BT Monthly Markets Chart Pack – January 2010

An overview of movements in global financial markets

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Global share markets were weaker in January...

Global share markets got off to a rocky start in 2010 after earnings reports from several US banks failed to meet analysts’ expectations and President Barrack Obama announced plans to clamp down on banks’ risk-taking. In the US, the benchmark S&P 500 Index closed January down 3.7% and this had a negative knock-on effect elsewhere, with markets in Europe (-6.4%), the UK (-4.1%) and Japan (-3.3%) all closing the month lower.

The Australian share market fell sharply in January, with the S&P/ASX 200 Accumulation Index closing the month 6.2% lower amid concerns that China – who initiated moves to curb its bank lending in January – may soon begin to raise interest rates. A poor lead from the US market also contributed to the fall.

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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

Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

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 January 2010

The Australian share market closed 6.2% lower in January

21,000

22,500

24,000

25,500

27,000

28,500

30,000

31,500

33,000

34,500

36,000

31/01/2009 31/03/2009 31/05/2009 31/07/2009 30/09/2009 30/11/2009 31/01/2010

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Key Australian economic news – January

The RBA left interest rates unchanged at just 3.75% following its early February meeting. The decision came as a surprise after a Bloomberg survey of 17 economists showed that all respondents predicted a rise in the official cash rate.

The Westpac/Melbourne Institute’s consumer sentiment survey ended a run of two consecutive monthly declines in January, gaining 5.6% to be 33.6% higher for the year.

The Australian economy added 35,200 jobs in December, sending the local unemployment rate down to just 5.5%.

Housing finance fell 1.6% in December but remains 32.2% higher for the year thanks to the government’s decision to raise the first home owner’s grant.

Consumer prices rose by 0.5% in the December quarter and 2.1% for the year. The result comes after a 1.0% jump in inflation in the September quarter.

Source: BT Financial Group

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The Australian dollar fell for a second consecutive month against the US dollar

The Australian dollar fell against the US dollar (US$) in January, losing 1.4% after stronger-than-expected December quarter growth in the US sparked speculation that the US Federal Reserve will raise interest rates sooner rather than later.

It was the Australian dollar’s second consecutive monthly decline against the US$, though it remains 47% higher against its US counterpart since its low in October 2008.

At the end of January:

A$1 bought US$0.8844 -1.4%

€0.6383 +1.9%

¥79.83 -4.2%Source: BT Financial Group

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Currency markets – A$ per US dollar

Source: BT Financial Group. Figures at 31 January 2010

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

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10

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

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10

Source: BT Financial Group. Figures at 31 January 2010

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and the Yen

55

60

65

70

75

80

85

90

95

100

105

110

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10

Currency markets – A$ per Yen

Source: BT Financial Group. Figures at 31 January 2010

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Official world interest rate movements – January

Interest rates in the major economies were again unchanged in January. The Reserve Bank of Australia surprised the market when it decided to leave the official cash rate unchanged at just 3.75% in early February.

Current rate Last movedDirection of last move

Australia 3.75% Dec 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 January 2010

Global share market returns

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

Global

S&P 500 Index (US) 30.03% -9.28% -1.89%

Nasdaq (US Tech.) 45.44% -4.48% 0.81%

Nikkei 225 (Japan) 27.57% -16.29% -2.18%

Hang Seng (Hong Kong) 51.54% 0.03% 7.96%

DAX (Germany) 29.28% -6.17% 5.68%

CAC (France) 25.74% -12.64% -0.91%

FTSE 100 (UK) 25.04% -5.78% 1.35%

Australia

S&P/ASX 200 Accum. Ind. 35.16% -3.37% 6.69%

S&P/ASX Small Ordinaries 52.85% -7.78% 4.17%

S&P/ASX 300 Listed Prop. 17.59% -24.80% -8.17%

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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 January 2010 (%) Best performing asset class for the year

2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

Australian cash

3.42 7.39 6.78 6.09 5.77 5.62 4.95 4.82 5.05 6.32 5.09 5.13 5.54 7.45 7.96 0.72

Australian bonds

1.67 15.16 4.24 3.45 5.91 7.23 2.44 9.20 3.94 14.02 -1.89 8.86 12.72 11.29 20.10 -0.07

Australian property

17.59 -52.85 -23.30 38.86 10.62 32.67 8.75 13.86 15.18 20.12 -6.51 12.91 27.10 10.63 20.93 -2.23

Australian shares

35.16 -34.32 1.63 22.22 25.36 30.88 15.58 -11.38 7.16 12.19 14.63 10.95 13.94 10.78 30.32 -3.89

International bonds

10.18 6.64 8.51 4.42 5.59 8.99 6.83 11.64 7.56 11.50 -1.10 9.95 11.27 9.09 19.82 1.79

International shares

-3.33

-17.28 -14.01 13.41 19.71 7.96 7.33 -31.04 -14.50 8.97 13.65 35.12 31.07 10.29 26.91 0.96

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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 January 2010 (%)

Short-term asset class performance (cont’d)

-3.3

10.2

35.2

17.6

1.7

-17.3

6.6

-34.3

-52.9

15.2

31 January 2009

31 January 2010

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 January 2010

Australian bonds

Listed property

Australian shares

Cash

Global shares

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Source: BT Financial Group. West Texas Intermediate oil price at 31 January 2010

Oil prices – US$ per barrel

Oil prices fell amid speculation that China may soon begin to raise interest rates (thus reducing oil demand)

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

$150

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

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