WWW.GLOBAL-EQUITIES.

COM / DEL SARTE / + 33 (0) 1 44 43 33 24

18-Jun-09 HEALTH FIRST

Fed officials have an awful lot to discuss at the upcoming two-day FOMC meeting, which concludes next Wednesday (24th June).
The recent surge in Treasury yields (cooling off this week) and mortgage rates has led to speculation that the Fed will increase the speed
or scale of its long-term asset purchases. It wouldn’t be surprising to see the Fed make what we think would be a largely symbolic
gesture. The recent rise in two-year yields and fed funds rate expectations has also increased speculation about when and how the Fed
will ultimately begin to tighten monetary policy. Fed officials will no doubt devote some of next week’s meeting to discussing various exit
strategies. It is possible that the Fed will offer some guidance to the markets on the timing and the tools it might use to tighten policy.
Fed unlikely to respond aggressively to rising rates The Fed might take a relatively sanguine view of the recent surge in long-term
Treasury yields for several reasons. In summary:1. the rise in borrowing costs for firms and households has been more modest; 2. the
rise in Treasury yields reflects welcome signs of economic recovery and improvements in financial conditions; 3. the Fed won’t want to be
seen monetizing the fiscal deficit; 4. the Fed still hasn’t bought half of the assets that it has already pledged to purchase.
Nevertheless, the Fed might still decide to increase the size and speed of its long-term asset purchases. According to the minutes
from the Fed’s last meeting in late April, “some members noted that a further increase in the total amount of purchases might well be
warranted at some point to spur a more rapid pace of recovery.” Furthermore, while a number of Fed officials have been using the
financial media to dampen market speculation that we will see a big increase, it is equally notable that those officials didn’t rule out any
expansion of its asset purchasing program whatsoever. Admittedly, the Fed’s initial announcement back in March, that it would buy up to
$300bn of Treasury securities, did lower 10-year Treasury yields by up to 50 basis points. However, the decline was mainly because bond
investors initially believed that announcement was a statement of intent rather than a final figure.
But the Fed has subsequently admitted that it isn’t targeting any certain level for yields. The market isn’t going to be fooled by the same
trick twice. If the Fed is going to lower yields it will probably need to deliver a massive increase in its Treasury purchases now. With the
Fed already committed to buying $1,250bn of mortgage-backed securities issued by the GSEs, equivalent to 25% of the total outstanding,
there appears to be little scope for increasing the scale of those purchases further. The Fed hasn’t purchased even half of the mortgage
backed securities it has pledged to buy yet. Just because the Fed isn’t going to jump in with both feet, however, doesn’t mean that
Treasury yields and mortgage rates will continue to rise inexorably. The yields rise should be it for now as expectations of a robust
economic recovery are dashed and worries about deflation resurface. The recovery will be gradual, fragile and monitored carefully by the
Fed and US government officials, which doesn’t mean an inflation fear.
U.S. CPI increased by a smaller than expected 0.1 % MoM in May (+0.3 % expected) as decline in the price of food and in gas and
electricity helped to offset a 3.1 % increase in gasoline prices ($2.72 /gal). Excluding food and energy, core consumer prices increased by
a modest 0.1 % MoM in May. The only sign of inflationary pressure was the 0.5 % MoM increase in motor vehicle price. The annual
headline inflation rate fell to -1.3 % from -0.7 %, while annual core inflation edged back down to 1.8 % from 1.9 %. The base effects from
last year’s energy price spike will push the headline rate further into negative territory over the next few months but, as those effects are
unwound, the rate should subsequently snap back to about +1.0 % by year end. Core inflation has so far proved to be fairly sticky, but the
recent tobacco tax increases explain some of that and, over the next 12 months, it should slow more substantially.
Yesterday, financials fell after Standard & Poors downgraded the credit rating of 18 banks, overshadowing gains in health-care
shares as Congress prepares legislation to overhaul the industry. Democratic leaders advanced legislation that would require all
Americans to have health insurance and make employers provide benefits to workers or pay a penalty. General Electric tumbled after its
vice-chairman predicted a few more “difficult months” in a speech at the Paris air show.
Leading indicators will be the focus today, as well as some (hopefully) specific flows due to the quarterly option expiry tomorrow.
Admittedly, the sharp steepening of the yield curve, the further rise in equity prices and the jump in the delivery times index of the ISM
manufacturing survey mean that the index of leading indicators will increase by around 0.8 %. On the face of it, any increase this month
would be consistent with GDP growth soon turning positive.

