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22-Apr-09 TELL ME MORE

Nice finish from the US with the Financials attracting the most support. The sector was down more than 1% in the early going, but
finished with an 8.2% gain at its best levels of the session. Buying in the sector was broad-based, but US Bancorp (USB 19.27, +3.33)
provided some of the most positive influence to diversified banks (+13.6%) and the overall financial sector after it reported better-than-
expected first quarter earnings. Meanwhile, Regions Financial (RF 6.14, +0.34) attracted buyers into regional banks (+6.9%) after holding
an upbeat conference call. The stock was initially sent lower after the company announced a small profit for the latest quarter. Shares of
RF swung nearly 28% from their session low to their closing price. Buying among financials also helped lift investment services stocks.
State Street (STT 36.15, +5.50) surged after topping earnings estimates, but even Bank of New York (BK 27.98, -0.05) and Northern
Trust (NTRS 56.17, -1.98) were able to pare losses after both falling short of analysts' expectations. Semiconductors (+3.3%) were
supported when Texas Instruments (TXN 17.11, -0.21) reported better-than-expected results and indicated that demand has begun to
stabilize. Dow components IBM (IBM 102.31, +1.88), Coca-Cola (KO 43.09, -1.24), Caterpillar (CAT 31.39, +0.91), DuPont (DD 28.06,
+1.32), Merck (MRK 23.54, -1.68), and United Technologies (UTX 47.99, +2.18) all issued quarterly results for participants to digest.
Treasury Secretary Geithner spoke before a congressional committee. He indicated that there is enough capital to implement the
measures, making fantasmatic rumors from internet the day before unfounded about the stress test issue. He added there was still about
$109.6 billion available from the $700 billion rescue package passed last year, and he expects to get at least an additional $25 billion
back, bringing the total to $134.6 billion, defending the government's financial stability plan.
Bull or bear, whatever, we are playing with an unprecedent scenario, where earnings releases are very important to get a fresh
view and understand what the economy is dealing with. The news that IBM managed to put 12.3 bn $ cash aside, in addition to Intel last
week and Caterpillar yesterday saying they will hold more cash than usual, is very much reflecting the heart attack of the economy
following the Lehman’s fall last September. So much focusing on a 29 crisis revival, all the world has been acting as such, which in
addition to the prompt and huge reactivity from worldwide officials (mostly US, Chinese and UK) will manage to make the crisis end up as
a normal one and not anymore in a 29 crisis or Japanese deflation one. This recession started like a “Great Depression” one, but the way
it has been monitor should make it end as a classic one. And so, the biggest reading for you and us at the present time should be the
earnings releases more than the strategists gloomy forecast trapped in their end of the world predictions since early March and the
market rebound. History has been helpful to avoid a repetition, but not to make the strategists tasks easier. Can’t be that simple. Fact
being that from the beginning, US officials have been prompt in acting, cutting rates at a time when inflation was still a threat, using the
past to avoid and repeat some mistakes which turned to be dramatic. And the last two days of earnings releases are confirming that the
past two quarters have been difficult, but that firms managed to deal with it rather fine. As to the corporate releasing figures out below
expectations (Caterpillar, Dupont), they are being forgiven thanks to some gradual confirmation that we are not heading into a Great
Depression, while fund managers are clearly still underweight cyclical names and trying to catch opportunity to jump in to be more neutral.
April’s sharp rise in the German ZEW index is a fairly positive sign for the economic outlook, although the business surveys later
this week will provide a much clearer steer. The rise in the headline index, from -3.5 to +13.0 was much better than the expected increase
to +2.0. Sentiment has now risen for six months running, coming from just -63.0 in October. This is the first time that the index has risen
