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3-Jun-09 ON THE ROAD AGAIN

June month has started, with it some brighter days for equity business which most players are still denying, while improving
economic data are gradually fitting with the current bull trend that has just started. Once again yesterday’s large 6.7% m/m increase in the
US pending home sales index in April is reflected in full in the existing home sale numbers, meaning the latter will soon jump from 4.7m to
around 5.1m. This would take them back to the level seen before the collapse of Lehman Brothers last September. The pending home
sales index has now improved for three months in a row, adding to the evidence that housing activity is finding a floor.
Once more today, both the ADP survey and the ISM non manufacturing should point out that macro data improvement is not a
one-off. On Friday will be released the Employment Report for May. This is the last chance for bear fund managers who missed the rally
(not so bear anymore...) to get a decent entry back. According to them, until businesses start to show a willingness to hire and not just to
lay off fewer people, the path to economic recovery will remain an arduous one. We think that when Employment sector is improving, then
the equity indices will be on fire as it is just a lagging indicator ... As such, last month's ADP survey correctly forecast the smaller decline
in the official payrolls release for April, so the May survey will be watched more closely than usual. Regarding the ISM non manufacturing,
it will likely show some improvement, which bears will call still recessionary as below 50, but gradually heading toward to 50 growth level.
Even in the heavily leveraged UK, today's headline index of the CIPS/Market report on services (09.30 BST) will likely show a
modest increase from 48.7 in April to 49.0 in May. This would suggest that services output is now barely contracting at all. Although the
index is still below the 50 level that technically separates expansion from contraction, in the past any reading above 48 or so has
generally been consistent with rising output. Elsewhere, April’s household borrowing figures (data released on Tuesday) provide further
evidence that housing market activity is gradually strengthening. The rise in the number of mortgage approvals for house purchase from
40,000 to 43,000 was the third monthly increase in a row.
A closer look at the relative performance of different commodities suggests that recovery hopes have played the largest part.
The rally has been led by the prices of industrial metals, which are typically most sensitive to the economic cycle, followed by oil. In
contrast, traditional hedges against inflation, namely precious metals and especially gold, have performed relatively poorly. This is
consistent with the limited evidence of a surge in inflation expectations either in the consumer or business surveys, or those derived from
inflation-linked bond markets. It is reassuring that higher commodity prices appear to be a response to increases in confidence in the
economic outlook rather than a more negative response to inflation fears.
The vicious circle has become a virtuous one , which the equity rally is feeding itself with, and since the 29 crisis revival was nothing
more than a huge psycho dark thought triggered by a sub prime blow up, the mirroring effect is just nice to attend and very welcome.
There is a lot more cash today than there was in 29, and officials reacted the right way (except for Lehman). Fund managers should get
used to it, as 2608 now granted will just be a temporary target on the cash Eurostoxx. Take profit if today was to be nice as market
players will be suspicious about Friday's so feared Employment report.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 68,7 1,4314 95,64 3,61 3,66 0,77 -0,01 -0,85 1,33 -0,49 0,80 0,43 -1,00 -3,30 0,20 0,44 0,22 US
