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28-Apr-09

THE TREE HIDING THE FOREST

The bear consensus is so big that the possibility of a pendemic surging during the week-end seemed to give a break for most players so much suffering from the latest rise, although it might be worrying for all of us as human beings. The outbreak of swine flu in Mexico and its spread to other countries has inevitably raised questions about the broader economic and market implications. While not wanting to downplay the social costs or uncertainty about how the disease might evolve, an initial comparison with the SARS crisis is reassuring. According to economists, the worst case scenario is the sort of global flu pandemic that the World Bank estimated last year might eventually cost up to 4.8% of world GDP (more than $3 trillion). But this assumed that 1% of the world’s population would die as a result of the pandemic – some 70 million people. This possibility clearly cannot be dismissed entirely. Influenza has a long track record as a mass killer. The best known example is the “Spanish flu” pandemic of 1918, which is estimated to have caused at least 50 million deaths worldwide (250,000 in the UK). Strains of Asian flu also killed 33,000 in the UK in 1957-58 and 30,000 in 1968-69. However, there is no hard evidence to suggest the current outbreak will evolve along these lines. Indeed, the world economy has shrugged off periodic outbreaks of avian flu for many years . The most recent precedent is the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 . This is believed to have caused 774 deaths, primarily in mainland China and Hong Kong. A study for the Asian Development Bank estimated the cost of the crisis in terms of lost economic activity in the Asia region at between $18bn and $60bn (equivalent to between 0.6% and 2.0% of regional GDP) . However, there are a number of reasons to be less concerned about the current outbreak of swine flu, at least based on what the real experts in this field are saying. For a start, swine flu appears to respond well to treatment using existing drugs . Admittedly, the disease is believed to have killed more than 100 people in Mexico itself, but the health care system there is relatively poor . As of yesterday, there have been no fatalities elsewhere. For example, the 20 confirmed cases in the US have involved only mild flu-like symptoms and just one has required brief hospitalisation . Even in Mexico, the death rate already appears to be falling now that the outbreak has been recognised and appropriate treatment made available. Secondly, the world is now much better prepared to deal with these sorts of crises, thanks to the experience of SARS and the persistent threat of avian flu . The main economic damage has typically come from panic measures to control a potential pandemic rather than direct impact of the disease itself. In the current outbreak, aside from some quite reasonable precautions in Mexico City itself, the wider fall-out has been limited. Even the World Health Organisation, which has declared a “Public Health Emergency of International Concern”, is not recommending any travel or trade restrictions in response to swine flu. Finally, even in the case of SARS, the economic costs turned out to be much less than initially feared, and activity soon recovered . For example, consumer confidence in China initially collapsed but the actual damage to retail sales appears as no more than a blip in the data. Everything is just looking like better than to focus on the financial crisis. There is money, but hardly enough confidence to make it be invested. Not pulling their leg, but US officials are very good at killing mosquitos with a bazouka, reason why we believe they will succeed in setting the economy back on track. But this high pendemic communication process surging in only one week-end time after 20 cases and no dead case, might be very helpful in sorting out the entire financial crisis. The focus is now on this pendemic threat, which to be honest at that stage, such as it has been explained above, is very premature, and for a developped country certainly easier and cheaper to cure than the latest financial turmoil. One solution for two problems, or maybe just only one single and same problem. Once the pandemic risk will no longer be, same as with the SARS which took place after the internet bubble burst, the September 11th strike, the accounting defaults, once the breaking news became routine the market just flew. Watch out the swine flu tree hiding the stress test from banks, the housing stabilization process, and the rising equity indices forests which altogether are just reflecting the end of a tough period and a bull market back in place.Should still be looking at a break of 2358 on the cash eurostoxx to head toward 2608 very soon, and then we sit and talk valos, pendemic posisbility, timing amn dstrength of the recovery. The good thing about the terrible period we suffered from, is that the worse was expected, and the worse has been avoided. So pendemic, no pendemic ? up to you ...
WTI Last Perf 1d % 49,2 -2,58 €/$ 1,3013 -0,18 $/¥ 96,09 0,70 10 yr US 2,90 -0,56 bp 10 yr Euro 3,16 -3 bp Basic -2,37 -1,03 Energy Financ Health -1,84 0,69 -3,16 0,08 0,95 0,63 Tech -0,76 -0,90 Tel -0,25 0,24 Indus Utilities -1,49 -0,39 0,85 -0,02 SOX -1,12 -1,43 S&P NAS DOW Close US Europe

