca Monte dei Paschi di Siena / JC Decaux / Deutsche Lufthansa / Enel
TUI Travel (GBp 7.666667) / Coca
Wednesday / International Power / Lagardere Groupe / Ingenico / National
Cola Co ($0.41)
Semiconductor / Bulgari / Terna / Hannover Re
Thursday Carrefour / VW / Aegon final / ADP / Delhaize / Geberit Nordea EGM
Friday Allianz / ENI
TRADING IDEAS
BUY EON / REPSOL / DAIMLER on reversal Head & Shoulder possibility
BUY RENAULT / AXA / NOKIA to play recovery
BUY TOTAL / SAP / PHILIPS / BASF on double bottom possibility

BUY BAYER / SELL BASF // BUY FTE / SELL TEF // BUY NOVARTIS / SELL SANOFI // BUY PHILIPS / SELL ASML // BUY SIEMENS / SELL
ALSTOM
BROKER METEOROLOGY
VEOLIA ........................................RAISED TO BUY .......................................................................................... BY BANK OF AMERICA
ADIDAS .......................................ADDED TO EUROPE 1 LIST ....................................................................... BY BANK OF AMERICA
COMPAS .....................................RAISED TO BUY FROM HOLD ............................................................................................. BY RBS

POPOLARE..................................CUT TO NEUTRAL FROM BUY ............................................................................................ BY UBS

GDF SUEZ ...................................CUT TO UNDERWEIGHT FROM NEUTRAL ....................................................................... BY HSBC
LONMIN .......................................CUT TO UNDERWEIGHT FROM NEUTRAL ............................................................ BY JPMORGAN

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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9-Mar-09 LONGER RUN

CHART OF THE DAY
US unemployment rate
since 1980

11

10

3
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Source : Bureau of Labor Statistics

The U.S. unemployment rate jumped to 8.1% in February, its highest level since 1982. If we look at the detail, manufacturing
employment fell by a modest 168 000 last month, compared with 257 000 the month before and the drop in service payrolls was even
bigger in a country were services represent 75 % of the activity. Most of the developed countries are facing a sharp recession cutting
the demand for American goods abroad and domestic demand is humped by the credit crunch. As a consequence companies are in
the obligation to sharply cut jobs.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
23.50 GMT Japan Money stock M3 YoY February 0,9% YoY 0,9% YoY
23.50 GMT Japan Money stock M2 YoY February 1,9% YoY 1,9% YoY
23.50 GMT Japan Current account total January -Yen 15,3 billion Yen 125,4 billion
23.50 GMT Japan Trade balance - BOP basis January -Yen 811 billion -Yen 197 billion
23.50 GMT Japan Bank lending (including trust) February + 3,7% YoY
4.30 GMT Japan Bankrupties February + 15,8 % YoY
5.00 GMT Japan Eco Watchers Survey : currrent February 17,3 % 17,1 %
5.00 GMT Japan Eco Watchers Survey : outlook February 22,1%
7.30 GMT France Bank of France business sentiment February 68 70

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

DJIA 6626,9 - 6,13% - 24,49% EUR/USD 1,2635 0,43% -9,58%
S&P 500 683,4 - 6,97% - 24,34% EUR/JPY 124,20 -1,25% -2,07%
Nas daq 1293,9 - 6,08% - 17,96% USD/JPY 98,31 -0,82% 7,76%
CA C 40 2534,5 - 6,22% - 21,24% Oil Price % 5 Days Ytd
DA X 3666,4 - 4,61% - 23,78% Brent $/b 45,1 7,15% 8,02%
Eur os tox x 50 1817,2 - 8,05% - 25,76% Gold Price % 5 Days Ytd
DJ 600 159,5 - 7,73% - 19,58% Gold $/oz 936,0 1,06% 6,11%
FTSE 100 3530,7 - 7,75% - 20,38% Rates USA Euro Japan
Nikkei 7086,0 - 5,22% - 20,02% Central Banks* 0,25 1,50 0,11
Shanghai Comp 2132,5 5,29% 17,12% Overnight 0,20 1,10 0,11
Sens ex ( India) 8175,1 - 6,36% - 15,26% 3 Months 0,20 0,78 0,23
MICEX ( Rus s ia) 688,9 3,43% 11,19% 10 Y ears** 2,87 2,93 1,31
Bov es pa ( Bras il) 37105,1 - 2,82% - 1,19% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

9-Mar-09 LONGER RUN

ECONOMIC DATA PREVIEW
No major economic data due in the United-States

Watch in Japan the release of the trade balance for January due at 23.50 GMT. The Japanese trade deficit is expected to sharply
increase as the global economic downturn is cutting the demand for Japanese goods abroad. This will boost the decline of the
Japanese economy which growth is essentially bases on external trade./JB

ECONOMY

UNITED-STATES : THE UNEMPLOYMENT RATE REACHED ITS HIGHEST LEVEL FOR 27 YEARS AND REAL WAGES INCREASED IN FEBRUARY
The U.S. unemployment rate jumped to 8.1% in February, its highest level since 1982. If we look at the detail, manufacturing
employment fell by a modest 168 000 last month, compared with 257 000 the month before and the drop in service payrolls was even
bigger in a country were services represent 75 % of the activity. Most of the developed countries are facing a sharp recession cutting
the demand for American goods abroad and domestic demand is humped by the credit crunch. As a consequence companies are in
the obligation to sharply cut jobs. Nevertheless if job destructions are huge (651 000 in February in nonfarm payrolls) they are
decreasing for a second month in a row since their peak of 681 000 job destruction in December 2008. In such configuration it is
possible to think that the U.S. labour market is touching the bottom and could find its way to a recovery and even create jobs starting
next summer. Indeed the job destruction are way too important in comparison to the downturn of the activity showing that companies
are over laying off. Consequently as soon as the recovery will start companies could inverse the trend and massively hire. That is why
if the unemployment rate could reach 8.7 % since this summer we could see later on an inversion of the trend. In the mean time the
average weekly hours remained stable at 33.3 in February and the average hourly earnings are increasing of 0.2% in February as in
January and of 3.6% from a year ago. Nevertheless with unemployment rising we should shortly see a drop in earning growth. /JB
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9-Mar-09 LONGER RUN

VIXindex: impliedvolatilityontheS&P500 $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
09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009 09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009
Source : Bloomberg Source : Bloomberg

UnitedStates: 10-year Treasuryyield 10-year TreasuryspreadUSA-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
09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009 09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009
Source : Bloomberg Source : Bloomberg

Oil : Brent ($/b) Forex: EurovsDollar (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
09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009 09/03/2007 09/09/2007 09/03/2008 09/09/2008 09/03/2009
Source : Bloomberg Source : Bloomberg