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12-Jun-09 ROSY PICTURE

Nobel Krugman’s words were premonitory. He recently said that the current recession would be over by next autumn. There are now
many signs confirming he is right: U.S. employment data clearly show that the peak of job cuts is behind us, consumer confidence is
increasing (see retail sales up 0.5 % overall and +0.2 % ex-gasoline price jump in may), raw material prices are up (the CRB index is now
up 33 % from its lowest level on March 2nd and oil price is above $72 /bbl, remember $31.41 /bbl on December 22nd 2008). Housing
market data also confirm that existing and new home sales are on an upward trend. Chinese data this morning were above expectations
with retail sales up 15.2 % YoY (15.0 % expected) and industrial production up 8.9 % YoY (7.7 % expected). In Japan, consumer
confidence rose in May (36.3 vs; 33.2) and the Nikkei closed above 10 000 for the first time since October 2008.
10-year U.S. Treasury rate hit 4 % yesterday (before retreating to 3.87 %) for the first time since last autumn. For sure, this rise can’t be
due to a strong rebound in future inflation rate, as stagnating real income, a sharp rise in savings rate (5.7 % in April 09 vs. a negative
figure last year), a historically low capacity utilisation rate (69.1 %) and weak real consumption are clues for no rise in price inflation in the
near future. But the yield on 10-year US inflation-protected bonds (TIPS) has fallen by 23 bps since the start of 2009. With nominal and
real bond yields moving in opposite directions, 10-year breakeven inflation rates have climbed sharply, especially in the U.S.
Rising government conventional bond rate prove policy is working. The jump in bond rates is a desirable normalisation after a panic.
Investors rushed into the dollar and government bonds. Now they are rushing out again. Welcome to the giddy world of financial markets.
At the end of December 2008, US 10-year Treasury yields fell to the frighteningly low level of 2.1 per cent from close to 4 per cent in
October. Partly as a result of this fall and partly because of a surprising rise in the yield on the TIPS, implied expected inflation reached a
low of close to zero. The deflation scare had become all too real.
The shift in sentiment on inflation can be partly explained by the adoption of quantitative easing by the Fed and the Bank of
England. But it has also been driven by the green shoots of economic recovery. In addition, breakeven inflation rates may have been
pushed up by expectations of greater supply in conventional bonds than in their inflation-indexed counterparts.
At the same time, some investors start thinking the Fed will have to raise the Fed Funds target rate as soon as next August.
While the implied probability of change to The Fed Funds target rate based on the price of Fed Funds shows that investors expect no
change during the June 23rd FOMC meeting, it also shows that the probability of a rise to 0.50 % from 0.00/0.25 % is at 15.3 % for the
August 12th meeting. As for the September 23rd meeting, implied probability of a rise to 0.50 % is at 20.4 %, while a probability of 1.4 %
for a rise to 0.75 % is emerging.
Initial weekly jobless claims are highly correlated to the economic cycle. Yesterday, they decreased to 601k from 621k a week
th
earlier and a peak of 674k on March 27 . Historically, initial weekly jobless claims hit a peak two or three months before the recession
officially ends according to the NBER. The NBER already said that the recession started in December 2007. Since then more than 6
million jobs have been cut. According to initial weekly jobless claims, the NBER could rapidly say that the recession is over.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 72,4 1,4082 97,92 3,83 3,70 1,55 1,84 0,53 0,98 0,44 1,90 0,17 2,01 -1,22 0,61 0,50 0,37 US
Perf 1d % 0,47 -0,18 -0,30 -2,72 bp 1 bp 1,45 1,38 1,05 1,05 0,87 2,13 0,44 1,69 -0,55 0,91 0,74 0,79 Europe
ECONOMIC DATA with impact
Import Price index (13h30 UK time) expected +1.4% from previous 1.6% / minor
June Michigan Confidence index (15h gmt) expected 69.5 from previous 68.7 / should still be on the rise / interesting as fresh related
data although need to be switched increasing spending
Treasury Secretary Geithner in Italy for G8 meeting of finance ministers
POSITIVE IMPACTS
BARCLAYS : BlackRock agreed to pay $13.5bn ($6.6bn in cash and the rest in shares) to buy BGI in a deal that will make the US money
manager the biggest in the world, with more than $3,000bn in assets under management
NOVARTIS completed first batch of H1N1 vaccine weeks ahead of expectations / It plans tostart clinical trials of vaccine in July, &
expects licensing in autumn / Said that more than 30 governments have asked it to supply H1N1 vaccine ingredients
EADS : Airbus will achieve its target of €2.1 bn of cost savings in 2010 despite the financial crisis (COO) / Concerning the A400M military
aircraft, COO said it is on track for a first flight by the end of the year…
GDF-SUEZ : The Electrabel unit denied allegations by Belgium’s energy regulator that it artificially increased power prices in Belgium by
halting certain electricity-generating units
DANONE : Right (DANO_r.PA / BNDS FP) stops trading tonight at the close

