Weekly Market Update: the new rules

The latest economic news and market highlights from the UK and abroad.

This week's headlines: 

• Trump tries again – The US announced fresh import tariffs of 10-12.5% on goods from 60 countries, including the UK Canada and the EU, on concerns they’re not doing enough to tackle forced labour. The UK faces a 10% levy but insists its businesses are not complicit in forced labour or human rights violations.
  
  
• Ceasefire frays – The US-Iran ceasefire has been showing signs of strain after renewed attacks from both sides, despite US Secretary of State Marco Rubio declaring the conflict “over”.
  
  
• SpaceX eyes blockbuster market debut – SpaceX is expected to start trading next week targeting a valuation of $1.75trn, with shares priced at $135. On Thursday, S&P Global announced it won't change its index rules, after a consultation on megacap stocks – keeping the aerospace giant out of the S&P 500 for now.
  
  
• Anthropic sets course to go public – the company behind AI chatbot Claude announced plans to list on the stock, after filling paperwork with US authorities on Monday, but the price and number of shares to be offered is yet to be set. 
  
  
• Creature comforts – The Bank of England (BoE) has unveiled a shortlist of animals that could be featured on new banknotes, replacing historical figures. The public have been encouraged to vote on their favourites including dolphins, hedgehogs, puffins and bumblebees.

The US isn’t letting matters rest over tariffs. Over the last few years Trump has repeatedly announced tariffs that have forced nations to come to the table to hash out deals.

The latest tariffs, while less severe than the “Liberation Day” tariffs – ruled unlawful by the Senate - are still far reaching. While framed as an effort to tackle forced labour, that anti-slavery charities say enough isn’t done globally to stop, they affect 60 countries, who account for 99% of US imports in 2024. Most of which are still struggling with the supply chain disruptions from the US-Iran conflict. 

For investors, it’s worth reminding that this is a trade tactic the US are likely to revisit whenever the administration sees strategic value in doing so. That creates an additional source of uncertainty for global markets and international businesses.

There was also further news on US stock market listings. With anticipated IPOs from megacap companies on the cards, S&P Global announced that it wouldn’t change its rules on inclusion in the S&P 500.

SpaceX was pushing for an early inclusion, but rules on profitability will exclude it for the time being. Under current rules, a company has to be profitable for a quarter and the sum of the previous four quarters to be eligible for inclusion.

The S&P 500 is a very popular index to track worldwide, and inclusion of companies like SpaceX would have had an interesting effect on diversification and pricing - and forcing passive funds to purchase significant amounts of the stock. By maintaining its profitability requirements, S&P has signalled that index eligibility will continue to be driven by established financial criteria rather than market excitement.

Tight labour - data suggests this is once again a job seeker's market 

A steady source of income is important to everyone, which is why there’s been so much discussion over the past few months on the impact of AI on jobs, especially in the tech space.

 Last month, US technology companies announced plans to cut more than 38,000 jobs, making that more than 123,000 cuts this year. Goldman Sachs estimates that 25% of current workhours over the next decade could be automated by AI.

But some question whether current job losses linked to AI might be “AI washing”, companies hiding other issues behind layoffs while trying to show that they’re actually using AI instead. Jobs data from the US appears to suggest there are jobs and a healthy job market - and there are more vacancies than before the pandemic.

AI can perform entry-level jobs in sectors like software engineering, but such changes are likely concentrated in specific sectors, and it still has work to catch up to humans in other industries.

It might be too soon to know when the impact of AI on jobs will be felt, but data suggests that now isn’t the case. It’s also worth noting that throughout the history of humanity that jobs have come and gone. In 1910 many working people were farm labourers or farmers, in 1970 we had typists, stenographers and telephone operators. Today, many of those roles have disappeared, but people have adapted and found new ways of working. We don’t have many ostlers or lamplighters today.

Could job losses be offset by new jobs created by technological change? And as things become easier, will that allow us to explore new depths to the work that we do?

For investors and advisers, that distinction matters. The long-term impact of AI may not be fewer jobs, but different jobs - and potentially higher productivity, new industries and new opportunities for growth.

UK – The FTSE 100 and 250 posted modest gains while gilt yields didn’t change much over the course of the week, as investors awaited fresh economic data and central bank signals.

US – The S&P 500 and Nasdaq saw a small decline following labour market data that showed an increase in job cuts. Last week had seen record highs.

Oil – Oil prices have had some ups and downs, with hostilities in the Strait of Hormuz increasing, though they fell back slightly on Thursday. There were also fresh concerns around supplies.

Emerging Markets – While the index shows a small decline, in Korea the stock market has shown a slide. This is due to a sell off of AI-linked tech companies that saw increases over the last few weeks.

Join our online event with global business futurist Kate Ancketill on 23 June at 11am. In one CPD-hour she’ll explore the AI-driven future of consumer experience and what it means for advice firms.

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