ASX 200 utilities shares outperform: Are investors switching to defensives?

The utilities sector was the best performing sector by a wide margin last week.

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ASX 200 utilities shares led the market sectors last week, rising 3.34% over the five trading days.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) lost 0.27% to finish at 8,580.1 points on Friday.

The utilities sector's bump was a substantial outperformance, with its nearest competitor, ASX 200 materials, up just 0.8%.

This may indicate a shift to defensive shares, given that the utilities sector is known for stable returns and dividends.

Utilities delivered the highest dividends of all 11 market sectors in FY25 at 6.17%.

Last week, US President Donald Trump extended the 90-day reprieve on the full range of US reciprocal tariffs to 1 August.

Trump also stated that a new tariff on imported pharmaceuticals into the US from next year may be set as high as 200%.

This impacted several ASX pharma stocks, including Australia's biggest listed healthcare company, CSL Ltd (ASX: CSL).

The market was also surprised last week when the Reserve Bank of Australia decided to keep interest rates on hold.

The board members were split 6:3, with six voting for rates to stay on hold pending quarterly inflation data due out on 30 July.

Three board members voted for a rate cut.

In a statement, the RBA said:

With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis

The next board meeting to discuss interest rates is scheduled for 11-12 August.

Only five of the 11 ASX 200 market sectors closed out last week in the green.

Let's recap.

A male electricity worker in hard hat and high visibility vest stands underneath large electricity generation towers as he holds a laptop computer and gazes up at the high voltage wires overhead.

Image source: Getty Images

Utilities shares led the ASX sectors last week

Just 21 companies make up the ASX 200 utilities sector.

Let's review the performance of the seven largest players by market cap.

Origin Energy Ltd (ASX: ORG) shares surged 8.6% to $11.75. The Origin share price reached a 10-year high of $11.78 on Friday.

There has been no price-sensitive news regarding Origin shares since 26 May when the company upgraded its FY25 guidance.

However, two top brokers issued new notes on Origin shares last week.

Macquarie retained its neutral rating but raised its 12-month price target from $10.12 to $10.94 a share.

Meanwhile, Morgan Stanley retained its underweight rating and $9.46 price target.

Shares in ASX 200 energy infrastructure group, APA Group (ASX: APA), fell 0.84% to $8.29 apiece.

On Wednesday, APA announced it had finalised agreements with CS Energy to deliver a natural gas pipeline connecting APA's Roma
Brisbane Pipeline with CS Energy's proposed Brigalow Peaking Power Plant in Queensland.

Mercury NZ Ltd (ASX: MCY) shares lost 0.18% of their value to close at $5.68 on Friday.

The New Zealand-based electricity, gas, and telco services retailer will release its full-year FY25 results on 19 August.

Meridian Energy Ltd (ASX: MEZ) shares rose by 0.18% to $5.42 per share.

The New Zealand-based renewable energy company will release its full-year FY25 results on 27 August.

The AGL Energy Limited (ASX: AGL) share price lost 2.94% to finish the week at $9.58.

Earlier this month, we reported that UBS has a neutral rating on this ASX 200 utility share with a price target of $11.50.

Genesis Energy Ltd (ASX: GNE) shares rose 2.82% to $2.19 apiece last week.

The Contact Energy Ltd (ASX: CEN) share price fell 2.24% to $8.28 on Friday.

ASX 200 market sector snapshot

Here's how the 11 market sectors stacked up last week, according to CommSec data.

Over the five trading days:

S&P/ASX 200 market sectorChange last week
Utilities (ASX: XUJ)3.34%
Materials (ASX: XMJ)0.8%
Communication (ASX: XTJ)0.2%
Industrials (ASX: XNJ)0.08%
Financials (ASX: XFJ)0.07%
Consumer Discretionary (ASX: XDJ)(0.54%)
Energy (ASX: XEJ)(0.61%)
Healthcare (ASX: XHJ)(0.82%)
Consumer Staples (ASX: XSJ)(1.84%)
Information Technology (ASX: XIJ)(1.96%)
A-REIT (ASX: XPJ)(3.18%)

Motley Fool contributor Bronwyn Allen has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group and Macquarie Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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