above zero since July 2007, meaning that the number of investors expecting the German economic conditions to improve in the next six
months is finally larger than the number expecting conditions to worsen. Admittedly, the monthly hard data still suggest that German GDP
fell even more sharply in Q1 than in Q4. What’s more, the ZEW index is not a particularly reliably predictor of actual GDP growth – the
German Ifo and euro-zone PMI indices released tomorrow and on Friday will tell us more about whether conditions are beginning to
improve. However, the fact that this forward-looking indicator is improving is still broadly encouraging.
In the UK, the deflation is not a done job. CPI inflation again fell rather modestly, from 3.2% to 2.9%, and remains way above the
equivalent rates in the US (-0.4%) and the euro-zone (+0.6%). What’s more, March’s fall in CPI inflation was driven by food and energy
costs, while core inflation edged up for the fourth consecutive month from 1.6% to 1.7%. This supported anecdotal evidence that retailers
have been reversing December’s VAT-induced cuts in prices and will fuel concern that the drop in the exchange rate is pushing
underlying inflation higher. Elsewhere, the first release of the Bank of England’s new monthly Trends in Lending report brought some
signs that new bank lending has increased over the last month or so.
Yesterday’s session just showed the market is more resilient than most players were imagining, although it still does remain within
a healthy consolidation time, with the mysterious stress test announce (or not) on one side which trading is keen on playing short, and
underweight fund managers who can no longer take the risk to sit aside given the huge underperformance they suffer from already, and a
still long and thrilling year to come. The gap has been closed on the Eurostoxx, but rangy trading days should take place for the week.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 48,7 1,2938 98,35 2,87 3,14 3,27 2,36 8,04 -0,80 1,85 0,66 2,63 0,57 0,20 2,13 2,22 1,63 US
Perf 1d % 5,70 -0,08 0,39 -2,59 bp -0,9 bp -1,03 0,69 0,08 0,63 -0,90 0,24 -0,39 -0,02 -1,43 0,03 -0,71 0,03 Europe
ECONOMIC DATA with impact
Mortgage Applications (11h gmt) / the higher the better / interesting although minor short term
House Price index (14h gmt) expected –0.6% from 1.7% / a lot more to go on the housing fron tomorrow and on Friday / interesting
although once again the story behind the data is not that obvious to read (lower prices might help reducing inventories faster)
Oil inventories (14h30 gmt)
Earnings : Altria Group (MO), AT&T (T), Boeing (BA), Freeport-McMoRan (FCX), McDonald's (MCD), Morgan Stanley (MS), Pepsi
Bottling Group (PBG), WellPoint (WLP), Wells Fargo (WFC), Apple (AAPL), eBay (EBAY), Qualcomm (QCOM)
POSITIVE IMPACTS
LVMH : DIAGEO is in the early stages of planning a bid for the wine and spirits arm of LVMH (Daily Telegraph) / The deal could be worth
€12 bn and would probably be all cash, supported by a potential capital raising by Diageo / No approach had been made to LVMH
NESTLE : Q1 sales 25.2 bn SFR (26bn exp) but organic growth 3.8% (3.7% exp) / Repeats 2009 forecast for org. grwth of 5% + sees
further EBIT margin improvement / Said west. europe market for bottled water continues to shrink but Northam retail market improves
COMMERZBANK wants to sell the operations of its Dresdner Bank units in Switzerland and Luxemburg (Die Welt) + plans to split off its
Eurohypo unit in order to get EU Commission approval for financial aid (FT Deutschland)
DBK made a Q1 net profit of about €800m (781m exp) (Platow Brief)
CNP : La Banque Postale wants to buy CNP ’s 50% stake in their JV La Banque Postale Prevoyance (Les Echos)
TELE 2 : Q1 revenue SEK10.12bn (9.94bn exp) / Ebitda SEK2.23bn (2.07bn exp) / Recession effects seen / Capex expected at
SEK4.7-4.9 bn against its forecast in its Q4 report of SEK4.5-4.7 bn, due to higher capex in Russia
ELECTROLUX : Q1 sales SEK25.82bn (25bn exp) / Operating loss 386m (-426m exp) / Sees no sign of immediate improvement in any
main markets
SEMICONDUCTORS : Japan's largest computer-memory chip maker Elpida Memory plans to raise prices up to 50% next month after
production cuts in the industry eased a glut (Bloomberg News)
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GERMAN BANKS are likely to park between €150 bn and 300 bn in vehicles designed to house their toxic financial assets (FT)