WTI €/$ $/¥ 10 yr US 10 yr Euro Basic Energy Financ Health Tech Tel Indus Utilities SOX S&P NAS DOW Close

Last 70,9 1,3934 95,76 3,69 3,48 -1,64 -1,60 -2,19 2,01 0,70 -0,34 -0,64 -0,09 0,93 -0,14 0,66 -0,09 US
Perf 1d % 0,21 -0,06 -0,01 -0,19 bp -4,4 bp -1,54 -1,92 -2,04 1,64 0,46 0,21 -0,67 -0,36 0,47 -0,18 0,42 0,05 Europe
ECONOMIC DATA with impact
Jobless Claims (13h30 UK time) expected 602k from previous 601k / showed some improvement lately / minor as weekly data
Leading Indicators (15h UK time) expected +1% from previous +1% / might be very much welcome although such a leading indicator
rise is reflecting growth level already seen through the steepening of the yield curve, the rising equity prices and the jump in the delivery
times index of the ISM manufacturing index meaning GDP should turn positive, and this is too much for most strategists / interesting
Philadelphia Fed index (15h UK time) expected –17 from previous –22.6 / Michigan index was up, NY one was down / minor then
FINLAND AND SWEDEN MARKETS CLOSED TOMORROW
POSITIVE IMPACTS

BAE SYSTEMS : Saudi Arabia is considering placing an order for a further 72 Typhoon fighter jets worth about £5 bn
CADBURY said that trading improved in April & May / Confirmed FY guidance
ROCHE : Evaluate Pharma, a source for pharma & biotech analysis, said Avastin would be the biggest single selling drug in the world,
with 2014 revenues of $9.23 bn, despite some recent setbacks in clinical trials
NOVARTIS : U.S. regulators have approved Ilaris to treat children and adults with a serious life long auto-inflammatory disease
D. POSTBANK : KfW agency plans to offer DPB state guarantees of up to €1.5bn for the securitization of loans (Handlesblatt)
E.ON aims to wrap up the sale of its gas distribution grid in Italy by the end of the year and potential investors have already been
sounded out / Il Sole 24 Ore said the gas grid could be valued at around €600 m
HSBC : Legal & General IM has offered for the first time public support for activist investor Eric Knight & urged the bank to answer
questions he has raised over the bank's strategy…
FIAT : Chrysler will resume production of vehicles in 7 North American assembly plants by the end of the month
HEIDELBERGCEMENT is being supported by its lenders (FTD citing a refinancing plan of more than €1 bn
FRANCE TELECOM got the telecom regulator’s backing on the prices it charges other providers to access its network (Les Echos)
VIVENDI (yest.) : French TV company Canal+ has ruled out an acquisition of TF1, but may entertain an alliance with M6 (Le Monde)
PEUGEOT is likely to set up a manufacturing facility for mid-sized cars in India (The Economic Times)
EADS : China Eastern Airlines agreed to buy 20 A320 family aircraft for $1.45 bn
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

18-Jun-09 HEALTH FIRST

NEGATIVE IMPACTS
UK BANKS : BoE Governor said Britain’s banking system may need to raise more capital to be able to supply credit at a price & on a
scale to finance a sustained recovery / “It is too soon to reverse the stimulus injected into the U.K. economy through monetary policy”
MICHELIN does not see recovery in global tyre market before mid to end 2010 / Stuck to positive FCF target in 2009
ENEL : OGK-5, the Russian unit of Enel, is not promising to make LT profits for Enel (OGK-5's general director) / But State officials,
however, have insisted that Enel stick to its commitments to pay for the sector's development, which suffers from outdated infrastructure
HANDELSBANKEN has placed a large sum of money (SEK100bn = €10.9bn) in an account at the Riksbank to help the central bank
safeguard the financial system (Dagens Newspaper ) / The Riksbank had already received €3bn from the ECB early June
AIR FRANCE-KLM launched €575 m convertible bond issue which could be increased up to €661 m / Expiry April, 1 2015 / French
State (shareholder at 15.7%) will take part to the subscription
RDSA : Nigeria's most prominent militant group said it had destroyed a major crude oil trunk line belonging to Shell
GKN announced a £423m right issue / Proposes 6 for 5 rights issue of up to 846,623,629 new ordinary shares at 50 pence each
CARREFOUR would have halted talks to buy “Seventh Continent” (Vedomosti)

