BT Monthly Markets Chart Pack – October 2009

An overview of movements in global financial markets

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Global share markets weaker across the board in October...

Global share markets were weaker across the board in October thanks in large part to concerns that corporate earnings will fail to justify the huge run-up in share prices since March of this year. In the US the market closed the month 2.0% lower and this had a knock-on effect elsewhere, with markets in Europe (-4.5%), the UK (-1.7%) and Japan (-1.0%) all closing in the red.

The Australian share market ended its run of seven consecutive monthly gains in October, with the S&P/ASX 200 Accumulation Index closing 2.1% lower. The fall came after a poor lead from the US market overshadowed some better-than-expected consumer confidence and unemployment numbers.

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Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$.Source: BT Financial Group, MSCI

Impact of major market events on global shares since 1987

…but continue to perform well over the long-term, despite some major market events

700

1,200

1,700

2,200

2,700

3,200

3,700

4,200

4,700

5,200

5,700

6,200

Oct-87 Oct-89 Oct-91 Oct-93 Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09

Jan 91Gulf War

Feb 94Bond Market Crash

Aug 97Asian Currency Crisis

Jul 98Russian Bond Crisis

Jul 01Tech Wreck

Sep 01Attack on Twin Towers

Jun 07US Sub-prime Crisis

Nov 89Fall of the Berlin Wall Mar 03

Troops enter Iraq

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Source: BT Financial Group, Premium Data

S&P/ASX 200 Accumulation Index – year to 31 October 2009

The Australian share market closed 2.1% lower in October

21,000

22,500

24,000

25,500

27,000

28,500

30,000

31,500

33,000

34,500

31/10/2008 31/12/2008 28/02/2009 30/04/2009 30/06/2009 31/08/2009 31/10/2009

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Key Australian economic news – October

As was widely expected, the Reserve Bank raised interest rates by a further 0.25% (to 3.50%) at its early November meeting. With the local economy well placed compared to many of its global counterparts, the Bank has now shifted its focus from growth to inflation.

The Consumer Price Index rose by 1.0% in the September quarter and was 1.3% higher for the year. The rise was slightly higher than the market had expected and follows a 0.5% jump in prices in the June quarter.

The Australian economy gained 40,600 jobs in September and this helped to bring the unemployment rate down from 5.8% to 5.7%.

The Westpac/Melbourne Institute’s consumer sentiment survey jumped another 1.7% in October – its fifth consecutive monthly gain.

Retail trade fell 0.2% in September, though it remains 6.0% higher for the year.

Source: BT Financial Group

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The Australian dollar hits US$0.93 cents on expectations of further interest rate hikes

The Australian dollar (A$) continued its remarkable run against its US counterpart in October, gaining a further 1.8% on expectations that the RBA would raise interest rates again in November. The local currency hit as high as US$0.9310 cents before eventually closing at US$0.8991 cents.

The A$ is now up 50% against the US$ since hitting a low of US$0.6012 cents in October last year and looks set to test the US$0.95 cent mark within the next couple of months.

At the end of October:

A$1 bought US$0.8991 +1.8%

€0.6114 +1.2%

¥80.99 +2.1%Source: BT Financial Group

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Currency markets – A$ per US dollar

Source: BT Financial Group. Figures at 31 October 2009

0.6300

0.6600

0.6900

0.7200

0.7500

0.7800

0.8100

0.8400

0.8700

0.9000

0.9300

0.9600

0.9900

Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09

The Australian dollar versus the US dollar…

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Currency markets – A$ per Euro

the Euro…

0.4900

0.5050

0.5200

0.5350

0.5500

0.5650

0.5800

0.5950

0.6100

0.6250

0.6400

0.6550

Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09

Source: BT Financial Group. Figures at 31 October 2009

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and the Yen

55

60

65

70

75

80

85

90

95

100

105

110

Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09

Currency markets – A$ per Yen

Source: BT Financial Group. Figures at 31 October 2009

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Official world interest rate movements – October

It was yet another dull month in terms of interest rate movements, with all the major central banks keeping their respective benchmark rates on hold in October. The Reserve Bank of Australia moved to raise the official cash rate by 0.25% in early November.

Current rate Last movedDirection of last move

Australia 3.50% Nov 2009

US 0% - 0.25% Dec 2008

Europe (ECB) 1.00% May 2009

Japan 0.10% Dec 2008

United Kingdom 0.50% Mar 2009

Source: BT Financial Group

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Source: BT Financial Group

31 October 2009

Global share market returns

1 year 3 years (pa) 5 years (pa)

Global

S&P 500 Index (US) 6.96% -9.06% -1.72%

Nasdaq (US Tech.) 18.84% -4.75% 0.70%

Nikkei 225 (Japan) 17.00% -15.10% -1.41%

Hang Seng (Hong Kong) 55.73% 5.88% 10.75%

DAX (Germany) 8.56% -4.76% 6.46%

CAC (France) 3.46% -12.30% -0.54%

FTSE 100 (UK) 15.24% -6.29% 1.76%

Australia

S&P/ASX 200 Accum. Ind. 21.39% -0.55% 8.85%

S&P/ASX Small Ordinaries 39.65% -4.19% 5.97%

S&P/ASX 300 Listed Prop. -6.11% -21.41% -6.79%

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Short-term asset class performance

Source: S&P/ASX 200 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A , UBS Bank Bill 0+ years

1-year rolling returns to 31 October 2009 (%) Best performing asset class for the year

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994

Australian cash

3.83 7.80 6.61 5.90 5.71 5.54 4.88 4.67 5.61 6.07 4.94 5.14 5.98 7.68 7.87 5.05

Australian bonds

4.89 10.59 3.62 4.40 5.18 7.17 4.15 4.24 11.67 7.60 -0.61 9.65 13.23 14.56 16.60 -6.11

Australian property

-6.11 -56.36 18.48 29.13 12.25 28.99 6.35 10.23 21.22 12.55 -0.27 19.19 17.16 14.33 8.87 0.24

Australian shares

21.39 -37.79 30.27 26.12 23.16 20.51 12.13 -2.81 3.31 19.11 13.99 10.17 9.69 17.51 6.99 -1.03

International bonds

13.42 5.10 5.43 5.48 6.49 9.23 7.26 7.76 12.83 6.68 1.29 10.69 10.62 11.48 17.82 -2.54

International shares

-14.53

-17.66 -0.24 16.95 13.00 7.35 -3.48 -22.89 -23.79 24.42 22.15 30.76 31.83 11.54 6.87 -3.43

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Source: S&P/ASX 200 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A

1-year returns to 31 October 2009 (%)

Short-term asset class performance (cont’d)

-14.5

13.4

21.4

-6.1

4.9

-17.7

5.1

-37.8

-56.4

10.6

31 October 2008

31 October 2009

Australian bonds

Listed property

Australian shares

Global bonds

Global shares

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Long-term asset class performance

Note: Accumulated returns based on $1,000 invested in December 1984Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, UBS Bank Bill 0+ years

31 October 2009

Australian bonds

Listed property

Australian shares

Cash

Global shares

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Source: BT Financial Group. West Texas Intermediate oil price at 31 October 2009

Oil prices – US$ per barrel

Oil prices ended the month higher on the back of a weaker US$ and expectations of rising demand

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

$150

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

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