Perf 1d % 0,38 0,07 0,14 -0,57 bp -1 bp 0,21 -0,21 -1,26 1,12 -0,49 0,17 0,04 -0,53 -3,25 -0,02 0,24 0,08 Europe
ECONOMIC DATA with impact
FEDERER VS MONFILS 14h French time
ADP Employment changes (11h15 gmt) expected -525k from previous -491k / will be more watched than usual as last month survey did
predict a smaller decline in the official payrolls release for April / interesting
Factory Orders (13h30 gmt) expected +0.9% from -0.9% / minor as volatile data
ISM Non Manufacturing (14h gmt) expected 45 from previous 43.7 / will likely show further improvement. The index is almost certain to
remain below the 50 mark separating expansion from contraction. Indeed, just as the manufacturing ISM index showed on Monday, the
data are likely to reveal that the recession is easing, but we are getting there ... interesting
Crude Inventories (14h35 gmt)
Fed Chairman Bernanke (14h gmt) testifies on economy and financial conditions before House Budget Committee
Kansas City Fed President Hoenig at business luncheon in Wyoming (18h30 gmt)
POSITIVE IMPACTS
RIO TINTO and Chinalco, are actively considering cutting the size of the convertible bond issue that forms part of their deal and
introducing a multi-billion-dollar rights issue to all shareholders (The Australian Financial Review)
FIAT (not new) could try to enter partnership talks with PSA or BMW (WSJ quoting analysts) / Separately, Chrysler, in which Fiat is taking
a 20% stake, said May sales in the United States fell 45%, the biggest fall among leading American car producers
NORTHUMBRIAN WATER : FY revenue £694.1m (691m exp ) / PTP £152.7m (150.2m exp) / Final dividend of 8.50p
PRO SIEBEN SAT 1 has no plans to break itself up or to sell off pieces of its core business (Sueddeutsche Zeitung)
ADECCO expects to post an op. profit in the Q2 + is confident it will achieve its goal of "protecting profitability" in 2009 (Handelszeitung)
SWISS LIFE has a solid investment portfolio, Chairman told HandelsZeitung, denying speculation about a large position in toxic assets.
SAINT-GOBAIN : Wendel’s Chairman repeated that Wendel’s investment in SGO is “a major part of strategy”
CARLSBERG is planning further expansion in Asia to reduce its exposure to the volatile Russian beer market (CEO in the FT)
ARCANDOR is confident of securing German State aid (Deutschland Radio)
HEALTHCARE : The WHO’s director-general is expected to announce in the next 10 days the move to the 6th step pandemic scale
REPOWER : Suzlon is looking to raise debt to make the final payment to acquire RPW before Friday's deadline (mydigitalfc.com)
MAY US CAR SALES -31,2% : FORD -21.3% / BMW -25% / PORS. -26.5% / GM -26.6% / MERC. -28% / NISSAN -30.5% / VOW -9%
NEGATIVE IMPACTS
BOUYGUES : Q1 operating €174 m (€214m exp) / Cut 2009 sales outlook / Now sees FY rev. €31.3bn (31.7bn e) due to "competitive
environment for Colas + price declines in real-estate + weaker ad sales at TF1 + commercial costs supported by Bouygues Telecom
NOVARTIS said it has launched a 7-year €1.5 bn bond issue with a coupon of 4.25%
DEUTSCHE BOERSE said turnover on its electronic orderbook Xetra fell 38% in May to €89.8 bn
GERMAN CORP : German industry associations are expecting a credit crunch in the next months (Handelsblatt citing a common
declaration industry associations sent to German Chancellor)
th
AIRLINES : The WHO’s director-general is expected to announce in the next 10 days the move to the 6 step pandemic scale
IBERDROLA sold a 10% stake in GAMESA at €16.10 per share at the bottom of the price range offered to investors, booking a capital
gain of €112m / Morgan Stanley ended up with a 4.9% stake.
DANONE (Minor) : The total amount of the issuance by EURAZEO of bonds exchangeable for existing BN shares is increased from
€610m to € 700m
US CAR SALES FOR MAY -31,2% : HONDA -39.2% / TOYOTA -38.4% and other Japanese carmakers…
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3-Jun-09 ON THE ROAD AGAIN

