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24-Mar-09 MASS CONSTRUCTIVE WEAPON

The rebound in the number of US existing homes sales, from 4,490k in January to 4,720 in February, reverses the previous
month’s fall, and is at last promising. Indeed, extracting from the monthly volatility, housing activity appears to have stabilised after the
post-Lehmans slump. Admittedly, around 45% of February’s home sales related to sales of distressed properties, which is only
exacerbating the downward pressure on prices. Note that the annual growth rate of the median house price fell from -14.8% in January to
a new low of -15.5%. But at least distressed sales are helping to clear the inventory backlog, which needs to happen before prices stop
falling and start rising. Although the months’ supply of unsold homes remained at 9.7 in February, it remains below the peak of 11.0 in
November. Looking ahead, once last week’s sharp fall in Treasury yields filers through into lower mortgage rates, some households will
be tempted back into the market, while homeowners will see their purchasing power increase significantly, especially as in the meantime
both energy and food prices are dropping. Moreover, the normal rates of turnover (some households simply need to move home
regardless of market conditions) suggest to us that housing activity may be close to a floor.
Already, t he Fed’s decision to more than double the amount of money it intends to inject into the economy, part of which will
be done by purchasing Treasuries, was a bold step that will help to support the economy , which increases the chances of a
meaningful recovery in activity by the year-end, or at least in 2010. Last week’s 40bps fall in 10-year Treasury yields and the drop in
corporate bond yields show that the Fed’s decision to boost the size of its asset purchasing programs from $600bn to $1,750bn has
succeeded in lowering public and private borrowing costs. It is only a matter of time before households benefit too from even lower
mortgage rates. Through this asset price route, the Fed has already boosted the prospects for economic activity . With the Fed ensuring
that the monetary base will increase very significantly, no one can say it isn’t trying. On 11th March, the value of the assets on the Fed’s
balance sheet was $1,822bn. The asset-purchasing programs and the Term Asset-Backed Securities Loans Facility (TALF) that had
previously been announced meant that even before last week’s news, the Fed’s balance sheet was set to nearly double in size to more
than $3,300bn. This was because the Fed had yet to purchase $431bn of the $500bn of mortgage-backed securities (MBS) it had
pledged to do, $56bn of the $100bn of agency debt (Fannie Mae and Freddie Mac bonds) it had planned and it had yet to do any of the
$1,000bn of lending through the TALF that it said it would. But now that the Fed has decided to buy an extra $750bn of mortgage-backed
securities, an additional $100bn of agency debt and $300bn of Treasuries, the balance sheet is set to balloon to close to $4,500bn . The
total increase will be slightly more than $2,600bn. The asset purchase programme also implies a huge increase in the size of the
monetary base (the reserves of banks held at the central bank and the amount of notes and coins in circulation) which will soon be
equivalent in size to 30% of annual GDP. What’s more, the monetary base is likely to reach such a size within a matter of months. The
Fed originally planned to complete its purchases of mortgage-backed securities and agency debt by the end of July and to lend $200bn
per month through the TALF. Last week it stated that it will make its Treasury purchases “over the next six months”. This means that the
monetary base is likely to reach such highs by the end of September .
The Treasury’s latest plans for a public-private investment program announced yesterday deserved the optimistic welcome they
have received from the stock market. At the very least, it is encouraging to see finally some real details of the program, particularly after
the debacle of Treasury Secretary Geithner’s initial announcement last month. Nevertheless, a number of questions remain unanswered.
In particular, the success or failure of the program still depends crucially on the willingness of private investors to get involved and, just as
importantly, the willingness of the owners of these distressed securities and loans to sell at the price that investors are ready to pay. The
program will be split into two roughly equal parts, with one half of the program devoted to purchasing what the Treasury calls the “legacy”
securities clogging up banks’ balance sheets, while the other half of the program will be devoted to purchasing “legacy” loans. Under the
legacy securities program, the Treasury will select up to five private fund managers to purchase distressed securities. It will provide a one-
for-one match for every dollar of private capital each investment fund raises and will be willing to lend them an additional 50% of the
equity capital in the form of senior debt (up to 100% in some cases). The investment funds will also then be able to leverage their
purchases of distressed securities by drawing on the Fed’s TALF program.
Unfortunately, some of the key mechanics of this program are still missing. Perhaps most importantly, there is no guarantee the
investment funds and the owners of these securities will be able to agree on a price. As regards the legacy loans program, once again the
Treasury intends to provide half of the equity capital with the rest coming from private sources. Investment funds will be able to finance
the loan purchases by issuing FDIC guaranteed debt, with the FDIC willing to guarantee up to six times the equity committed. Under this
program, banks or other financial institutions will identify pools of loans they want to get off their balance sheets. Those pools will then be
auctioned off among the various new investment funds. The danger here, however, is that the winning bid could still be below the “reserve
price” that the selling bank is willing to accept. This latest part of the Obama administration’s Financial Stability Program could turn out to
be a powerful tool to get banks lending again . For instance, the legacy loan program may end up purchasing $500bn, or 10% of the
$4,700bn in real-estate loans still on the books of US banks. Nevertheless, there is still plenty of uncertainty surrounding how the pricing
of these assets and loans will occur. In particular, banks may prefer to continue to sit on the assets rather than accept a substantial loss.
Same as on the D Day of June 6th 1944 , or Hiroshima in July 26th 1945, the US has now use unlimited forces as they crossed the
point of no return in order to succeed, which was already the case from the start, but the Lehman fall to try and please the public opinion
was of very costly mistake which has delayed the process and is now being solved. Whoever doesn't believe in the recovery should
however be convinced by the markets levels which have now passed their point of no return too. Any downside move should now be seen
as an opportunity to jump in.
WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 53,6 1,3664 98,17 2,66 3,02 6,50 7,99 15,60 3,86 6,43 5,96 7,34 4,00 7,20 7,08 6,76 6,84 US
Perf 1d % 1,53 0,23 -1,24 0,72 bp 4,5 bp 4,82 5,85 en 2,58 4,11 4,12 4,59 2,38 4,87 4,43 4,12 4,31 Europe
ECONOMIC DATA with impact
FHFA House Price Index (14.00 GMT) / US house prices still falling, but activity may be stabilising / interesting
Chicago Fed President Evans speaks at European Banking and Financial Forum (10.00 GMT)
St. Louis Fed President Bullard speaks on "Effective Monetary Policy in a Low Interest Rate Environment" (17.35 GMT)
Treasury Secretary Geithner and Fed Chairman Bernanke testify on AIG before House Financial Services Committee (18.00 GMT)
President Obama news conference on economic recovery plan (midnight UK time)
POSITIVE IMPACTS
ALCATEL was chosen by China Unicom to deploy 3G mobile networks in 14 Chinese provinces / Financial details weren't disclosed, but
China Unicom said in August it plans to invest $14.6 bn in 3G mobile services from next year through 2010.
VINCI won a 30-year Public-Private Partnership contract in Slovakia / Estimated value of over €1 bn
BANCO ESPOSITO SANTO : Rights to buy new BES shares in a cap increase to start trading till April 2 / BESDS PL – BES_r.LS
SANTANDER said its board approved a fourth 2008 dividend, to be paid from May 1, of €0.2574
GENERALI : Moody's affirms the Aa3 Insurance Financial Strength Rating with Stable
BARCLAYS is in talks with Goldman Sachs about a sale of the iShare, adding one more name to a growing list of possible bidder
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24-Mar-09 MASS CONSTRUCTIVE WEAPON

