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9-Jun-09 NORMALIZATION
Banks are doing much better now. Anytime soon a few of them such as Goldman Sachs, JP Morgan, Bank of America and American
express should be repaying the US government’s TARP. Banks are also seeing a decline in their funding costs. In recent weeks interbank
interest rates – the rates at which banks borrow from one another – of all maturities have edged lower. In particular, three month interest
rates have declined to a new record low of 0.65%. This has meant that the spread of three month interbank interest rates above overnight
swap rates of the same maturity – a good proxy of illiquidity and credit risk in the wholesale funding markets – has declined to levels not
seen since the collapse of Lehmans. Banks are now able to borrow again from their peers at favourable rates. In fact, it seems that banks
are also able to raise funds from the private sector . It was reported last week that in the last month banks have raised $85bn. This is
more than the $74bn that the stress tests suggested banks needed to raise to protect themselves from future losses and is equivalent to a
little under 10% of Tier 1 capital. With banks once again able to raise cash from private sources, their reliance on the Fed’s various
funding programs has continued to decline. At the start of the year the Fed provided $350bn of commercial paper. At the end of last week,
it had fallen to $150bn. Similarly, the outstanding value of currency swaps taking place between the Fed and other central banks has
more than halved. Moreover, banks are now taking up less of the funds offered through the Fed’s Term Auction Facility. This is
particularly the case for loans of longer maturities, i.e. 84 days. It is these trends that explain the recent decrease in the size of the Fed’s
overall balance sheet from $2,250bn to $2,000bn. Overall, conditions in a wide range of financial markets appear to have improved
significantly in recent weeks . Of course, conditions are still a long way from those that prevailed before the financial crises began almost
two years ago. Nonetheless, barring any further shocks, it seems that the financial markets are gradually moving back towards conditions
that may be able to support the economic recovery when it eventually begins.
The dollar seems to be on track for some better levels. Indeed The dollar had been running the opposite of commodities prices for a
while. But if dollar strength is on the back of economic hopes for the U.S. (such as what happened on Friday), and better than economies
abroad, then we could still see commodities rally along the dollar. Concerns over ballooning government spending and related debt
issuing had pressured the dollar. While upbeat economic news normally boosts a currency, as it increases the odds of higher interest
rates, the dollar has been used as a safe haven during the financial and economic crisis . That has typically meant the dollar would rally in
times of stress for stocks, while the U.S. currency has come under pressure since early March, as stocks began to stage a powerful rally.
Things are gradually changing in a good way, and this part of a normalisation process which the Fed will monitor carefully.
Housing sector bottoming process as always, will tell the bottom was there once the lagging data being printed are back to the
upside . Already a big real estate agent reported "My phone was ringing off the hook, my voice mail was on overload and people were
coming into the office receptionist saying they couldn't reach me" . " Everyone was waiting for the bottom, and the problem is they waited
too long, because the bottom has already come and gone ." Spurred by markdowns up to 80% from market highs, first-time buyers and
investors both American and foreign descended en masse in the last three months on San Francisco's hardest-hit hinterlands as Wall
Street and the economic climate improved. They're picking clean the Delta region's banked-owned inventory as soon as properties hit the
market and are engaged in unprecedented bidding wars even on short sales.
The panicked buying -- fuelled by buyers' fear they'll miss out on fire-sale prices -- belies the doom-and-gloom evoked by recent
reports of rising mortgage delinquency rates and foreclosure activity . It is one of several overlooked signs the U.S. housing-market