-1,01 -0,88 -0,64 0,03 -0,71 0,03

ECONOMIC DATA with impact
UK CBI distributive trends survey (11.00 BST) may show a modest rebound in April / interesting although it would only fit with the other April UK indicators S&P / Case Shiller Home price index (13h gmt) expected 142.8 from previous 146.4 / interesting, although t he recent stabilisation in housing activity is not yet enough to support a sustained increase in prices in February Consumer Confidence (14h gmt) expected 29.9 from 26 prior / minor Richmond Fed Manufacturing index (14h gmt) expected -17 from -20 / minor

POSITIVE IMPACTS
ALCATEL signed a $1.7 bn contract with China Mobile & China telecom to provide network upgrades, integration & maintenance in 2009 CARREFOUR new CEO is weighing the partial sale of Carrefour's property division (La Tribune) / Carrefour will be in contact with institutional investors to invest in the properties, in increments of €200 m to €500 m BP : Q1 clean net profit $2.39bn (2.23bn exp) / Production 4.016m boepd (3.997m exp) / Quarterly dividend $0.14, unch. DBK : Q1 revenue €7.2bn / NII €3.84bn (€3.12bn exp) / PTP €1.8bn (€1.2bn exp) / ROE 21.9% (25% rumored Yesterday) / Trading Profit €2.26bn (€650m exp) / Mardowns €1bn / Tier1 capital ratio 10.2% from 10.1% / Ackerman signs extension until 2013 BBVA : Q1 NII €3.27bn (€3.07bn exp) / Tier 1 ratio 7.7% end-March / Core capital 6.4% end-March vs 6.2% end-Dec / Bad Loans Ratio 2.8% from 1.1% Year earlier HANDELSBANKEN : Q1 Total income SEK8.39bn (7.92bn exp) / NII SEK5.39bn (5.33bn exp) / Operating Profit SEK3.81bn (2.63bn exp) / Tier1 capital ratio 11.6% end-Q1 / Says liquidity improved further in Q1 FORTIS AGM at 9:30 UKT / Will be suspended pending a statement from Co ALLIANZ sold shares in Industrial and Commercial Bank of China at HK$3.86 per share. Allianz sold 3.22 bn ICBC shares (€1.2bn) DAIMLER reached an agreement with others Chrysler’s owner to exit its 19.9% stake in the company / Daimler will forgive the repayment of loans it had extended to Chrysler that it already has written off in 2008 / Daimler agreed to pay $200 m to Chrysler's pension plans on the date of the execution of the deal and in each of the next 2 years / That will reduce an existing pension guarantee of $1bn to $200 m INBEV : KKR is in exclusive talks with InBev to acquire South Korea's Oriental Brewery (Reuters) / Also on Monday, MoneyToday cited an industry source as saying KKR had raised its bid for OB to more than $1.9 bn and accepted most of InBev's demands

NEGATIVE IMPACTS
KPN : Q1 rev. €3.40 bn (3.5bn e) / Ebitda €1.234 bn (1.27bn e) / Kept 2010 EBITDA target of at least €5.5 bn & FCF target of ~ €2.4bn