RESULTS DIVIDENDS EVENTS
Cable & Wireless (6.30 GBp) / EADS (€0.20) / Electronic Arts analyst meeting / Tenaris AGM / Acciona AGM / Bombardier AGM /
Today Bombardier / Vodafone (GBp 5,777778) / WPPP (GBp Peugeot AGM / ASML at Merrill Lynch TMT conf / European Gaming Companies
11.42222) / British Food (GBp 7,666667) conf at Credit Suisse / Havas AGM
Vallourec AGM / Acciona AGM / Saint-Gobain AGM / Home Depot analyst meeting
Thursday Johnson Matthey / Voestalpine Hermes (€1.03) /
/ Power, Gas & 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
Monday Texas Instruments mid-quarter ADP (€1.38)
/ Apple expected to reveal new iPhone at Worldwide Developers Conferenc
Dassault Systemes AGM / Aegon investor conf / Publicis AGM / Mastercard AGM /
Tuesday Tesco trading statement
Valeo AGM
TRADING IDEAS
BUY PHILIPS / VIVENDI / NOKIA / KPN / FTE / DTE / TOTAL / GSZ / EDF / ACCOR looking good
BUY ALLIANZ / MUNICH RE / EON / BAYER / DANONE / SANOFI to play eco recovery

BUY NESTLE / SELL UNILEVER // BUY CARREFOUR / SELL METRO // BUY DAIMLER / SELL PEUGEOT // BUY ENI / SELL REPSOL // BUY
GLAXO / SELL ASTRAZENCA // BUY LINDE / SELL BASF

BROKER METEOROLOGY
ARCELORMITTAL ..................... RAISED TO BUY FROM SELL .................................................................................................BY ING
DEUTSCHE BANK ..................... RAISED TO HOLD FROM SELL ................................................................BY SOCIETE GENERALE
DRAX ......................................... RAISED TO EQUALWEIGHT ....................................................................... BY MORGAN STANLEY
AVIVA ........................................ RAISED TO BUY FROM NEUTRAL ............................................................................... BY NOMURA

ADECCO ................................... CUT TO UNDERWEIGHT ............................................................................. BY MORGAN STANLEY

VTB............................................. CUT TO SELL ................................................................................................ BY GOLDMAN SACHS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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3-Jun-09 ON THE ROAD AGAIN

CHART OF THE DAY
Euro against dollar and WTI ($/b)
since 2009
1,5 75

70

65

1,4 60

55

50

1,3 45

40

35

1,2 30
01/01/09 01/02/09 01/03/09 01/04/09 01/05/09 01/06/09
EUR/USD WTI ($/b)

Source : Bloomberg
The crude oil prices reached a new high above the $68 level after rising more than 10 % during a six-session winning streak before
declining Tuesday. The WTI climbed more than 53 % since the beginning of the year and rose more than 118 % since its lowest level
of December 22 ($31,41).

Time Country Indicator Period GE forecasts Consensus Previous

8.50 GMT France PMI services (final) May 47,6 47,6
8.55 GMT Germany PMI services (final) May 46,0 46,0
9.00 GMT Euro zone PMI services (final) May 44,7 44,7 44,7
9.00 GMT Euro zone PMI composite (final) May 43,9 43,9
9.30 GMT United Kingdom PMI services May 49,5 48,7
9.30 GMT United Kingdom Official Reserves (changes) May -$ 326 million
10.00 GMT Euro zone Gross Domestic Product (preliminary) First quarter -2,5%,-4,6% YoY -2,5%,-4,6% YoY -2,5%,-4,6% YoY
10.00 GMT Euro zone Producer price index April -0,8%,-4,5% YoY -0,7%,-3,1% YoY
12.00 GMT United - States MBA mortgage applications May 29 -14,2%
12.30 GMT United - States Challenger job cuts May 47% YoY
13.15 GMT United - States ADP employment change May - 525 000 - 491 000
15.00 GMT United - States ISM non manufacturing composite May 46 45,0 43,7
15.00 GMT United - States Factory orders May 0,5 % 0,9% - 0,9%

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

DJIA 8740,9 3,16% - 0,41% EUR/USD 1,4315 3,58% 2,50%
S&P 500 944,7 3,82% 4,59% EUR/JPY 137,27 -3,80% 7,53%
Nas daq 1836,8 4,96% 16,47% USD/JPY 95,91 -0,37% 5,28%
CA C 40 3378,0 3,84% 4,97% Oil Price % 5 Days Ytd
DA X 5144,1 3,18% 6,94% Brent $/b 68,1 12,17% 63,07%
Eur os tox x 50 2534,2 2,90% 3,54% Gold Price % 5 Days Ytd
DJ 600 214,2 2,65% 8,01% Gold $/oz 986,7 3,90% 11,89%
FTSE 100 4477,0 1,51% 0,97% Rates USA Euro Japan
Nikkei 9755,0 4,23% 10,11% Central Banks* 0,25 1,00 0,11
Shanghai Comp 2756,2 5,11% 51,37% Overnight 0,15 0,64 0,11
Sens ex ( India) 15034,3 9,46% 55,84% 3 Months 0,13 0,68 0,20
MICEX ( Rus s ia) 1198,6 15,15% 93,47% 10 Y ears** 3,61 3,66 1,53
Bov es pa ( Bras il) 53999,5 4,16% 43,81% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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3-Jun-09 ON THE ROAD AGAIN