turnaround has started in the nation's hardest-hit markets, which is critical to driving an overall recovery :
•After spending most of the 1990s in the $250,000 range, the median-priced home that was sold in the seven-county San Francisco area
rose to a staggering $850,000 by its May 2007 peak. It since fell to a low of $399,000 in February -- a 53% drop in just 21 months --
before posting its first monthly gain in March, albeit a 1% up tick. The median is expected to continue rising at a healthy clip in months
ahead since it's now at the level of nine years ago, before the bubble began inflating.
•California's statewide inventory of unsold homes -- based on the number on the market divided by the present monthly sales rate -- stood
at a 15.2 months supply in February, 2008. That figure was down to 5.8 months in March, near the historic average.
•At roughly 22,000 units, Las Vegas' inventory is not far off its recent record high. Yet total sales closed in March showed flourishing
demand, the fourth best on record. That monthly record -- set during the height of the boom -- is expected to be broken this summer.
" Things have been looking up but it's going unnoticed ," says a board member with the Greater Las Vegas Association of Realtors and a
broker for Prudential American Group Realtors. "It's just going to take the data a little longer to catch up with reality ." "We've overshot the
market in places like Las Vegas and Arizona in terms of fair value and buyers are bidding prices up again on many properties. The
challenge is going to be whether there is enough financing to eat up the inventory that's yet to come." Yet the number of pending sales of
existing U.S. homes took a surprising upswing in April, rising 6.7 percent in the biggest monthly gain in more than seven years, the
National Association of Realtors reported Tuesday. That increase lags the 9.2% jump in October 2001, but that spike owed to buyers
temporarily putting off home shopping following 9/11. And in an overlooked report that belies the first-quarter delinquency numbers,
defaults on privately insured mortgages -- where borrowers are more than 60 days behind -- fell 3% in April and were down 24% from a
record 106,482 in February, the trade group Mortgage Insurance Companies of America reported Friday.
The quarter should end nicely. There are enough investors out there that do feel they have missed the market's rally since early March
to make sure equity indices will see higher levels very soon. Not only there are still about two trillions dollars sleeping in monetary funds
that should soon step into equity business, but the end fo the quarter is bringing further pressures as fund managers for the biggest part
did not believe that the macro background would improve, while now equity indices are in the green year to date. The quarter end is
approaching and funds are having to show how well they've done to their shareholders
Latest weakness in equity indices should be seen as an opportunity to step in, and as a little pause of a short term overbought
market, which coming days will send higher nicely and smoothly. The rising yields move remains soft and an expected pay back from the
welcoming normalisation of the financial markets. The focus should more be the ability to borrow money and not the current yields levels
which whatever their latest rise remain close to historical levels. Unfortunately another quiet day ahead.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 68,5 1,3872 98,08 3,86 3,68 -1,51 -0,14 0,77 -1,07 -0,31 -0,66 -0,43 -0,68 -0,06 -0,10 -0,38 0,02 US
Perf 1d % 0,74 -0,20 0,42 -1,77 bp -4,6 bp -2,97 -1,33 0,23 -1,40 -1,60 -1,50 -1,64 -1,43 -1,34 -1,05 -1,44 -1,13 Europe
ECONOMIC DATA with impact
German Industrial production (12.00 GMT) / minor
US Wholesales inventories (14.00 GMT) exp –1.2%/ minor
POSITIVE IMPACTS
PORSCHE may sell up to 25% of its holding company to the Gulf state of Qatar / A 25% stake would be worth more than $2 bn (FT)
ALCATEL : Reliance Communications is close to awarding a $500 m-$600 m contract to Alcatel-Lucent of France (Business Standard)
INTESA SANPAOLO : Compagnia di San Paolo's management committee has decided to go ahead and buy another 1.93% of the bank,
bringing its total stake to 9.89%
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