NATIONAL SEMI CONDUCTOR : Q4 revenue $281m (273m e) / EPS loss $0.28 (-0.38 e) / Sees Q1 sales $285-305m (283m e)
EUROPEAN BANKS : To be noted : EU govts have approved $5.3 trillion of aid, more than the annual GDP of Germany, to support
banks during the credit crunch / The U.K. pledged $1.1tn to restore confidence in its lenders, the most of any of the 27 EU members /
“The operating environment for banks is likely to remain challenging due to credit losses linked to their loan portfolios” (EU’s doc)
NEGATIVE IMPACTS
EDF (Yesterday) : Maryland ordered further review of Constellation Energy's plan to sell half its nuclear business to EDF because the
$4.5bn deal would give EDF "substantial influence" over Constellation's regulated utility, Baltimore Gas & Electric / Separately, EDF
denied reports in Les Echos that it would increase its stake in Dalkia, a JV with VEOLIA
UNICREDIT’s head of the bank's central and eastern Europe operations, said there would be "serious pressure" on provisioning because
of the region's economic downturn (the Economist)
SPANISH BANKS : The current economic downturn will force Spanish banks and savings banks to close more than 1,500 offices in 2009
and 2010 (Expansion) / The figure represents 3.2% of the 45,662 branches available at the end of 2008
RESULTS DIVIDENDS EVENTS
Today Club Med / Danone Rights issue expiry / Transgene AGM
Monday Vtech Holdings
Tuesday Tesco / Adobe / Best Buy Thomson AGM
Arkema (€0.60) / Imperial Tobacco (GBp 23,33333) / Land Securities
Arcelor Mittal EGM / Nokia Exhibition to launch
Wednesday Sainsbury / FedEx (GBp 7.00) / Raiffeisen internat Bk (€0.93) / Rio Tinto 21 per 40 / Severn
new phone
Trent (GBp 45.61111) / United Utilities (GBp 24,47778)
Thursday RIM / Cadbury trading statement conf Gecina (€1.98) Maurel & Prom AGM
TRADING IDEAS
BUY MUNICH RE / ALLIANZ / GENERALI to play insurance sector higher beta
BUY L OREAL / ALSTOM / BOUYGUES / FRANCE TEL / DEUTSCHE TEL on double bottom possibility & PERNOD on reversal H&S
SELL BMW / UNILEVER to play double top possibility
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12-Jun-09 ROSY PICTURE