SANTANDER - GAS NATURAL - TOTAL : International Petroleum Investment agreed to buy Santander's & UNF's stakes in Cepsa, for
€33/sh. (close €32.61) (Expansion) / Late Feb., Santander said it was in talks to sell its 32% stake in Cepsa at a price between €30-
€35/sh. / Fenosa has a 5% stake in Cepsa / Santander will get more than €2.7 bn / Total is the leading shareholder, with 49% of Cepsa
CREDIT SUISSE said it had strong start to 2009 but added it is difficult to predict business developments for 2009 / It said it will ask its
AGM for approval to create as many as 100m shares in conditional capital / Targets ROE >18%
SWISS LIFE agreed strategic partnership with Talanx = Talanx to buy 9.9% in SLHN & 8.4% in MLP / Separately, 2008 Gross Premiums
CHF18.5bn (19bn exp) / Oper Loss CHF842m / Solvency Ratio at end 2008 159% / Proposes CHF5 dividend, in line with exp.
SEVERN TREND : No material change to business performance or outlook since Jan. 27 interim statement / Trading in line with views
UTILITIES : The EU reached a deal on liberalizing energy markets after lawmakers accepted a compromise over breaking up giant
utilities in return for action to protect consumers' rights
FIAT : CNH (subsidiary of Fiat) is looking "with great interest" into the loan facility set up by the Fed to revive the ABS market …
GERMAN CARMAKERS : Germany may extend a program that gives buyers of new cars a subsidy of €2500 if they scrap an old one
NEGATIVE IMPACTS
BHP BILLITON has agreed to set prices for coking coal to major Japanese steelmakers at around $128 a ton for the fiscal year starting in
April, down about 57% from this year (Nikkei)
rd
ARCELORMITTAL launches a €750m convertible bond offering / Maturity April 3 2014 / Confirms Q109 Ebitda guidance
SNAM RETE has named Morgan Stanley and UBS as joint global coordinators and bookrunners for an up to €3.5bn rights issue
METRO : Q4 sales €20.1bn (20.17bn exp) / Ebit €1.37bn (1.32bn exp) / Dividend €1.18, unchanged / Expects 2009 sales growth rate
to fall significantly short of mid-term goal of more than 6% and then affecting 2009 earnings
RESULTS DIVIDENDS EVENTS
Today Banco Popolare / Deutsche Bank / Metro AG / Swiss Life
Aviva (GBp 22,12222) / B Sky B (GBp
Hochtief / TUI Travel / TUI AG / Inditex / / Sainsbury trading DSM AGM / UK real estate conf at Merrill Lynch / Ciena
Wednesday 8,333333) / Intercontinental Hotel Group
statement / Nizhnekamskneftekhim / A2a / Legal & General AGM / Small and mid cap conference at Deutsche Bank
(GBp 22,44444)
Cimport cimentos / H&M / Kingfisher / Premier Oil / Geithner testify of rules revamp / Fiat AGM / Vestas
Thursday
Salzgitter / Man Group trading statement Wind AGM / ASML AGM / Givaudan AGM
Friday Wendel / DSM (€ 0.80) Portugla Telekom AGM
Monday Porsche / Banco Popolare ASML (€0.20) / Philips Electronics (€0.70)
TRADING IDEAS
Upside gap to be closed on the Eurostoxx cash 2176/2193 for info
BUY FINANCIALS as BBVA / AGRICOLE / ING / AEGON / BNP / INTESA to play recovery not finish yet
BUY DPW / L OREAL / METRO / EON / ROCHE / SIEMENS / ACCOR / AIR FRANCE / LAFARGE on reversal Head & Shoulder
BUY DTE / UNILEVER / PERNOD / THYSSEN / ARCELOR on double bottom possibility

