BT Monthly Markets Chart Pack – February 2009

1. BT Monthly Markets Chart Pack – February 2009 An overview of movements in global financial markets

2. Global share markets performed poorly throughout February... • February proved to be another poor month for global share markets, with all the leading indices falling on the back of further weakness in the global economy. In the US, the market closed 11% lower and it was a similar story elsewhere as markets in the UK (-6.1%), Europe (-11%) and Japan (-5.3%) all finished the month in negative territory. • The Australian share market fell for the six consecutive month in February, with the S&P/ASX 200 Accumulation Index closing 4.6% lower thanks to a weak lead from the US, some poor profit results from the likes of Woolworths, QBE and Telstra, and rising job losses.

3. …but continue to perform well over the long-term, despite some major market events Impact of major market events on global shares since 1987 Jul 01 Tech Wreck Jun 07 US Sub-prime Crisis Sep 01 Attack on Twin Towers Jul 98 Russian Bond Crisis Aug 97 Asian Currency Crisis Nov 89 Fall of the Berlin Wall Feb 94 Bond Market Crash Mar 03 Troops enter Iraq Oct 87 Wall Street crash Jan 91 Gulf War Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$. Source: BT Financial Group, MSCI

4. The Australian share market closed 4.6% lower in February S&P/ASX 200 Accumulation Index – year to 28 February 2009 Source: BT Financial Group, Premium Data

5. Key Australian economic news – February • The Reserve Bank of Australia left interest rates on hold at 3.25% at its early March meeting, suggesting that the Bank considers the existing cash rate to be appropriate given the current state of the economy. However, the RBA has hinted that it’s prepared to move again should conditions here deteriorate. • Retail sales came in 0.2% higher in January and follows a 3.8% gain in December. The market had expected a monthly fall of 0.5%. • The unemployment rate rose 0.3% in February to 4.8%, its highest level since June 2006. Unemployment is a strong indicator of the underlying strength (or weakness) of an economy so a rise of this magnitude is particularly significant. • Australia’s current account balance came in at A$6.5 billion in the December quarter, slightly better than the market was expecting. Source: BT Financial Group

6. The Australian dollar little changed against the US dollar in February • After slumping 10% against the US dollar last month, the Australian dollar (A$) was little changed in February, closing at US$0.6387 cents. It’s difficult to imagine any sort of sustained recovery in the A$ in the near-term, particularly if global growth remains weak and commodity prices continue to trend lower. However, the currency should begin to rally as growth begins to improve next year. • At the end of February: A$1 bought US$0.6387 +0.6% €0.5053 +1.6% ¥62.29 +9.1% Source: BT Financial Group

7. The Australian dollar versus the US dollar… Currency markets – A$ per US dollar Source: BT Financial Group. Figures at 28 February 2009

8. the Euro… Currency markets – A$ per Euro Source: BT Financial Group. Figures at 28 February 2009

9. and the Yen Currency markets – A$ per Yen Source: BT Financial Group. Figures at 28 February 2009

10. Official world interest rate movements – February • The Bank of England was the only major central bank to cut their benchmark interest rate in February, lowering its cash rate by 0.50% (to 1.00%). Elsewhere, the European Central Bank, the Bank of Japan and the RBA* left their rates on hold. The US Federal Reserve didn’t meet in February. * The RBA met on 4 March 2009. The Bank lowered the cash rate by 1.00% (to 3.25%) at its February board meeting. Source: BT Financial Group

11. Global share market returns 28 February 2009 Source: BT Financial Group

12. Short-term asset class performance 1-year rolling returns to 28 January 2009 (%) Best performing asset class for the year 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

13. Short-term asset class performance (cont’d) 1-year returns to 28 February 2009 (%) 28 February 2008 28 February 2009 Australian bonds Listed property Australian shares Global bonds Global shares 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

14. Long-term asset class performance 28 February 2009 Australian shares Listed property Australian bonds Global shares Cash Note: Accumulated returns based on $1,000 invested in December 1984 Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, UBS Bank Bill 0+ years

15. Oil prices were up in February, thanks mainly to a rise in US stockpiles and a slump in the US dollar Oil prices – US$ per barrel Source: BT Financial Group. West Texas Intermediate oil price at 28 February 2009

16. Summary • Evidence continues to suggest that the Australian economy is on the brink of its first since recession since 1991, particularly with unemployment now at its highest level in more than two and a half years. That said, the Rudd Government has shown that it’s ready to act by way of its massive A$42 billion stimulus package announced in February. • The RBA may have left interest rates on hold in March but the Bank will be forced to cut them again if economic conditions here deteriorate. However, the RBA has already hinted that the days of `super-sized' rate cuts, i.e. 0.75% and 1.00%, may have come to an end (barring any major financial crisis, of course). • With global growth set to slow even further and with commodity prices likely to remain under pressure in the months ahead, it’s hard to see a sustained recovery in the Australian dollar in the near-term. • 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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