9-Jun-09 NORMALIZATION
CONTINENTAL will examine a full merger with Schaeffler (Continental supervisory Board Chairman) / Results of a review should be
completed by the end of July.
HEIDELBERGCEMENT is looking to sell assets in Malaysia for at least $250 million, to reduce debt.
INSURANCE : According to a survey of insurance executives from 49 countries by KPMG and the Economist Intelligence Unit, 55%
expect an improvement in organic growth, while 53% expect to grow through acquisition or take-over during the next 12 months
SWEDISH BANKS : Latvia's government and coalition partners agreed to slash Latvian's 2009 budget, a move that could help it secure
more emergency loan funds and stave off pressure to devalue its currency…
VEOLIA Transport & Keolis have made offers to buy a stake in French transport grp Transdev worth around €1bn incl. debt (Les Echos)

TEXAS INSTRUMENT raised its Q2 guidance as customers slowed the rate at which they are reducing chip inventories = It now sees
Q2 revenue $2.30-2.50 (2.21bn exp) & Q2 EPS $0.14-0.22 (0.10 exp)
US BANKS : The US Treasury said that it will approve 10 banks for TARP repayment / Announcement expected tomorrow / Separately,
U.S. regulators should periodically repeat stress tests as long as banks continue to hold large amounts of toxic assets (Reuters)
NEGATIVE IMPACTS
FIAT : The U.S. Supreme Court delayed Chrysler’s sale to Fiat at the request of several Indiana pension funds and consumer groups /
Fiat’s CEO said that Fiat will "never" walk away from its deal to buy Chrysler, even if a June 15 deadline is missed
AIR FRANCE : May passenger traffic down 7.8% / May passenger load factor 77.3%
EADS : Thai Airways is reconsidering its order of A380, which it considers too costly & not viable for its operations (the Bangkok Post) /
The International Lease Finance Corp said it has no plans for now to delay or cancel orders for 10 A380s (denying a Sueddeutsche
Zeitung report), but may review the contract given the tough economic climate… / Emirates airline may slow down deliveries of its plane
orders from next year as a recovery in business travel demand is not in sight, its president said…
LUFTHANSA… : Lufthansa CEO said that an industry recovery was not in sight yet, but kept its 2009 op. profit guidance unch. (FAZ)
DANONE : The CEO said that it will maintain its lowered prices in many countries even when the situation improves (Les Echos)
ENEL expects its net debt to reach €45bn or 3 times its gross margin in 2010 (La Repubblica) = That means gross margin in 2010 should
total €15 bn, vs €14.3 bn in 2008 and a touch below current consensus at €15.5bn / It is looking to sell a stake in Enel Green Power,
valued at between €10 & €15 bn / It is also planning to sell its high voltage grid in the Spanish islands as well as some assets in SouthAm
TERNA said electricity consumption in Italy fell 7.3% year on year in May, a consequence of the economic downturn
UBS : Many US clients of UBS who are facing investigation for tax evasion are coming forward to authorities in a voluntary disclosure
program / Separately, the lock up period expires Today for the Swiss govt's convertible bonds in the bk / The Swiss Finance Ministry is in
talks with various parties to discuss options for its stake but has not yet decided to convert its notes into shares or sell them
ARCANDOR : Reuters reported late yesterday that Arcandor was preparing for an insolvency filing Today, but a final decision had not
been taken yet / However, the company would still be focused on submitting another, improved bid for state aid
BARCLAYS : BlackRock plans to pay Barclays $12bn-$13bn for BGI by June 10 (50% in cash and 50% in shares)
VERBUND : Moody's places verbund's A1 rating under review for possible downgrade / It may cut VERBUND A1 senior unsecured rating
STEELMAKERS : Brazil has reinstated a tax of 12 to 14% on some imported steel products

CITIGROUP expects to begin its $58 bn stock swap later this week, as part of a plan that could leave the govt with a 34% stake / The
conversion, announced in Feb, was supposed to happen in April but was slowed by negotiations between the bank and federal officials
over details of the transaction…
RESULTS DIVIDENDS EVENTS
Dassault Systemes AGM / Aegon investor conf / Publicis AGM / Mastercard AGM / Valeo
Today Tesco trading statement
AGM / Morgan Stanley Commodities and Shipping conf
Aegon investor conf / Home Depot investor conf / Antofagasta AGM / Global Transportation
Wednesday Inditex Saint Gobain (€1.00)
conf at Merrill Lynch / SAP at UBS technologies and services conf / Iberdrola Renovables
Thursday Bureau Veritas (€0.72) / Vallourec (€6.00) Theolia AGM / OZ Minerals AGM
Friday Club Med /
Monday Vtech Holdings
TRADING IDEAS
BUY FRANCE TEL / DEUTSCHE TEL / L OREAL / PERNOD / AHOLD / SUEZ ENV / GSZ / PHILIPS looking good
BUY NOKIA / NESTLE / DANONE / MUNICH RE / GLAXO / ROCHE / NOVARTIS / EON to play eco recovery

BUY BOUYGUES / SELL ST GOBAIN // BUY VINCI / SELL LAFARGE // BUY FTE / SELL DTE // BUY CAP / SELL SAP // BUY DANONE / SELL
UNILEVER // BUY DAIMLER / SELL PEUGEOT
BROKER METEOROLOGY
LEGRAND ...................... RAISED TO NEUTRAL FROM UNDERWEIGHT ................................................................... BY JP MORGAN
LEGRAND ...................... RAISED TO BUY FROM NEUTRAL..................................................................................................... BY UBS
DANONE ........................ RAISED TO OVERWEIGHT ....................................................................................... BY MORGAN STANLEY
LUFTHANSA .................. RAISED TO BUY FROM HOLD ........................................................................................................... BY RBS

GDF SUEZ...................... REMOVED FROM EUROPE FIRST LIST ....................................................................... BY MERRILL LYNCH
SAIPEM .......................... CUT TO SELL FROM NEUTRAL ......................................................................................................... BY UBS
AIR FRANCE.................. CUT TO HOLD FROM BUY.................................................................................................................. BY RBS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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9-Jun-09 NORMALIZATION
CHART OF THE DAY
Germany’s Factory Orders % YoY
Since 2005