YAHOO : Q1 revenue ex-TAC $1.16bn (1.20bn exp) / EPS $0.15 ex-items (0.08 exp) / Will cut about 5% more of its work force / Still
discussing with MSFT an agreement that would enable the 2 companies to combine search-ad assets, with Microsoft taking over the
business of selling search ads on Yahoo pages. But no deal appears imminent

NEGATIVE IMPACTS
HEINEKEN : Q1 revenue €3.05 bn / Org. growth -1% (+2.5% exp) on UK beer market under pressure / Ebit fell by 1 single low digit
BHP said that output from its world biggest copper mine, Escondida, will decline by 30% this fiscal year, part of a surprisingly large drop
of 14% in copper output in March / Iron ore + aluminium output also fell, & BHP said it stood ready to halt ops as demand weakened…
PPR : Q1 sales €4.78bn (4.72bn exp) / Gucci resisted well & Redcat was better, offset by CFAO & Conforama / Priority on preserving
GM even if means sales drop / CFO doesn't expect a significant improvement in April
PEUGEOT : Q1 sales €10.97bn (11.4bn exp) / Confirms expecting loss, negative FCF in 2009 / Overall outlook 'remains volatile with
limited visibility' / Will not pay a dividend for 2008 (Not a surprise as Renault said it will pay nothing) /
FIAT : Chrysler's creditors have offered to swap $7 bn in debt for equity in a restructured company merged with Fiat (Reuters)
AEGON sold its Taiwanese life insurance activities based on valuation of €65 m but will result in a total negative earnings impact of
approximately €400 m in the Q2…
BANCO POPULAR : Fitch downgraded Banco Popular LT Default Rating to 'AA-' from 'AA' / Outlook on the LT IDR is negative
IBERDROLA RENOVABLES : Q1 Ebitda €338.1m (340m exp) / Net €113.6m (121m exp) / Said that 2009 core earnings should grow at
least 10% (+30% prev. exp) while net profit could be in line with the €390 m reported for 2008 (+30% prev. exp) / IBE results exp today
INDEPENDENT NEWS & MEDIA is asking bondholders for more time to repay its debt and may raise capital in the medium term (FT)
RBS : Regulatory uncertainties surrounding the sale of RBS's Asian assets could limit the price that bidders are prepared to offer + delay
any divestment (FT)
ICAP has lost 85% of 1 of the most actively traded mortgage bond markets / Analysts said the threat of more losses were not imminent
NORSKE SKOG said it will book around NK1.35bn loss from reduced value of energy contract in Q1

AMD : Q1 revenue $1.18bn (978m exp) / EPS -0.62 (-0.66 exp) but forecast Q2 weaker sales / CEO doubts PC market has bottomed
CAPITAL ONE FINANCIAL : Q1 revenue $3.7bn ( $4.15bn exp.) / EPS $-0.39 ($-0.08 exp) / Tier 1 ratio 11.4% / Said its capital strong

RESULTS DIVIDENDS EVENTS

GSK / Tele2 / Apple (AMC) / Boeing / AT&T (BMO) / Mc do / BAE Systems ( GBp 9,666667) / Cadburry (GBp
Today Air Product / Morgan Stanley / eBay / Xilinx / Pepsi / Altria / 12.33333) / Deutsche Post (€0.60) / Reed Mun Re AGM
Continental Airlines/ Elsevier PLC (GBp 16,66667)

ABB / Akzo Nobel / Novartis / Saab / Sodexo / Microsoft /

Mun re (€5.50) / RWE (€4.50) / Sanofi-Aventis
Thursday Amgen / Amazon.com / Marriott Int / American Express / Danone AGM
(€2.20)
ConocoPhillips
CNP (€2.85) / Nokia (0.40) / Reed Elsevier NV
ENI / ACS / Bankinter / Valeo / Volvo / Bristol Myers Squibb
Friday (€0.29) / Swisscom (CHF 19.00) / Syngenta Lufthansa AGM
/ 3M / Honeywell / Schlumberger / Xerox
(CHF 6.00) / VW (€1.93)
Atlas Copco / Scania / Merck KGaA / Nippon Steel / Verizon Lufthansa (€0.70) / Eiffage (€1.20) / Heineken
Monday
/ southwestern Energy (€0.34)
Tuesday BBVA / BP / Sandvik / Theolia / Pfizer / Sun Micro Bouygues (€1.60) Fortis EGM
TRADING IDEAS
An eye on Eurostoxx & Nasdaq cash index downside gap left on 2111 & 1599 levels (Nasdaq upside gap to be closed at 1653)
BUY NOVARTIS ahead of results tomorrow / BUY PHILIPS / DANONE / UNILEVER looking good
BUY OIL names as TOTAL / ENI (results Friday) / BP / ROYAL DUTCH to play the economic recovery
BUY NESTLE / L OREAL / VIVENDI / SIEMENS / PERNOD on reversal Head & Shoulder possibility
BUY AHOLD / GSZ on double bottom possibility

