BT Monthly Markets Chart Pack – June 2008

An overview of movements in global financial markets

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Global share markets slump in June...

Global share markets fell sharply in June. In the world’s biggest market - the US - the Dow Jones Industrial Average slumped more than 10% over the month - the worst June for the Index since an 18% tumble during the Great Depression back in 1930. The underperformance of the US market was felt globally, with most other share markets also closing the month firmly in the red.

The Australian share market was not immune to the volatility that affected other global markets, with the S&P/ASX 200 Accumulation Index closing the month 7.5% lower amid talk of further domestic rate hikes and a very weak lead from the US. So far this year, the local market is down 16% after having fallen as much as 19% in mid-March.

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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 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

Jun-86 Jun-88 Jun-90 Jun-92 Jun-94 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-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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Source: BT Financial Group, Premium Data

S&P/ASX 200 Accumulation Index – 2008

The Australian share market closed June 7.5% higher

32,500

33,500

34,500

35,500

36,500

37,500

38,500

39,500

40,500

31/12/2007 31/01/2008 29/02/2008 31/03/2008 30/04/2008 31/05/2008 30/06/2008

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Key Australian economic news – June

The Reserve Bank of Australia (RBA) left interest rates on hold at 7.25% following its early July meeting. Inflation is still a major concern and the RBA has clearly retained a tightening bias.

The Australian economy grew more than expected in the first quarter of 2008, with headline GDP growth coming in at 0.6%. Growth for the December quarter 2007 was revised slightly higher, from 0.6% to 0.7%.

The local job market was modestly weaker in May, losing 19,700 jobs, though the latest figures come after an upwards revision to last month’s gain. The unemployment rate remained steady at 4.3%.

Australia’s current account deficit was $19.5 billion in the March quarter, or 6.9% of GDP.

Building approvals came in much stronger than expected in April, up 7.8% for the month versus the market’s pick of a 0.5% fall.

Source: BT Financial Group

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The Australian dollar little changed in June

The Australian dollar (A$) ended the month little changed against the US dollar, despite expectations that the US Federal Reserve will soon begin to raise interest rates as it tries to contain rising inflation. However, with commodity prices still at very high levels and with the threat of further interest rate hikes here in Australia later this year, the A$ looks set to remain at elevated levels for some time yet.

At the end of June:

A$1 bought US$0.9578 +0.2%

€0.6081 -1.1%

¥101.59 +0.8%

Source: BT Financial Group

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Currency markets – A$ per US dollar

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

0.5000

0.5500

0.6000

0.6500

0.7000

0.7500

0.8000

0.8500

0.9000

0.9500

1.0000

Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08

The Australian dollar versus the US dollar…

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Currency markets – A$ per Euro

the Euro…

0.5300

0.5450

0.5600

0.5750

0.5900

0.6050

0.6200

0.6350

0.6500

Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08

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

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and the Yen

70

75

80

85

90

95

100

105

110

Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08

Currency markets – A$ per Yen

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

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Official world interest rate movements – June

The US Federal Reserve, the European Central bank, the Bank of England and the Bank of Japan all left their benchmark interest rates on hold in June. The Reserve Bank of Australia also left rates on hold following its early July meeting.

Current rate Last movedDirection of last move

Australia 7.25% Mar 2008

US 2.00% Apr 2008

Europe (ECB) 4.00% Jun 2007

Japan 0.50% Feb 2007

United Kingdom 5.00% Apr 2008

Source: BT Financial Group

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Source: BT Financial Group

30 June 2008

Global share market returns

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

Global

S&P 500 Index (US) -14.86% 2.42% 5.61%

Nasdaq (US Tech.) -11.92% 3.69% 7.16%

Nikkei 225 (Japan) -25.67% 5.19% 8.22%

Hang Seng (Hong Kong) 1.51% 15.89% 18.21%

DAX (Germany) -19.84% 11.85% 14.79%

CAC (France) -26.76% 1.59% 7.54%

FTSE 100 (UK) -14.86% 3.24% 6.89%

Australia

S&P/ASX 200 Accum. Ind. -13.40% 11.35% 16.23%

S&P/ASX Small Ordinaries -20.46% 12.97% 18.42%

S&P/ASX 300 Listed Prop. -37.74% -2.44% 5.21%

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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$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

1-year rolling returns to 30 June 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

7.34 6.42 5.76 5.64 5.30 4.97 4.66 6.08 5.58 5.04 5.11 6.77 7.75 7.10 4.93 5.91

Australian bonds

4.42 3.99 3.41 7.79 2.33 9.78 6.21 7.42 6.17 3.28 10.88 16.76 9.45 11.88 -1.13 13.93

Australian property

-37.74 26.32 18.09 18.40 17.21 12.17 15.24 13.91 15.62 3.96 9.74 29.21 3.70 9.08 8.11 17.50

Australian shares

-13.67 29.21 24.02 26.03 21.73 -1.61 -4.54 9.11 18.49 15.13 1.63 27.16 14.62 6.39 15.54 8.66

International bonds

3.44 -9.93 2.23 -1.66 1.71 -2.46 3.14 14.54 13.73 -2.57 26.19 9.13 -9.60 21.99 -5.07 26.42

International shares

-21.26

7.77 19.88 0.06 19.37 -18.53 -23.50 -6.01 23.81 8.17 42.16 28.56 6.66 13.76 0.45 31.95

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Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

1-year returns to 30 June 2008 (%)

Short-term asset class performance (cont’d)

-21.3

3.4

-13.7

-37.7

4.4

7.8

-9.9

29.2

26.3

4.0

30 June 2007

30 June 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, Citigroup World Government Bond, Unhedged in A$

30 June 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 June 2008.

Oil prices – US$ per barrel

Oil prices continued to rise throughout June, hitting a new record high of over US$140 a barrel.

$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 underlying strength of the Australian economy relative to its global counterparts looks set to continue in the near-term, though any significant deterioration in global growth will obviously have an adverse effect locally.

Though the RBA left interest rates on hold following their July meeting, the Bank will no doubt be concerned by the high level of domestic inflation, which currently sits well outside its target band of 2-3%.

The Australian dollar looks set to remain at high levels in the near-term and could well hit parity with the US dollar in the coming months.

Gains in global share markets, including here in Australia, are likely to remain under pressure in the near-term but are likely to stay above their recent March lows.

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