30

20

10

-1 0

-2 0

-3 0

v -4 0
2005 2006 2006 2007 2 008 200 9

Source : Bloomberg

Factory orders dropped by 37.5% from a year ago, close to their lowest level reached in February at -38.0%. Despite upcoming
improvements as showed by the encouraging ISM manufacturing and ISM services, Germany which start 2009 with a “growth deficit”
of 2.0% should have its worst GDP contraction since the reunification with a drop of 2.5% in 2009./

Time Country Indicator Period GE forecasts Consensus Previous

7.00 GMT Germany Trade balance April € 9,3 bn € 11,3 bn
7.00 GMT Germany Importations April 0,5% 0,8%
7.00 GMT Germany Exportations April -0,1% 0,7%
7.00 GMT Germany Current account balance April € 10,0 bn € 10,2 bn
7.00 GMT Japan Machine tool orders ( preliminary) May -80,4% YoY
7.45 GMT France Trade balance April € - 4,5 bn € - 4,9 bn
11.00 GMT Germany Industrial production April 0,3%,-20,5% YoY 0,0%,-20,4% YoY
15.00 GMT United-States Wholesale inventories April -1,1% -1,6%
15.30 GMT United-States Timothy Geithner Testifies on department budget
22.00 GMT United-States ABC consumer confidence June 7th -49

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

DJIA 8764,5 0,61% - 0,14% EUR/USD 1,3884 -2,96% -0,66%
S&P 500 939,1 - 0,33% 3,97% EUR/JPY 136,22 0,59% 6,95%
Nas daq 1842,4 0,76% 16,83% USD/JPY 98,12 -2,40% 7,62%
CA C 40 3289,7 - 2,40% 2,23% Oil Price % 5 Days Ytd
DA X 5004,7 - 2,68% 4,04% Brent $/b 67,9 0,41% 62,60%
Eur os tox x 50 2468,4 - 2,61% 0,85% Gold Price % 5 Days Ytd
DJ 600 209,3 - 2,17% 5,51% Gold $/oz 950,0 -3,26% 7,68%
FTSE 100 4405,2 - 1,86% - 0,65% Rates USA Euro Japan
Nikkei 9783,1 1,94% 10,42% Central Banks* 0,25 1,00 0,11
Shanghai Comp 2748,7 2,06% 50,96% Overnight 0,15 0,35 0,11
Sens ex ( India) 14823,5 - 1,12% 53,65% 3 Months 0,18 0,84 0,20
MICEX ( Rus s ia) 1120,3 - 7,12% 80,83% 10 Y ears** 3,85 3,68 1,54
Bov es pa ( Bras il) 53630,4 - 1,57% 42,82% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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9-Jun-09 NORMALIZATION
ECONOMIC DATA PREVIEW
No major economic data are due the United-States .

Watch in Germany the release of the trade balance for April due at 7.00 GM. Germany’s trade surplus is expected to decline as
exports should fell due to the global economic downturn cutting the demand for German’s goods abroad and due to the high level of
the euro currency. Meanwhile imports will drop but at a slower pace than exports. Watch as well the release of the industrial
production for April due at 11.00 GMT. Germany’s industrial production is expected to slightly increase since May as it seems that the
economy reached a floor. Nevertheless from a year ago the industrial production should remained very weak around -20.5% YoY.

Watch in France the release of the trade balance for April due at 7.45 GM. France’s trade deficit is expected to slightly improve but it
will mot looks as good as it seems as imports should sharply decline .JB

ECONOMY
GERMANY : FACTORY ORDERS HOLD STEADY AFTER MARCH GAIN
After increasing of 3.7% in March German’s factory orders hold steady at 0.0% in April . If we take in consideration the global economic
downturn cutting demand for German’s goods abroad, a strong euro currency and a weak domestic demand this is not a bad figure at
all. Indeed after a gloomy GDP at the first quarter (-3.8%,-6.9% YoY) it seems that German economy reached the ground floor .
Meanwhile from a year ago factory orders dropped by 37.5% close to their lowest level reached in February at -38.0%. Despite
upcoming improvements as showed by the encouraging ISM manufacturing and ISM services, Germany which start 2009 with a “growth
deficit” of 2.0% should have its worst GDP contraction since the reunification with a drop of 2.5% in 2009./JB
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9-Jun-09 NORMALIZATION

VIX index : implied volatility 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
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
Source : Bloomberg Source : Bloomberg

United States : 10-year Treasury yield 10-year Treasury spread USA-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
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
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
11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009
Source : Bloomberg Source : Bloomberg