BUY FTE / SELL TEF // BUY HEWLETT PARCKARD / SELL DELL // BUY EXXON / SELL CHEVRON // BUY ROCHE / SELL SANOFI
BROKER METEOROLOGY
NOVONORDISK ..........................RAISED TO HOLD FROM SELL ............................................................................... BY CITIGROUP

AVIVA ..........................................CUT TO NEUTRAL FROM OVERWEIGHT .............................................................. BY JPMORGAN

FURGO ........................................CUT TO NEUTRAL FROM BUY ............................................................................................ BY UBS
LINDE ..........................................CUT TO UNDERPERFORM .......................................................................BY BANK OF AMERRICA
CGG VERITAS ............................RATED OVERWEIGHT IN NEW COVERAGE .......................................................... BY JPMORGAN

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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24-Mar-09 MASS CONSTRUCTIVE WEAPON

CHART OF THE DAY

Russian Micex Index
Since January 2009

900

850

800

750

700

650

600

550

500
j a nv-0 9 fé vr-0 9 ma rs-0 9

Source : Bloomberg
Russian Micex index is one of the indexes that is still increasing since the beginning of the year. The Russian index rose
more than 34% year to date.

ECONOMIC DATA
Time Country Indicator Period GE forecasts Consensus Previous
23.50 GMT Japan BoJ to publish minutes of Feb 18-19 meeting 18-19 Feb
7.45 GMT France Consumer spending February -1,0%,-0,6%YoY 1,8%,+1,8% YoY
7.50 GMT France Business confidence indicator March 68 68
7.50 GMT France Production outlook indicator March -78 -76
9.00 GMT Euro area Current account January - € 7,3 billion
9.00 GMT Euro area PMI manufacturing (advanced) March 34 33,5 33,5
9.00 GMT Euro area PMI services (advanced) March 41 39,2 39,2
9.00 GMT Euro area PMI composite (advanced) March 36,2 36,2
9.30 GMT United Kingdom Consumer price index February 0,3%,+2,6% YoY -0,7%,+3,0%YoY
9.30 GMT United Kingdom Consumer price index core (ex food and energy) February +1,3% YoY +1,3% YoY
14.00 GMT United - States House price index January - 0,9% 0,1%
14.00 GMT United - States Richmond Fed manufacturing index March -51 -51
14.00 GMT United - States Bernanke,Geithner testify about AIG
21.00 GMT United - States ABC consumer confidence March 22 th -47

