ASX 200 Showing Signs of Internal Churn 

• Financials rally on Friday, while materials and miners struggle. 
• Possible internal churn for the ASX 200. 
• The Aussie dollar has its part to play. 
• Interest rates fall slightly in Australia. 

Australian equities rallied during the Friday session last week but gave back most of the gains as it appears that we are starting to see a little bit of internal churn. With the ASX 200 being so heavily influenced by just a couple of industries, it makes a certain amount of sense that traders may go from one extreme to the other occasionally. On Friday, there seems to be a very strong bifurcation between financials and miners. 

Financials Rally While Miners Struggle 

Financials did fairly well in Australian trading on Friday, as the Australian 10 year government bond yield fell below 4.3% but managed to bounce just a bit from the lows of the day. The market will continue to pay close attention to the spread that financials can earn from paper versus loans. Keep in mind that eventually the higher yields that banks were able to get in the bond market eventually started to work against them, and now a little bit of relief could make some of those previous loans they made perform even better. 

Some of the winners on Friday included the Commonwealth Bank of Australia (CBA), which gained 0.38%, capping off a 2.21% gain for the week. Another big winner for the week was Westpac Banking Corporation (WBC), gaining 1.29% on Friday, adding to its weekly gains to close up 2.42%. Further adding to the wins in the financial sector, ANZ Group Holdings (ANZ), rallied 1.04%, gaining 3.05% for the week. 

On the other side of the equation, it appears that miners are struggling, albeit more likely than not only from a temporary standpoint. BHP Group Limited (BHP), lost 35 basis points for the day, but did close the week positive at a 1.25% gain. Another company of note is Rio Tinto Limited (RIO), which lost 16 basis points on Friday, gaining 0.71% for the week. Some concerns about commodity demand may have leaked into the market, but at the end of the day inflation should continue to push pricing higher around the world for some of the most basic materials. 

The Australian Dollar 

The Australian dollar has been very noisy during the course of the week, and Friday ended up seeing a bit of a loss. The 0.6650 level continues to be a major resistance barrier that a lot of people are paying attention to, and therefore it is worth keeping an eye on the Australian currency if you are trading any of the stocks in the ASX 200.  

As many of the biggest companies are very export heavy, it’s worth noting that an expensive Australian dollar could influence some of the sales globally. This may have been part of what was going on during the Friday session, as fears of exports becoming too expensive may have crept into the markets. For that matter, it very well could have been a situation where traders are simply willing to step in and take profit in the stock market heading into the weekend, as there are a lot of geopolitical fears out there. 

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