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28-Apr-09

THE TREE HIDING THE FOREST

AIR LIQUIDE : Q1 revenue €3bn, in line / Cut 2009 guidance, aiming now for FY revenue and net profit to be close to 2008 levels vs previous guidance for a growth in both levels / Positive signs first observed end Q1 do not yet provide signs of trend UK BANKS may be required to hold more capital than the sector average under a plan that M.Darling should announce next month (FT) VOLKSWAGEN is temporarily halting prod. at its factory in Mexico, where the New Beetle is produced, due to weaker global demand PEUGEOT : FAURECIA launches a €455 m rights issue from April 30 to may 12 on the basis of 8 new shares for 3 existing / Price €7 (34% discount compared to April 24 closing share price) / Capital hike underwritten by Peugeot (which owns 70.85% of the company) WPP : Q1 revenue £2.12bn (2.13bn exp) (org. -5.8% vs -5.2% exp) / Said it will be difficult to maintain operating margins at the level achieved in 2008, after adjusting for TNS & due to very difficult H1 / FORTUM : Q1 sales €1.6bn (1.7bn exp) / Underlying Ebit 602m (627m exp) / UCG Bank Austria : Moody's downgraded the bk financial strength rating to D+ from C+ & its LT debt & deposit ratings to A1 from Aa2 GDF Suez said that it was not in talks to buy part of the stake held by E.ON in the Nord Stream gas pipeline it is building with Gazprom DEUTSCHE BOERSE : The International Securities Exchange, the No. 1 U.S. equity options market, plans to eliminate customer transaction fees in all its multiple-listed exchange-traded funds and index options. NESTE OIL : Q1 Sales €2.05bn (€2.35bn exp) / Operating €95m (€90.4mln exp) / Largest drop in demand in diesel market / mkt situation not improving during April / demand fall, new capacity to pressure margins / cut 09 invest to €890mln from €950mln WHITBREAD : Total revenue £1.334bn, in line / PTP £228m (222m exp) / Final dividend of 26.9P FINNAIR : Q1 sales €515.7m (€524m e) / Operating Loss €47.5m (€ -23m e) / Says 2009 funding safeguarded / Sees FY 2009 Loss YARA INTL : Q1 sales Nok17.10bn (14.83bn exp) / Ope profit Nok1.19bn (1.02bn exp) / Global fertilizer deliveries lagging last season. VERBUND : Q1 Sales €881.6m / EBIT €256m (€282m exp) / Says sticks to past div policy US STEEL : Q1 revenue $2.75bn (3.14bn exp) / EPS -$3.78 (-$1.69 exp) / Cut dividend to 5 cents from 30 cents / Will offer 18 m shares of its common stock and $300 m of senior convertible notes to pay off loans due in 2010 and 2012 CITIGROUP-BOA : Based on the results of recently concluded "stress tests," US regulators told Citigroup and Bank of America they may need to raise more capital (WSJ) / Citigroup and BofA are likely not the only banks that the Fed has determined might need more capital MINERS : China's steel makers and global miners have agreed to cut term iron ore prices sharply (Reuters) STEELMAKERS : The World Steel Association expects the apparent steel demand to fall by 14.9% (steepest fall in demand since WW2) Demand in the US seen down 37% with EU -29% / Expects demand to stabilize late 2009, leading to a recovery in 2010
RESULTS DIVIDENDS EVENTS BBVA / BP / Sandvik / Theolia / Pfizer / Sun Micro Bouygues (€1.60) Fortis EGM ArcelorMittal / royal Dutsch Shell / Sanofi-Aventis / SAP / Siemens / Bayer / Continental AG / Volkswagen / France Aegis (GBp 1.711111) / Akzo Nobel (€1.40 ) / Fortis EGM / Allianz AGM Telecom / Geberit / Nordea Bk / Norsk Hydro / ST Micro Nestlé (CHF 1.40) / Sandvik (SEK 3.15) (after US close) / General Dynamics / American Electric Power / Time Warner AstraZeneca / BASF / BG group / B Sky B / Cap Gemini / Technip / Scor / Dassault Systemes / Lufhansa / Edison / Allianz (€3.50) / Credit Suisse ( CHF 0.10) / AXA AGM / Deutsche Tel AGM / BASF AGM Ferrovial / Novo Nordisk / Kellogg / Motorola / Safeway / Danone (€1.20) / Ahold (€0.18) Eastman Kodak / International Paper Chevron Santander (€0,25737) / BASF (€1,95) / Beirsdorf (€0,70 + 0,20) / Carrefour (€1.08) / Deutsche Tel Acerinox / Alcatel Lucent / TNT Stress Test Results (€0.78) / Inditex (€0.55) / Lagardere (€1.30) / Schneider Electric (€3.45)