BUY DANONE / SELL NESTLE // BUY BBVA / SELL SANTANTER // BUY ALLIANZ & MUNICH RE / SELL AXA // BUY IBERDROLA / SELL VEOLIA
// BUY BOUYGUES / SELL ST GOBAIN
BROKER METEOROLOGY
ASML....................................................................RATED NEW OVERWEIGHT ............................................................. BY BARCLAYS
INFINEON.............................................................RATED NEW OVERWEIGHT ............................................................. BY BARCLAYS
SWISS RE ............................................................RAISED TO HOLD FROM SELL ......................................................................BY ING
GENERALI ...........................................................RAISED TO BUY FROM HOLD........................................................................BY ING
BASF ....................................................................RAISED TO BUY FROM NEUTRAL ...................................... BY GOLDMAN SACHS
LONZA .................................................................RAISED TO NEUTRAL FROM SELL ..................................... BY GOLDMAN SACHS
PETROBRAS .......................................................RAISED TO OVERWEIGHT FROM EQUAL ........................ BY MORGAN STANLEY
WPP......................................................................ADDED TO CONVICTION BUY LIST ..................................... BY GOLDMAN SACHS
SCHNEIDER.........................................................STARTED AT BUY ................................................................................ BY NOMURA
PHILIPS ................................................................STARTED AT BUY ................................................................................. BY NOMURA
INVENSYS............................................................STARTED AT BUY ................................................................................. BY NOMURA
ALSTOM...............................................................STARTED AT BUY ................................................................................. BY NOMURA
EUROPEAN CAPITAL GOODS SECTOR ...........STARTED AT BULLISSH....................................................................... BY NOMURA

PRUDENTIAL.......................................................CUT TO HOLD FROM BUY..............................................................................BY ING

IRISH LIFE ...........................................................CUT TO HOLD FROM BUY..............................................................................BY ING
LEGAL & GENERAL............................................CUT TO SELL FROM HOLD ............................................................................BY ING
AIR LIQUIDE ........................................................CUT TO NEUTRAL FROM BUY............................................. BY GOLDMAN SACHS
SAIPEM ................................................................ADDED TO LEAST PREFERRED.................................. BY BANK OF AMERICA ML
ERICSSON ...........................................................CUT TO UNDERWEIGHT FROM EQUAL .......................................... BY BARCLAYS
NOKIA ..................................................................CUT TO EQUALWEIGHT FROM OVER............................................. BY BARCLAYS
INTERCONTINENTAL HOTELS ..........................REMOVED FROM CONVICTION BUY LIST .......................... BY GOLDMAN SACHS
IBERDROLA RENOVABLES...............................CUT TO SELL FROM NEUTRAL .................................................................. BY UBS
VOESTALPINE.....................................................CUT TO NEUTRAL FROM OVERWEIGHT ...................................... BY JP MORGAN
TOMKINS .............................................................STARTED AT REDUCE.......................................................................... BY NOMURA
ATLAS COPCO....................................................STARTED AT REDUCE.......................................................................... BY NOMURA
ABB ......................................................................STARTED AT REDICE ........................................................................... BY NOMURA

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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12-Jun-09 ROSY PICTURE

CHART OF THE DAY

Nikkei 225
Since 2008

16000

15000

14000

13000

12000

11000
v
10000

9000

8000

7000

6000
ja mar m a i- juil- se nov- ja mar m a i- juil-
nv- s-08 08 08 pt- 08 nv- s-09 09 09

Source : Bloomberg

The Japanese Nikkei 225 climbed 1.55 % this morning to close above the 10 000 level for the first time since October 2008…

Time Country Indicator Period GE forecasts Consensus Previous

3.00 GMT China Industrial production May 7,7% YoY 7,3% YoY
5.30 GMT Japan Industrial production (final) April 5,2%,-31,2% YoY
5.30 GMT Japan Capacity utilization (final) April 0,8% MoM
7.45 GMT France Consumer price index May 0,2%,-0,2% YoY 0,2%,0,1% YoY
7.45 GMT France Central Government balance April € - 43,7 bn
10.00 GMT Euro zone Industrial production April -0,4%, -19,8% YoY -2,0%,-20,2% YoY
15.30 GMT United-States U.S. Treasury Geithner at G8 Conference in Italy
16.00 GMT United-States University of Michigan Confidence (preliminary) June 69,5 68,7

