BT Monthly Markets Chart Pack – November 2008

An overview of movements in global financial markets

2

Markets continued to fall in November …

Global share markets continued their slide in November amid weakening economic data and the realisation that several of the world’s major economies had slipped into recession. In the US, the benchmark S&P 500 Index fell 7.5%, while bourses in Europe (-6.2%), the UK (-2.0%) and Japan (-0.8%) were also lower.

The Australian share market fell for the third month in a row in November, with the S&P/ASX 200 Accumulation Index closing down 6.2%. Again, the fall came mostly on the back of a weak lead from the US and falling commodity prices.

So far this year, the Australian share market is down 38.3%, compared to a gain of 16.1% in 2007.

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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 1986

…but the long-term trend is still positive, 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

Nov-86 Nov-88 Nov-90 Nov-92 Nov-94 Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06 Nov-08

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

Oct 87Wall Streetcrash

Nov 89Fall of the Berlin Wall Mar 03

Troops enter Iraq

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Key Australian economic news – November

The Reserve Bank of Australia (RBA) cut interest rates by a further 1.00% (to 4.25%) at its early December meeting. The RBA has now cut the official cash rate by 3.00% since September last year.

The unemployment rate remained steady at 4.3% in October, with the economy adding 34,300 new jobs during the month. The market had anticipated a loss of 10,000 jobs, so the outcome was much better than expected.

The Westpac/Melbourne Institute’s consumer sentiment survey recorded a jump of 4.3% in November. The improvement in the month coincided with a further sharp reduction in the RBA cash rate (-0.75%) at the beginning of November.

Retail sales were up just 0.1% in the September quarter to be 1.0% higher over the year.

Source: BT Financial Group

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The Australian dollar falls further in November

The Australian dollar (A$) fell again against the US dollar (US$) in November, though not by nearly as much as last month. The local currency lost 1.9% to close at US$0.6549 cents thanks largely to weaker commodity prices and a gloomy economic outlook. It’s likely now that we’ll see the A$ trade around current levels as we head into 2009, particularly if commodity prices remain under pressure.

At the end of November:

A$1 bought US$0.6549 -1.9%

€0.5162 -1.6%

¥62.51 -4.9%

Source: BT Financial Group

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Currency markets – A$ per US dollar

Source: BT Financial Group. Figures at 30 November 2008.

0.6500

0.6800

0.7100

0.7400

0.7700

0.8000

0.8300

0.8600

0.8900

0.9200

0.9500

0.9800

Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08

The Australian dollar versus the US dollar…

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Currency markets – A$ per Euro

the Euro…

0.5050

0.5200

0.5350

0.5500

0.5650

0.5800

0.5950

0.6100

0.6250

0.6400

0.6550

Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08

Source: BT Financial Group. Figures at 30 November 2008.

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and the Yen

60

65

70

75

80

85

90

95

100

105

110

Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08

Currency markets – A$ per Yen

Source: BT Financial Group. Figures at 30 November 2008.

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Official world interest rate movements – November

In Australia, the Reserve Bank cut the official cash rate a further 1.00% (to 4.25%) at its early December meeting. Elsewhere, the European Central Bank, the Bank of England and the Bank of Japan (late October) also cut their benchmark interest rates. The US Federal Reserve didn’t meet in November.

Current rate Last movedDirection of last move

Australia 4.25% Dec 2008

US 1.00% Oct 2008

Europe (ECB) 3.25% Nov 2008

Japan 0.30% Oct 2008

United Kingdom 3.00% Nov 2008

Source: BT Financial Group

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Source: BT Financial Group

30 November 2008

Global share market returns

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

Global

S&P 500 Index (US) -39.49% -10.48% -3.27%

Nasdaq (US Tech.) -42.29% -11.73% -4.77%

Nikkei 225 (Japan) -45.71% -16.97% -3.36%

Hang Seng (Hong Kong) -51.51% -2.40% 2.43%

DAX (Germany) -40.67% -3.48% 4.51%

CAC (France) -42.46% -10.61% -0.97%

FTSE 100 (UK) -33.34% -7.53% -0.25%

Australia

S&P/ASX 200 Accum. Ind. -39.95% -2.83% 7.75%

S&P/ASX Small Ordinaries -56.11% -10.52% 2.03%

S&P/ASX 300 Listed Prop. -53.44% -13.60% -1.18%

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Short-term asset class performance

Source: 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, Barclays Capital Global Aggregate Bond Index hedged to $A

1-year rolling returns to 30 November 2008 (%) Best performing asset class for the year

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Australian cash

7.79 6.66 5.96 5.72 5.61 4.86 4.71 5.42 6.18 4.97 5.15 5.79 7.62 7.97 5.20 5.48

Australian bonds

13.35 3.32 4.41 4.81 8.86 3.54 5.50 8.35 9.38 -0.28 10.30 11.28 12.40 19.91 -5.21 16.83

Australian property

-53.44 5.19 31.67 12.54 29.85 6.97 12.45 18.45 15.33 -5.05 20.45 16.94 18.41 11.74 -0.98 23.65

Australian shares

-40.45 23.75 23.83 22.50 28.69 9.02 -4.70 5.50 14.03 15.29 15.02 7.91 14.75 19.93 -2.67 39.95

International bonds

6.88 5.84 5.83 6.61 9.26 7.35 8.87 10.29 8.08 0.82 10.91 9.11 11.48 19.46 -1.77 13.93

International shares

-22.44

0.01 12.56 16.40 9.15 -7.78 -21.75 -15.34 11.66 20.05 30.70 34.44 8.36 22.45 -6.40 21.62

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Source: 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, Barclays Capital Global Aggregate Bond Index hedged to $A

1-year returns to 30 November 2008 (%)

Short-term asset class performance (cont’d)

-22.4

6.9

-40.5

-53.4

13.4

0.0

5.8

23.8

5.2

3.3

30 November 2007

30 November 2008

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

30 November 2008

Australian bonds

Listed property

Australian shares

Cash

Global shares

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Source: BT Financial Group. West Texas Intermediate oil price at 30 November 2008.

Oil prices – US$ per barrel

Oil prices fell again as demand dried up and the global economy slowed

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

$150

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

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Summary

The Australian economy has held up pretty well compared to some of its global counterparts in 2008, though we are now seeing evidence that the global economic slowdown is having a real and negative effect locally.

The RBA’s decision to lower the official cash rate again in December highlights the Bank’s concern over the direction of the Australian economy and we expect another rate cut when meetings resume in February next year.

With commodity prices likely to remain under pressure in the near-term and the RBA likely to cut interest rates again in early 2009, we think the Australian dollar will continue to trade around current levels into next year.

Gains in global share markets, including here in Australia, are likely to remain under pressure in the near-term, particularly as global growth continues to slow down.

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