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ASX 200 and AUD/USD wrap: BNPL stocks continue to dominate headlines

We look at some of the key market moves from the week that was, as well as take a brief look at the recent price action from the Australian dollar.

ASX 200 and AUD/USD Source: Bloomberg

ASX 200 trades lower as enthusiasm around BNPL stocks continues to grow

It’s been a relatively dour week for Australian equities, with the ASX 200 benchmark trading lower during four out of the last five trading sessions, ultimately finishing out the week down around 138 points, at the 5,919 point level.

Health care and consumer staples were the best performing industry sectors on Friday, while energy and industrials were the worst performing.

CSL, Australia’s largest listed company closed out the week 2.90% lower, at $282.37 per share. In a note released on Friday, analysts from UBS lowered their price target on CSL from $335.00 per share to $331.00 per share – as the company’s plasma collection operations come under pressure as a result of Covid-19.

In saying that, UBS remains bullish on the stock overall, retaining their Buy rating based on the biotech's robust medium-term earnings outlook.

Australia’s key mining stocks – by comparison, traded higher during the week – with BHP Group, Rio Tinto and Fortescue Metals Group all rising over the last five sessions. This comes as CME’s front-month iron ore futures contract continues to trade above US$100 per tonne.

FMG was the best performing of the three, up 6.68% for the week.

Elsewhere, the big four banks faced moderated selling pressure from investors, with the Australian Prudential Regulation Authority (APRA) on Wednesday providing new regulatory guidance for authorised deposit taking institutions (ADIs) around extending customer loan deferrals by an additional four months.

We discuss the implications of APRA’s regulatory guidance in more detail here.

Finally, amidst these market moves, buy now pay later (BNPL) stocks have continued to dominate the news cycle – with both Afterpay (APT) and Sezzle (SZL) tapping the markets for almost $1 billion in fresh capital, combined.

In the last three months, Australia’s BNPL cohort has staged a remarkable comeback after being sold-off heavily in March, with the Afterpay share price rising 154% in that period, Sezzle gaining 382%, Zip soaring 179% and Splitit adding 232%.

Some are calling the sector a bubble.

We discuss Afterpay’s capital raise in more depth here and Sezzle’s capital raise here.

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The Australian dollar (AUD/USD): the technical outlook

By comparison to equity markets, the Australian dollar (AUD/USD) range-traded during the week, on Thursday breaking above the 0.70 handle, before quickly retreating, to last trade at the 0.69464 mark.

Looking forward, DailyFx Analyst, Rich Dvorak, said that downside in the Aussie dollar would likely be fuelled by remerging US-China trade tensions.

‘This bearish fundamental development, in combination with barriers of technical resistance around the 0.7000-handle, have potential to pressure AUD/USD price action lower. Also, as the strong advance by spot AUD/USD price action starts to stall, it is possible that a Bollinger Band squeeze lurks on the horizon. This could facilitate additional Australian Dollar weakness,’ Mr Dvorak contended.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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