BUY ST GOBAIN / SELL SCHNEIDER // BUY BAYER / SELL AKZO // BUY TOTAL / SELL REPSOL // BUY AXA / SELL ALLIANZ
BUY BNP / SELL SOCGEN // BUY CAP / SELL SAP
BROKER METEOROLOGY
HOLCIM.................................UPGRADED TO OVERWEIGHT FROM NEUTRAL ......................................................................BY JPM
BAYER .................................UPGRADED TO BUY FROM NEUTRAL............................................................................... BY NOMURA
YARA ....................................DOWNGRADED TO REDUCE FROM NEUTRAL ................................................................. BY NOMURA
EON ......................................DOWNGRADED TO NEUTRAL FROM OUTPERFORM ............................................................ BY CSFB
RWE ......................................DOWNGRADED TO UNDERPERFORM FROM NEUTRAL ....................................................... BT CSFB
D TEL ....................................DOWNGRADED TO HOLD FROM BUY ...................................................................................... BY DBK
D TEL ...................................DOWNGRADED TO NEUTRAL FROM OVERWEIGHT ................................................................BY JPM
CRH .......................................DOWNGRADED TO NEUTRAL FROM OVERWEIGHT.................................................................BY JPM
ARKEMA .......................DOWNGRADED TO NEUTRAL FROM OVERWEIGHT ........................................................................ BY CITI

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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22-Apr-09 TELL ME MORE

CHART OF THE DAY

ZEW Germany Expectation of Economic Growth
Since 2005

80

60

40

20

-20

-40

-60

-80
2005 2006 2007 2008 2009

Source : ZEW Zentrum fuer Europaeische

German investor confidence turned positive at 13.0 in March (prior -3.5) for the first time in almost two years in April and coming from -
63 in October . Economic sentiment has risen for 6 consecutive months and the April increases is a positive sign for the economic
outlook . Nevertheless if the release of the ZEW expectation of economic growth is encouraging this index is not the best indicator of
actual GDP growth at the opposite of the German IFO and the PMI indices released later on this week.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
21-22 April China Wholesale prices March -6,0%YoY
0.50 GMT Japan Adjusted merchandise trade balance March - Yen 250,7 billion - Yen 43,3 billion
6.00 GMT Japan Supermarket sales March -5,4%YoY
9.30 GMT United Kingdom Bank of Engkand Minutes March
9.30 GMT United Kingdom Claimant count rate March 4,6% 4,3%
9.30 GMT United Kingdom Public Sector Net borrowing March £ 15,5 billion £ 9,0 billion
13.00 GMT United States MBA mortgage applications April 17 th -11,0%
16.00 GMT United States House price index February -0,6%MoM 1,7%MoM

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

DJIA 7969,6 0,67% - 9,19% EUR/USD 1,2938 -2,19% -7,40%
S&P 500 850,1 1,03% - 5,89% EUR/JPY 127,26 3,30% 0,43%
Nas daq 1643,9 1,12% 4,24% USD/JPY 98,37 1,03% 7,85%
CA C 40 2973,9 - 0,81% - 7,58% Oil Price % 5 Days Ytd
DA X 4501,6 - 1,22% - 6,42% Brent $/b 49,4 -5,10% 18,18%
Eur os tox x 50 2243,6 - 1,46% - 8,33% Gold Price % 5 Days Ytd
DJ 600 190,2 - 0,33% - 4,11% Gold $/oz 883,8 -0,80% 0,21%
FTSE 100 3987,5 - 0,02% - 10,07% Rates USA Euro Japan
Nikkei 8767,7 - 1,49% - 1,04% Central Banks* 0,25 1,25 0,10
Shanghai Comp 2535,5 0,35% 39,25% Overnight 0,10 0,83 0,10
Sens ex ( India) 11007,3 - 0,63% 14,10% 3 Months 0,14 0,77 0,20
MICEX ( Rus s ia) 877,2 - 4,43% 41,59% 10 Y ears** 2,87 3,14 1,45
Bov es pa ( Bras il) 44433,2 - 3,39% 18,33% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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ECONOMIC DATA PREVIEW

