High interest rate nervousness, UK’s sick workers and Amazon’s AI investment
Susannah Streeter head of money and markets, Hargreaves Lansdown: “With little data expected to blow away worries about the impact on high interest rates, concerns are set to linger, holding back gains for stocks. Nervousness is setting in about restrictive monetary policy in major economies, particularly the US, reducing appetite for goods and services, as consumers and companies keep their belts tightened.
The UK’s twin problems of inflation and sluggish productivity will be harder to solve if workers continue to be absent from the labour force. Data from the CIPD showing that UK workers are taking more sick days than at any point in the last decade points to a malaise that is set to be hard to cure without greater investment into health services. Staff took on average 7.8 sick days in the past year, up from 5.8 before the pandemic. With patients facing month-long waits to even have a telephone conversation with a doctor, and facing long delays for hospital treatment, it’s little surprise they are staying off work. The high numbers of long-term sick are contributing to tightness in the labour market, and competition for workers has pushed up pay demands, which continues to be a nagging worry for the Bank of England and is partly why interest rates are set to stay higher for longer.
Oil prices have slipped back, as the focus switches to the impact of higher interest rates on growth prospects. Expectations have risen slightly that there will be less demand for energy to keep transport systems running or for hydrocarbons, used as raw materials for a huge array of products. However, concerns about supply given production cuts by Saudi Arabia and Russia, will keep a high floor on prices and Brent Crude is still trading at $92 a barrel, near levels not seen for 10 months. Nevertheless, the retreat in oil prices is likely to mean energy giants may find it harder to hang onto gains.
Amazon is stretching its tentacles further into artificial intelligence by becoming a minority owner of San Francisco based Anthropic, a rival to Open AI. The investment which could expand to $4 billion from the tech giant will help Anthropic develop future generative AI language models and also make them easier to access by customers using Amazon’s AWS cloud platform. Its next generation AI assistant Claude is set to become a household name though this deal, but how soon it joins the family vocabulary like Alexa has done isn’t clear. Claude will have to face off against dominant rival ChatGPT and Google’s Bard is also jostling for position, and while Apple has yet to join this party, being late might have its advantages in learning from mistakes of its rivals.
Nissan’s pledge to stop selling petrol and diesel cars in Europe from 2030, again raises big questions about Rishi Sunak’s decision to push back the official UK ban on new sales of petrol and diesel models until 2035. Instead of taking the lead, the UK government has dropped behind the net zero curve. It will be harder to take a back seat on investment into better charging infrastructure if the big automakers are ploughing ahead with new models, and buyers will demand improvements to older slower charge points. The UK is legally obliged to plan developments to reach net zero and it’s essential that both businesses and investors have consistent signals on future policy in order to energise – and profit from – the net zero transition.”