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

DJIA 8770,9 0,32% - 0,06% EUR/USD 1,4077 0,78% 0,76%
S&P 500 944,9 0,32% 4,61% EUR/JPY 137,88 -0,04% 8,09%
Nas daq 1862,4 0,69% 18,09% USD/JPY 97,95 0,73% 7,43%
CA C 40 3334,9 0,81% 3,64% Oil Price % 5 Days Ytd
DA X 5107,3 0,84% 6,18% Brent $/b 71,4 5,26% 70,93%
Eur os tox x 50 2522,3 1,45% 3,05% Gold Price % 5 Days Ytd
DJ 600 214,8 2,57% 8,29% Gold $/oz 953,6 -0,17% 8,12%
FTSE 100 4461,9 1,71% 0,63% Rates USA Euro Japan
Nikkei 10128,3 3,23% 14,32% Central Banks* 0,25 1,00 0,10
Shanghai Comp 2773,0 1,17% 52,29% Overnight 0,15 0,73 0,10
Sens ex ( India) 15516,5 2,87% 60,84% 3 Months 0,17 0,75 0,20
MICEX ( Rus s ia) 1138,5 1,61% 83,77% 10 Y ears** 3,83 3,70 1,53
Bov es pa ( Bras il) 53410,9 2,54% 42,24% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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12-Jun-09 ROSY PICTURE

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

Watch in France the release of the Consumer price index for May, due at 7.45 GMT. France inflation is expected to reach negative
territory which will be acting a deflation situation.

Watch in the euro area the release of the Industrial production for April due at 10.00 GMT. Euro area industrial production is expected
to drop again as the global economic downturn is hitting exportations and as domestic demand is weak. .

ECONOMY
UNITED-STATES : RETAIL SALES ROSE BY 0.5% IN MAY
U.S. retail sales rose from -0.2% in April to + 0.5% in May. This rise was mainly led by the rise of incomes (0.5% in April) boosted by the
checks distribution, by the good resistance of household as showed by the Conference Board consumer confidence and by the
slowdown of the jobs destruction. Indeed we can say that U.S. household consumption is progressively recovering. Meanwhile retail
sales ex- autos rose 0.5% and retail sales ex-gas rose 0.2%. Looking at the breakdown we see an increase of 1.3% in building materials
which is very encouraging for the house market. We noticed as well a rise of 3.6% in gasoline stations, 0.7% in health and personal care
and 0.4% in food and beverages. This rise of American retail sales is another concrete sign of the progressive U.S. recovery.

UNITED-STATES : INITIAL JOBLESS CLAIMS DECLINED AND CONTINUIG CLAIMS REACHED A NEW HISTORICAL HIGH
After remaining stable May 30th at 625 000 initial jobless claims dropped to 601 000 last week confirming that the labour market has
reached a ground floor. Indeed as showed by the recent encouraging economic data ( PMI manufacturing and services , consumer
confidence of the Conference Board, rise of the retail sales , factory orders and incomes) the U.S. economy is slowly recovering. On the
other hand the continuing claims reached a new historical ,high at 6 816 000 showing that even if jobs destructions are decreasing
companies are still freezing hiring process.

CHINA : THE TRADE SURPLUS SLIGLY WIDENED IN MAY

China trade surplus rose from $13.14 billion in April to $13.39 billion in May. Nevertheless this data is not as good as it looks indeed
exportations dropped by 26.4% as the global economic downturn is cutting demand for Chinese goods abroad. This gloomy export data
as been overshadowed by a slump of importations by 25.2% explaining the increase of the Chinese trade surplus./JB
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12-Jun-09 ROSY PICTURE

VIX index : implied volatility on the S&P 500 $ Libor - 3-Month (Interbank Rate)
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
12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009 12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009
Source : Bloomberg Source : Bloomberg

United States : 10-year Treasury yield 1,2 10-year Treasury spread USA-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 12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009
12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009
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
12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009 12/06/2007 12/12/2007 12/06/2008 12/12/2008 12/06/2009
Source : Bloomberg Source : Bloomberg