Today Wednesday

Thursday Friday Monday

TRADING IDEAS
BUY Cars ahead of RENAULT & DAIMLER results + fund managers underweight cyclical names + good Monthly car registration lately + boosted by gvt help BUY DANONE / UNILEVER looking good & BUY AHOLD / GSZ on double bottom possibility BUY OIL names as TOTAL / ENI / BP / ROYAL DUTCH to play the economic recovery BUY MUNICH RE / NESTLE / L OREAL / VIVENDI / SIEMENS / PERNOD on reversal Head & Shoulder possibility BUY MUNICH RE / SELL AXA // BUY L OREAL / SELL CARREFOUR // BUY AHOLD / SELL METRO // BUY BNP / SELL SOCGEN

BROKER METEOROLOGY
IBERIA ..................................RAISED TO BUY FROM HOLD......................................................................................... BY CITIGROUP CENTRICA ...........................CUT TO UNDERWEIGHT FROM EQUAL WEIGHT ........................................... BY MORGAN STANLEY RICHEMONT ........................CUT TO UNDERWEIGHT ................................................................................... BY MORGAN STANLEY FORTUM................................CUT TO HOLD FROM BUY .............................................................................................. BY CITIGROUP EASYJET ..............................CUT TO HOLD FROM BUY .............................................................................................. BY CITIGROUP MERCK KGAA ......................CUT TO NEUTRAL FROM OVERWEIGHT ..................................................................... BY JPMORGAN SUEZ ENVIRONNEMENT ..... CUT TO NEUTRAL FROM OVERWEIGHT ............................................................................... BY HSBC TELEKOM AUSTRIA ............CUT TO NEUTRAL FROM OUTPERFORM ..............................................................................BY EXANE

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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28-Apr-09

THE TREE HIDING THE FOREST
CHART OF THE DAY
Japan Retail Trade YoY NSA Since 1998

5 1 -3 -7 -1 1 -1 5 98 99 00 01 02 03 04 05 06 07 08 09

Source : Ministry of Economy, Trade industry - Japan Japan retail sales slid 3.9% from a year earlier after decreasing 5.7% in February, the steepest pace since February 2002.

Tim e

Country

Indicator

ECONOMIC DATA
Period

GE forecasts

Consensus

Previous

0.50 GM T Japan Retail trade 28-30 April United Kingdom Nat'wide house prices 7.45 GM T France Consumer confidence 9.00 GM T Italy Retail sales 14.00 GM United States S&P/CS Composite 20 YoY T Germany Consumer price index (preliminary) 15.00 GM United States Conference Board consumer confidence T 15.00 GM United States Richmond Fed M T anufacturing index 22.00 GM United States ABCconsumer confidence T

M arch April April April February April April April 26 th April

-41

30

-0,4% ,-4,7%YoY -1,2% ,-15,8%YoY -43 -0,2% ,-1,3%YoY -18,7%YoY 0,1% ,+0,8%YoY 29,5 -15

-0,2% ,-5,7%YoY 0,9% ,-15,7%YoY -43 0,3% ,+0,7%YoY -18,97%YoY -0,1% ,+0,5%YoY 26,0 -20 -47

Inde x e s
DJIA S&P 500 Nas daq CA C 40 DA X Eur os tox x 50 DJ 600 FTSE 100 Nikkei Shanghai Comp Sens ex ( India) MICEX ( Rus s ia)

P rice
8025,0 857,5 1679,4 3102,4 4694,1 2317,4 196,5 4167,0 8578,6 2384,7 11303,4 902,5

% 5 D a ys
2,38% 3,04% 4,43% 4,99% 4,63% 3,66% 3,85% 4,55% - 2,22% - 5,94% 3,57% 2,35% 0,09%

Ytd
- 8,56% - 5,06% 6,49% - 3,59% - 2,41% - 5,32% - 0,92% - 6,03% - 3,17% 30,97% 17,17% 45,67% 22,02%