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

DJIA 7775,9 7,78% - 11,40% EUR/USD 1,3659 4,91% -2,26%
S&P 500 822,9 9,19% - 8,89% EUR/JPY 134,07 -4,26% 5,48%
Nas daq 1555,8 10,82% - 1,35% USD/JPY 98,17 0,44% 7,66%
CA C 40 2869,6 2,79% - 10,83% Oil Price % 5 Days Ytd
DA X 4176,4 3,26% - 13,18% Brent $/b 51,9 10,76% 24,21%
Eur os tox x 50 2121,7 4,33% - 13,32% Gold Price % 5 Days Ytd
DJ 600 177,7 2,69% - 10,40% Gold $/oz 941,2 2,90% 6,79%
FTSE 100 3952,8 2,43% - 10,86% Rates USA Euro Japan
Nikkei 8488,3 8,54% - 4,19% Central Banks* 0,25 1,50 0,09
Shanghai Comp 2340,7 8,00% 28,55% Overnight 0,20 0,75 0,09
Sens ex ( India) 9666,1 5,37% 0,20% 3 Months 0,22 0,61 0,26
MICEX ( Rus s ia) 849,8 11,42% 37,17% 10 Y ears** 2,66 3,02 1,27
Bov es pa ( Bras il) 42438,6 9,92% 13,02% *US: Fed Funds; Jap: Overnight; Euro: Ref i
** Euro: German Bund rate So urc e : B lo o m berg
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24-Mar-09 MASS CONSTRUCTIVE WEAPON

ECONOMIC DATA PREVIEW
Watch in the United-States the release of the house price for January due at 14.00 GMT, expected to pursue its drop trend after the
slight rebound of 0.1% in December as the real estate crisis is not over yet.

Watch in Euro area the release of the PMI manufacturing (advanced) for March due at 09.00 GMT. After reaching its lowest level in
February the PMI manufacturing which seems to have reached a bottom, should remained stable at this low level. Meanwhile the PMI
services should slightly increases. Watch in France the release of the consumer spending for February due at 07.45 GMT expected to
decrease after the rebound of January. Indeed the sales time is now over and consumer price index rose 0.4% in France in February.
From a year ago the French consumer spending should not increase nor decrease at 0.0% YoY. Actually France’s consumer
spending will be weak till next summer but without collapsing./JB

ECONOMY

UNITED-STATES : EXISTING HOME SALES SURPRISINGLY ROSE IN FEBRUARY

U.S. previously owned home sales surprisingly climbed in February of 5.1% to reach 4.72 million after dropping of 5.3% in January
(4.49 million).This unexpected rise was led by a record of foreclosures bringing bargain hunters into the market to benefit of low
prices. Home prices already dropped 30% and will drop further, in addition interest rates are decreasing and Barrack Obama
administration commit as much as $ 1.1 trillion to unclog credit market. Consequently the access to financing add to a drop in
borrowing cost are impacting positively home buying. As the housing starts rose 22.2% and building permits climbed of 3.0% in
February we can see a positive evolution in the real estate market. What is interesting to notice in these positive evolutions is that
except the drop in rates decided before fall, the American revival plan did not had any impact yet. This could be consider as a good
new for the future.

EURO ZONE : TRADE DEFICIT SHARPLY INCREASED IN JANUARY

The euro zone trade deficit (nominal, seasonally adjusted) increased from - € 1.7 billion in December to - € 5.5 billion in January. This
gloomy trade data is mainly due to the slump of exports as the global economic downturn ( recession in the United Kingdom, in the
United States, and slowdown in China) is cutting the demand for European goods abroad. Indeed after dropping of 2.3% in December
euro zone exportations dropped 10.7% in January and 22% from a year ago. Meanwhile importations fell 7.3 % from a month ago and
19.3% from a year ago. If we look to 2008 final figures, exportations to the United Kingdom the main trading partner of the euro area
fell 4 % to € 222 billion euro and exportation to the United-States the second trade partner of the euro area fell as well 4 % to € 186.8
billion euro the most in five years. More generally demand for euro zone goods is contracting sharply in all of the euro zone’s major
export destination. Unfortunately the recent quantitative easing measures in the United-States, creating money without counterparts
will make the dollar fell and the euro rise, humping European exportations. This is why at the G20 meeting European and Americans
leaders must find an agreement on a real policy mix, not only about a budgetary and a monetary policy but in a fine tuning of the Fed
and the ECB policy. If this is the case the euro will reach at fall time 1.15 $ which will be its optimal level for an American growth
without humping the European growth.

EURO ZONE : PRODUCTION IN CONSTRUCTION ROSE IN JANUARY.

After 10 months of decline since February 2008 and a bottom level at -2.8 in December, euro zone construction output rebound and
rose of 1.3% in January. This rise of course do not make a trend but could be seen as a slight sign of recovery in the construction
sector. From a year ago the trend is still negative at -9.1% but we can notice as well an improvement since February data at -13.0
%./JB
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24-Mar-09 MASS CONSTRUCTIVE WEAPON

VIXindex: impliedvolatilityontheS&P500 $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
26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009 26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009
Source : Bloomberg Source : Bloomberg

UnitedStates : 10-year Treasuryyield 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
26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009 26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009
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
26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009 26/03/2007 26/09/2007 26/03/2008 26/09/2008 26/03/2009
Source : Bloomberg Source : Bloomberg
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24-Mar-09 MASS CONSTRUCTIVE WEAPON