RESULTS DIVIDENDS EVENTS

Acciona AGM / Homebuilders at Bank of
Cadbury strading statement / Centrica /
Thursday GE ($0.31) America / eBay AGM / Telecom Italia board
Irish Life
meeting / Deutsche Boerse investor day
BSCH AGM / Telenor capital market day /
Friday Heinz ($0.415) / Gamesa (€0.23)
Toyota AGM / Valeo AGM
Monday Enel (€0.29) / Finmeccanica (€0.41) / Tenaris ($0.25)
Alstom AGM / WPP AGM / General Electric &
Applied Materials at Deutsche Bank conf /
Tuesday Kroger
Utilities conf at Bank of America / Tech conf at
UBS / Alternative Energy conf at Deutsche Bank
Brisitsh Energy (GBp 15.11111) / Compass group (GBp4.444444) /
BB&B / Nike / Oracle / RIM / Monsanto /
Wednesday United Utilities (GBp 34.966667) / Marks & spenser (GBp 0.38) / Kraft
General Mills
food ($0.27)
TRADING IDEAS
BUY ENERGY names as TOTAL / ENI / REPSOL / EDF / GSZ / ENEL on recovery
BUY DAIMLER / MUNICH RE / ST GOBAIN / FRANCE TEL / CARREFOUR on double bottom possibility
BUY DANONE / NESTLE / PERNOD on reversal Head & Shoulder

BUY LAFARGE / SELL HOLCIM // BUY ALLIANZ & MUNICH RE / SELL AXA // BUY DAIMLER / SELL BMW // BUY PHILIPS / SELL ASML
BROKER METEOROLOGY
SAINSBURY......................................................... RAISED TO NEUTRAL ......................................................................... BY MERRILL
ING ......................................................................RAISED TO BUY FROM NEUTRAL ...................................... BY GOLDMAN SACHS
SCHNEIDER ........................................................RAISED TO BUY FROM HOLD .............................................. BY DEUTSCHE BANK
ATLAS COPCO....................................................RAISED TO BUY FROM HOLD .............................................. BY DEUTSCHE BANK
XSTRATA ............................................................RAISED TO BUY FROM HOLD ......................................................... BY CITIGROUP
CNP ......................................................................RAISED TO BUY FROM HOLD........................................................................BY ING
SAINSBURY ........................................................RAISED TO NEUTRAL FROM UNDERPERFORM................................ BY MERRILL
HOME RETAIL GROUP ......................................RAISED TO EQUALWEIGHT .............................................. BY MORGAN STANLEY
MEDIASET ..........................................................RAISED TO BUY FROM SELL ...................................................................... BY RBS
SAINSBURY ..........................CUT TO HOLD FROM BUY ...................................................................................... BY ING
REED ELSEVIER....................CUT TO EQUALWEIGHT FROM OVERWEIGHT ........................ BY MORGAN STANLEY

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

18-Jun-09 HEALTH FIRST

CHART OF THE DAY
United-States Consumer Price index YoY %
Since 1990
0 a/a, % a/a, %
6,3 6,2
5,8 Mai 5,7
5,3 5,2
4,8 4,7
4,3 4,2
3,8 3,7
3,3 3,2
2,8
2,7
2,3
2,2
1,8
1,7
1,3
v 1,2
0,8
0,3 0,7
-0,2 0,2
-0,7 -0,3
-1,2 -0,8
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Prix à la consommation - G -
Prix à la consommation hors énergie et produits alimentaires - D -

Source : Bloomberg

Looking at the year on year data we see that U.S. inflation fell further into negative territory from -0.7% in April to -1.3% in May
deepening a deflation situation. This drop of inflation is explained by a “base effects” from last year’s energy price pike and will go
deeper in the coming months. Nevertheless the year on year drop of prices do not get generalized, indeed core inflation rose 1.8%
(prior1.9%) from a year ago. A core consumer price index of 1.8% represent an perfect inflation meaning not to high to hit household
purchase power and not to slow to push companies to increase lays off.