Forex
EUR/USD EUR/JPY USD/JPY

Price
1,3007 124,91 96,05

% 5 Days
0,47% 2,26% 2,75%

Ytd
-6,89% -1,37% 5,66%

Oil
Brent $/b

Price
47,9

% 5 Days
-2,92%

Ytd
14,77%

Gold
Gold $/oz

Price
898,5

% 5 Days
1,78%

Ytd
1,98%

Rates
Central Banks* Overnight 3 Months

USA
0,25 0,10

Euro
1,25 0,44

Japan
0,11 0,11

Bov es pa ( Bras il) 45819,7

0,12 0,74 0,20 10 Y ears** 2,90 3,16 1,42 *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

28-Apr-09

THE TREE HIDING THE FOREST
ECONOMIC DATA PREVIEW

Watch in the United -States the Conference Board consumer confidence for April due at 15.00 GMT, expected to improve to reach the level of 30 led by the drop of interest rates and by the upcoming budgetary revival plan. Watch in France the consumer confidence for April due at 7.45 GMT, expected to slightly improve from -43 to -41 despite the rise of unemployment as bank interest rates are on a lasting drop trend as well as inflation./JB

ECONOMY
UNITED-STATES : TEXAS MANUFACTURING ACTIVITY IMPROVED IN APRIL The decline in Texas manufacturing activity slowed in April according to the Texas Manufacturing outlook survey. Indexes for production, capacity utilization , volume of new orders and shipment improved for the second consecutive month but remained negative. Although still negative the business activity index. Meanwhile manufacturing continued to draw down inventories and manufacture’s labour demand continue to contract . It is important to notice that most indicators of future activity continued to improved . We can conclude that we most likely hit the ground floor and that the activity is on its way to recover. FRANCE : UNEMPLOYMENT ROSE CLOSE TO A THREE YEAR HIGH The number of French jobseekers rose by 63.400 in March taking the total to 2 448 000 which is the highest level in almost three years. Nevertheless there are signs of hope in France despite the fact that exportations are strongly hit by the global economic downturn cutting demand for French goods abroad. Indeed domestic demand is showing good signs of resistance as consumer spending on manufactured goods rose 1.1% in March from February and 0.6% from a year earlier and index of manufactures ‘ confidence climbed in April for the first time in 13 months. Nevertheless the level of unemployment remained very high putting more pressure on the European Central Bank to cut significantly its leading rate May 7 th./JB

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28-Apr-09
V ind : im liedvolatility onthe S& 5 0 IX ex p P 0
85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 30/04/2007

THE TREE HIDING THE FOREST
6 5,5 5 4,5 4 3,5 3 2,5 2 1,5 1

$Lib r -3 M n (In rb kR o - o th te an ate)

30/10/2007

30/04/2008

30/10/2008

30/04/2009

3 /0 /2 0 0 4 07

3 /1 /2 0 0 0 07

3 /0 /2 0 0 4 08

3 /1 /2 0 0 0 08

3 /0 /2 0 0 4 09

Source : Bloomberg

Source : Bloomberg
1,2 1 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 -0,8

5,5 5,25 5 4,75 4,5 4,25 4 3,75 3,5 3,25 3 2,75 2,5 2,25 2
30/04/2007

U nitedStates : 1 -year T 0 reasury yield

1 -year T 0 reasury sp U -Eurozone read SA

30/10/2007

30/04/2008

30/10/2008

30/04/2009

-1 30/04/2007

30/10/2007

30/04/2008

30/10/2008

30/04/2009

Source : Bloomberg
150 140 130 120 110 100 90 80 70 60 50 40 30 30/04/2007 30/10/2007 30/04/2008 30/10/2008 30/04/2009

Source : Bloomberg

O : Brent ($ ) il /b

1,65 1,6 1,55 1,5 1,45 1,4 1,35 1,3 1,25 1,2
30/04/2007

Forex: Eurovs D (EU /U ) ollar R SD

30/10/2007

30/04/2008

30/10/2008

30/04/2009

Source : Bloomberg

Source : Bloomberg