bt monthly markets chart pack – may 2008 an overview of movements in global financial markets
TRANSCRIPT
BT Monthly Markets Chart Pack – May 2008
An overview of movements in global financial markets
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Global share markets were mixed in May...
May proved to be a mixed month for global share markets, helped on the one hand by speculation that the US economy had avoided a recession but hurt on the other by rising oil prices and stagflation fears. The US and Japanese share markets managed to close the month higher, while markets in the UK and Europe finished slightly in the red.
The Australian share market posted its second monthly gain in a row in May, with the S&P/ASX 300 Accumulation Index returning 1.71%. The gains came mostly on the back of a solid rise in resources stocks, which rallied amid speculation that Chinese aluminium giant, Chinalco, had bought a significant stake in our own BHP Billiton.
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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
May-86 May-88 May-90 May-92 May-94 May-96 May-98 May-00 May-02 May-04 May-06 May-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 300 Accumulation Index – 2008
The Australian share market closed May 1.71% 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
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Key Australian economic news – May
The Reserve Bank of Australia left interest rates on hold at 7.25% following their early June meeting. The decision had been widely expected after recent economic data hinted that the Bank’s earlier rate hikes were beginning to have the desired effect (of slowing the local economy).
Australia’s trade balance was -$2.7 billion in March, a touch better than the market (-$2.9 billion) had expected.
Retail trade fell 0.2% in April but remains 4.7% higher year-on-year. The fall came after March’s numbers were revised down from 0.5% to 0.2%.
The Australian job market remains healthy, with 25,400 jobs added in April, though the unemployment rate did edge up slightly from 4.1% last month to 4.2%.
Source: BT Financial Group
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The Australian dollar hit US$0.96 cents in May
The Australian dollar climbed to US$0.9653 cents in May, its highest level since way back in February 1983. So far this year, the local currency has risen 9% against the US dollar, helped along by strong commodity prices and relatively high domestic interest rates.
At the end of May:
A$1 bought US$0.9557 +1.4%
€0.6148 +1.8%
¥100.82 +3.0%
Source: BT Financial Group
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Currency markets – A$ per US dollar
Source: BT Financial Group. Figures at 31 May 2008.
0.5000
0.5500
0.6000
0.6500
0.7000
0.7500
0.8000
0.8500
0.9000
0.9500
1.0000
May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-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
May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08
Source: BT Financial Group. Figures at 31 May 2008.
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and the Yen
70
75
80
85
90
95
100
105
110
May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08
Currency markets – A$ per Yen
Source: BT Financial Group. Figures at 31 May 2008.
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Official world interest rate movements – May
The European Central bank, the Bank of England, the Bank of Japan and the Reserve Bank of Australia all left their benchmark interest rates on hold in May. The US Federal Reserve, which lowered interest rates by 0.25% in April, didn’t meet in May.
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
31 May 2008
Global share market returns
1 year 3 years (pa) 5 years (pa)
Global
S&P 500 Index (US) -8.51% 7.16% 7.76%
Nasdaq (US Tech.) -3.14% 6.84% 9.59%
Nikkei 225 (Japan) -19.79% 8.34% 11.22%
Hang Seng (Hong Kong) 18.89% 20.95% 20.93%
DAX (Germany) -9.97% 16.74% 18.93%
CAC (France) -17.85% 6.76% 10.88%
FTSE 100 (UK) -8.58% 6.84% 8.38%
Australia
S&P/ASX 300 Accum. Ind. -6.71% 16.18% 18.38%
S&P/ASX Small Ordinaries -10.25% 19.80% 22.11%
S&P/ASX 300 Listed Prop. -33.16% 3.15% 7.15%
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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 31 May 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
7.22 6.38 5.75 5.63 5.24 4.97 4.67 6.20 5.45 5.06 5.16 6.93 7.76 6.80 5.03 6.07
Australian bonds
3.65 4.64 3.84 7.58 1.94 11.17 4.95 8.56 4.54 3.05 13.92 15.22 8.39 9.34 3.22 14.53
Australian property
-33.16 40.83 16.60 14.27 12.63 15.50 20.32 11.56 14.18 -3.10 23.81 27.34 -2.24 9.84 10.27 16.85
Australian shares
-6.71 31.99 27.33 23.53 20.01 -6.89 3.40 13.59 13.02 10.79 7.83 19.99 16.12 1.59 20.76 6.19
International bonds
0.51 -6.77 0.38 2.44 -5.29 7.85 -3.54 12.77 12.53 2.48 28.10 8.52 -9.70 22.66 -4.96 28.09
International shares
-16.66
13.00 18.43 4.47 12.75 -21.92 -22.00 -4.50 29.48 9.21 46.46 22.91 6.13 13.22 0.38 28.00
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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 31 May 2008 (%)
Short-term asset class performance (cont’d)
-16.6
0.5
-6.7
-33.2
3.7
13.0
-6.8
32.0
40.8
4.5
31 May 2007
31 May 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$
31 May 2008
Australian bonds
Listed property
Australian shares
Cash
Global shares
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Source: BT Financial Group. West Texas Intermediate oil price at 31 May 2008.
Oil prices – US$ per barrel
Oil prices hit a record US$134 a barrel in May on concerns that supply will fail to keep up with demand
$0
$15
$30
$45
$60
$75
$90
$105
$120
$135
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 have an adverse effect locally.
Though the Reserve Bank of Australia left interest rates on hold following their June 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 greenback within the next few 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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