Market report: Geopolitics in focus at Davos while PageGroup flags difficult jobs market
- Focus on potential escalation in geopolitical conflict around the globe at the World Economic Forum in Davos.
- FTSE 100 makes small steps in early trade, before losing ground.
- Rightmove signals strong start to the year for the housing market.
- Employers showing lack of confidence in difficult jobs market according to PageGroup.
- International Monetary Fund warns that AI will widen inequality as the HL Savings and Resilience Barometer shows gap is widening between haves and have-nots.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The focus is being trained on tense geopolitics, economic malaise and the impact of artificial intelligence on nations around the globe as leaders gather at the World Economic Forum in Davos. Amid the uncertain economic outlook, the FTSE 100 is set to struggle for a sense of direction. It managed to gain small ground in early trade, before losing ground, with energy giants helped by the recent uplift in oil prices. Activity is expected to be lighter, given that exchanges in the US are largely closed for Martin Luther King Day.
Despite some more optimistic outlooks from small business leaders in the UK, there are fresh signs that employers are becoming more reluctant to hire staff. Data from Hargreaves Lansdown’s Savings and Resilience Barometer shows that income inequality is continuing to grow as cost-of-living pressures swirl with poorer households continuing to see finances sideswiped.
Geo-political conflict in focus at Davos
The spotlight is being trained on concerns about a potential escalation in geo-political conflict around the globe in Davos this week, with hopes relatively slim of major diplomatic breakthroughs. Ukraine’s Zelensky will address attendees on Tuesday as he battles to keep funding channels open to combat Russia’s aggression. Stubborn inflation is threatening to rear up as a key concern amid what appears to be an increasingly intractable crisis in the Middle East, as attacks on ships continue in the Red Sea, despite US-led coalition attacks on Houthi bases in Yemen. Oil prices remain elevated, with a barrel of Brent crude trading around $78. Now, attention is turning to prospects for a potentially more recalcitrant attitude from Taiwan towards China, with Lai Ching-te from the ruling Democratic Party winning the presidential elections over the weekend. He has vowed to uphold democracy and the nation’s sovereignty, and Chinese officials have highlighted their unhappiness after the UK, the US and Japan congratulated his win.
Rightmove signals strong start to the year for housing market.
The housing market is continuing to show determined resilience in the face of higher mortgage costs, with data from Rightmove showing that asking prices rose at the start of the year. They were 1.3% higher on January 6th compared to at the beginning of December, more than double the average increase for this time of year, showing that agents and sellers were looking more optimistic about demand. As some better mortgage deals have come onto the market, it’s starting to help thaw the deep freeze which had descended. However, the data hasn’t moved the dial much in terms of the housebuilders’ share prices in early trade. They have already made significant gains in recent months as expectations of interest rate cuts have risen, and there is still uncertainty ahead about the prospects for the UK economy.
Jobs market weakening according to Page Group.
PageGroup, the recruiter is putting a brave face on a difficult jobs market, but it’s clearly a real struggle as employers around the world turn cautious amid the uncertain economic climate. Group gross profit fell 8.9% in the final quarter compared to last year and was down 10% compared to the previous three months. Recruitment budgets are dwindling so managers are taking a lot longer to go through the hiring process, particularly when it comes to permanent staff. The situation has worsened in European markets, and there has been no improvement either across Asia, the United States or the UK. Page is also having to deal with a talent shortfall, with a lack of skills flagged among pools of workers, while good potential candidates desire high fees to move.
AI warnings on jobs as income inequality widens.
The gap between the haves and the have-nots looks set to widen further as artificial intelligence is adopted by companies around the world. The International Monetary Fund’s latest study on the potential effects of the technology estimates that 40% of jobs worldwide will be affected., rising to 60% in advanced economies. Productivity gains will benefit around half of workers in more developed nations, but with AI set to replicate tasks humans currently do, it forecasts great swathes of jobs could be redundant, widening income inequality. Already data from the Hargreaves Lansdown Savings and Resilience Barometer released today shows that people on lower incomes are seeing their finances continue to deteriorate, while the situation for wealthier individuals and households has improved and is set to continue to do so in the months to come. With those at the bottom of the pack already having suffered badly through the pandemic, and the cost-of-living crisis, pressure is likely to mount on the political classes to do more to prevent the potential for serious disaffection if the technology takes away people’s ability to survive. ‘’
