13 June 2025: Weekly Update – Rare Earths, Middle East Tensions and UK Value Opportunities

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Weekly Update

Global Equities

Trade tensions between the US and China remained elevated while renewed geopolitical risks in the Middle East triggered a cautious tone across financial markets.

There was considerable anticipation surrounding the high-level trade discussions between US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng at the beginning of the week with focus on the contentious issue of rare earth elements. China's stranglehold on this critical sector has become a key point of leverage for its negotiations in its trade tensions with the US.

Whilst the negotiations yielded a temporary reprieve, trade tensions show little sign of turning. China’s agreement to resume rare earth exports to US companies, is crucially limited to six-month export licenses, ensuring Beijing retains significant future negotiating power.

China’s dominant supply of refined rare earth magnets

Source: Bloomberg and the International Energy Agency.

However, in contrast to the optimistic start to the week, Friday morning's dramatic events in the middle east put financial markets on a more cautious footing. Israeli military strikes on Iran's nuclear facilities triggered an immediate flight to safety across asset classes as oil prices surged over 7%, reflecting concerns about potential supply disruptions, particularly given the possibility of Iranian retaliation targeting regional infrastructure or attempts to restrict the Strait of Hormuz.

Oil price through the last year

Source: LSEG Workspace

The UK continued to face downbeat news this week with gross domestic product reportedly shrinking in April by 0.3% and unemployment reaching a four-year high of 4.6%, the latter being attributed to higher minimum wages and increased national insurance contributions. However, the lacklustre state of the UK economy belies the attractiveness of its equity markets. This was evidenced this week by takeover bids for three prominent British technology companies from US buyers. Spectris, a manufacturer of high-tech measurement instruments and a holding in the T. Bailey UK Responsibly Invested Equity Fund, received an offer from US private equity firm Advent International which saw its share price rise c.60% on the day. Alphawave (semiconductors) and Oxford Ionics (quantum computing) were the other two names targeted.

In other corporate news relevant to the T. Bailey funds, shareholders of Urban Logistics collectively gave the greenlight to its takeover by LondonMetric Property. As a consequence, and with returns in excess of 50% year-to-date, we took the opportunity to exit the positions held in the T. Bailey multi-asset funds.

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