Energy drives ASX higher, Mineral Resources bid, Fletcher takes a hit

The local bourse couldn’t manage a positive week, with a negative lead from Wall Street and renewed rhetoric around rate hikes impacting on sentiment. The S&P/ASX200 finished down 0.8 per cent with energy and industrials the rare winners, up 0.4 and 0.2 per cent, while the tech and utilities sector both fell by more than 2 per cent. Block (ASX: SQ2) was among the biggest detractors falling 6.2 per cent while Aurizon (ASX: AZJ) added 4 per cent after announcing the sale of East Coal Rail to Magnetic Rail Group for $425 million. It was more good news for Mineral Resources (ASX: MIN) which announced a takeover offer for Norwest Energy, a listed oil and gas explorer, with deal valued at $403 million; shares gained more than 30 per cent with Mineral Resources losing 1 per cent. Building group Fletcher (ASX: FBU) fell 2.5 per cent after the company confirmed that would take a $142 hit to complete the NZ Convention Centre project in another sign of a more challenging construction sector. Dexus (ASX: DXS) revalued their entire property portfolio down by $322 million or just 1.9 per cent on the back of higher capitalisation and interest rates. Across the week, the market ended down 0.8 per cent, with energy gaining 3.6 per cent, and both industrials and technology more than 1 per cent higher. St Barbara (ASX: SBM) was among the highlights, gaining 10 per cent, while lithium companies were hit hardest with Liontown, Lake and Mineral Resources all down more than 10 per cent.
 
Adobe profits flat, S&P500 delivers negative week, Powell doubles down
 
Real estate was among the biggest detractors from global markets on Friday, with the sectir pushing the S&P500 and other benchmarks lower after comments from Federal Reserve members that the cash rate may need to exceed the inflation rate. The result was a 0.8 per cent fall in the Dow Jones, 1.1 per cent in the S&P500 and 1 per cent in the Nasdaq. The falls came after the Fed hiked rates by another 50 basis points despite more data showing the services economy is beginning to slow sharply. Shares in Adobe (NYSE: ADBE) bucked the trend to finish 3 per cent higher after the company reported only a small fall in quarterly profit to US$4.76 billion on sales that increased 6.3 per cent. The group forecast a significant improvement in sales for the 2022 fiscal year with the final quarter up 10 per cent thus far. Across the week the Dow fell 1.7 per cent, the S&P500 2.1 and the Nasdaq 2.7 per cent.
 
Last report for the year, energy retreats, eventful times
 
This being the last daily report for the year, we wanted to wish everyone a Merry Christmas, Happy Holidays and a wonderful new year. We remain open this week and will return early in January. 2022 has been much different to almost every year of our careers working in finance and investments with no shortage of challenges. Despite this, however, it is worth taking stock and considering that the S&P/ASX200 has fallen just 5.8 per cent year to date, while the S&P500 remains down close to 20 per cent, once again reflecting the value of diversification. We have been faced with a swift shift in the market paradigm, in which a multi-decade tailwind of falling interest rates has turned into a headwind, impacting on the valuations of everything from bonds to equities and property. We hope this newsletter has helped in some way to guide you through these challenging conditions. Finally, a small, yet interesting fact, the oil price now sits below the point when Russia formally invaded Ukraine, despite clear and continuing challenges to supply.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.