Time Country Indicator Period GE forecasts Consensus Previous

9.00 GMT Italy Trade balance April € 82 million
9.30 GMT United Kingdom Retail sales May + 0,3%,-0,4%YoY + 0,9%,+2,6%YoY
13.30 GMT United-States Initial jobless claims June 13 th 602 000 601 000
13.30 GMT United-States Continuing claims June 6 th 6 840 000 6 816 000
15.00 GMT United-States Conference Board leading indicators May 0,8% 1,0% 1,0%
15.00 GMT United-States Philadelphia Fed June -17,0 -22,6
18.30 GMT United-States U.S. Treasury 's Geithner at house Financial Service

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

DJIA 8497,2 - 2,73% - 3,18% EUR/USD 1,3944 -1,20% -0,23%
S&P 500 910,7 - 3,00% 0,83% EUR/JPY 133,64 3,13% 5,14%
Nas daq 1808,1 - 2,42% 14,65% USD/JPY 95,85 1,88% 5,41%
CA C 40 3161,1 - 4,60% - 1,77% Oil Price % 5 Days Ytd
DA X 4800,0 - 4,97% - 0,21% Brent $/b 69,6 -2,60% 66,59%
Eur os tox x 50 2383,7 - 4,69% - 2,61% Gold Price % 5 Days Ytd
DJ 600 204,6 - 3,80% 3,16% Gold $/oz 938,6 -1,64% 6,38%
FTSE 100 4278,5 - 3,52% - 3,51% Rates USA Euro Japan
Nikkei 9674,6 - 1,51% 9,20% Central Banks* 0,25 1,00 0,10
Shanghai Comp 2853,0 - 0,03% 56,69% Overnight 0,20 0,78 0,10
Sens ex ( India) 14530,6 - 5,95% 50,62% 3 Months 0,17 0,73 0,20
MICEX ( Rus s ia) 1039,4 - 6,68% 67,78% 10 Y ears** 3,69 3,48 1,46
Bov es pa ( Bras il) 51045,8 - 3,97% 35,94% *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

18-Jun-09 HEALTH FIRST

ECONOMIC DATA PREVIEW
Watch in The United-States the release of the advanced Conference Board indicator for May, due at 15.00 GMT. Following the
recent encouraging U.S. economic data (reduction of the jobs destruction,increase of the ISM new order, and good resistance of the
consumer confidence) the Conference Board Index is expected to rise aound 0.8%. Keep an eye on the weekly release of the initial
jobless claims and continuing claims, due at 13.30 GMT and expecte respectively to slow down and to reached new historical
high./JB

ECONOMY
UNITED-STATES : INFLATION FELL FURTHER INTO NEGATIVE TERRITORY IN MAY
American consumer prices slightly increase from 0.0% in April to 0.1% in May (expected 0.3%). This rise, smaller than expected is
mainly due to the declines in the price of food and gas & electricity offsetting the 3.1% increase in gasoline prices. Indeed food prices fell
by 0.2% and Gas& electricity prices fell by 1.7% following the continuing decline in natural gas price. Excluding food and energy, core
consumer price index increase by 0.1% (prior 0.3%) in May. Looking at the breakdown we see that the only sign of inflationary pressure
can be find in the 0.5% increase in motor vehicle prices. Meanwhile the price of clothing and public transportation both fell in May.
Looking at the year on year data we see that inflation fell further into negative territory from -0.7% in April to -1.3% in May confirming a
deflation situation. This drop of inflation is explained by a “base effects” from last year’s energy price pike and will go deeper in the
coming months. Nevertheless the year on year drop of prices do not get generalized, indeed core inflation rose 1.8% (prior1.9%) from a
year ago. A core consumer price index of 1.8% represent an perfect inflation meaning not to high to hit household purchase power and
not to slow to push companies to increase their lay off.

EURO AREA : TRADE DEFICIT NARROWED IN APRIL

Euro area trade deficit narrowed from €1.8 billion in March to 300 million in April. Nevertheless this improvement is not as good as it
looks. Indeed the global economic downturn is cutting demand for European goods abroad as well as a strong euro currency,
consequently exports dropped by 1.3% in April and by 24.3% from a year ago. But importations fell even more sharply by 2.7% and by -
24.3% YoY, as the sharp recession is weakening demand, as a matter of fact the balance between exports and imports generated an
improvement of the trade deficit. The euro area is strongly affecected as industrial production dropped by the most on record in April due
to the global economic slump forcing companies to cut spending and investments. Meanwhile construction output remained stable at
+0.6% in April and dropped at a slower pace from a year ago by 4.7% (prior 8.3%) confirming that the ground floor has been
reached./JB
 WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

18-Jun-09 HEALTH FIRST

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
18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009 18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009
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 18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009
18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009
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
18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009 18/06/2007 18/12/2007 18/06/2008 18/12/2008 18/06/2009
Source : Bloomberg Source : Bloomberg