ECONOMIC DATA PREVIEW
Watch in the United-States the ISM services for May due at 15.00 GMT. This index is expected to rise for a second consecutive
month led by the good resistance of the household consumption. It will be another sign that the bottom has been reached in the
United-States. Watch as well the factory orders for April due at 15.00 GMT as well, expected to rise lead by the increase of the ISM
manufacturing

Watch in the Euro area the final release of the PMI manufacturing for May due at 9.00 GMT confirming the rise of the preliminary
release at 44.7. Watch as well the preliminary release of the GDP for the second quarter due at 9.00 GMT confirming the historical
drop of the advance release, increasing the pressure on the European Central Bank to cut its refi rate next Thursday /JB

ECONOMY
UNITED-STATES : PENDING HOME SALES SURGED IN APRIL
US pending home sales rose from 3.2% in March to 6.7% in April this is the third increase in a row and the fourth increase in five month.
The gain was the biggest in seven years. This sharp rise can be explained by the positive impact of the drop of the interest rates and by
the foreclosures driving down home values as well as by tax incentives boosting buyers. It seems that the housing activity is finding a
floor as home sales are stabilizing. Nevertheless the pending home sales remained weak as they are just above their level before the
Lehman Brother fall ( 6.0% in August 2008). Even if pending home sales are considered as a leading indicator because they track
contract signing its important to follow closely the upcoming figures of existing home sales.

EURO ZONE : UNEMPLOYMENT RATE ROSE NEAR A TEN YEAR HIGH

European unemployment rate rose from 8.9% in March to 9.2% in April (forecast 9.1%) the highest level since Septembre1999. If we
look to the breakdown by country we see that Spain is the most affected with and unemployment rate of 18.1%, but Germany and
France are as well hit with rates reaching respectively 7.7% and 8.9%. Even if the recession is slowing down in the United-States as the
economic crisis most likely reached a bottom, the global economic downturn is forcing European companies to cut jobs as demand is
very weak and as the deflation is almost here ( prices rose 0% in May and will most likely reached negative territory in June). This sharp
increase of unemployment is partially offsetting the boost of purchase power due to the drop of prices in the Euro area. As the euro
currency is way to high in regards to the economic fundamentals and as the Euro area is facing an historical recession at the first
quarter, this rise of unemployment increasing the pressure on the European Central Bank to cut its leading rate this week.

EURO ZONE : PRODUCER PRICE INDEX DROPPED IN APRIL

In negative territory since August 2008 Producer price index dropped from -0.3% in march to -0.9% in April. The breakdown of the data
revealed a drop of 4.2% in mining, electricity, utilities ( prior +0.2%) and a drop of 0.7 in machinery and electric (prior +0.2%) underlining
the impact of the drop of energy prices. From a year ago producer prices are pursuing their drop trend since their peak at + 8.3% in July
2008 (at a time when the barrel was at $147) and decline at -6.4% in April (prior-4.7%). Looking at the breakdown we see a sharp drop
of 7.3% of manufacturing products. The year on year drop is mainly due to the fell of energy and commodity prices and to a “base
effects” as the producer prices were at +6.0% in April 2008 meaning a year ago. This sharp decline of producer prices is increasing the
pressure on the European Central Bank to cut its refi rate next Thursday./JB
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3-Jun-09 ON THE ROAD AGAIN

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
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

UnitedStates : 10-year Treasury yield 10-year Treasury spreadUSA-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
80
1,4

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