Watch in the United-States the release of the house price index for February due at 15.00 GMT, expected to decrease of 0.6% after
rising of 1.7% in March as delinquencies are still at a high level. The real estate data must be seen as a major indicators of the
economic situation in the United-States as their improvement will be a strong gauge of the recovery.

Watch in Japan the trade balance (adjusted) due at 0.50 GM. The Japanese trade deficit is expected to sharply increase as the global
economic downturn is humping demand for Japanese goods abroad and as the strong yen is still penalizing exports ./JB

ECONOMY
GERMANY: PRODUCER PRICES RECORD FIRST ANNUAL DROP IN FIVE YEARS IN MARCH
German’s producer prices dropped of 0.5% in March (forecast+0.1%) after rising of 0.9% in February. Producer prices recorded their
first annual decline since February 2004. This price decline was mainly led by the drop of oil prices ( oil prices have fallen 65 % from a
record last July). If we look to the breakdown the annual percent changes revealed a drop of : heating oil -42.1%,fuels -20.7%, mining -
8.3%, food and beverage -3.0%. Most of the conditions are now set up to create a deflation situation as prices are declining
(YoY),demand is falling as well as house and energy prices and credit conditions are very tight. Deflation will be the worst scenario for
the euro area as it will generate a rise of unemployment and of bankruptcies increasing the drop of the demand and deepening the
deflation. This risk of deflation is increasing the pressure on the European Central Bank to cut significantly its leading rate May 7 th.

GERMANY: ZEW INVESTOR SENTIMENT INCREASED TO TWO YEAR HIGH IN APRIL

German investor confidence turned positive at 13.0 in March (prior -3.5) for the first time in almost two years in April and coming from -
63 in October . Economic sentiment has risen for 6 consecutive months and the April increases is a positive sign for the economic
outlook . Indeed this data means that the number of investors expecting the German economic conditions to improve in the next six
months is larger than the number expecting conditions to worsen. This increase can be explained by the stock market rally and by the
government measures to boost economic growth. Indeed chancellor Angela Merkel’s coalition will spend about 80 billion euros to stop
the deepest recession in German ‘s history. Meanwhile the ZEW survey for the current situation dropped from -89.4 to -91.6 showing
that the investors state of mind about the gloomy present economic environment . Nevertheless if the April release of the ZEW
(economic sentiment) is encouraging this index is not the best indicator of actual GDP growth at the opposite of the German IFO and the
PMI indices released later on this week

UNITED KINGDOM : CONSUMER PRICE INDEX DROPPED IN MARCH AND RETAIL PRICES TURNED INTO NEGATIVE TERRITORY
After reaching a peak in September 2008 at 5.2% U.K. consumer price index dropped regularly since then, except a slight rebound of
3.2% in February, to reach 2.9% in march as expected. This decline is the direct consequence of the sharp drop of energy and
commodity price leading United Kingdom inflation down for 6 months. The relative stabilization of the oil price around $50 should slow
down the drop of inflation in the coming month. Meanwhile the retail price index turned negative for the first time in almost 50 years at -
0.04% drove partly by the fall in housing . These data revealed that there is still a risk of deflation in the United Kingdom even if its not
as imminent as in the euro area./JB
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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
23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009 23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009
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
23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009 23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009
Source : Bloomberg Source : Bloomberg

Oil : Brent ($/b) Forex: Eurovs 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
23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009 23/04/2007 23/10/2007 23/04/2008 23/10/2008 23/04/2009
Source : Bloomberg Source : Bloomberg