German Chancellor Olaf Scholz struck an upbeat tone in his address to the World Economic Forum, telling delegates that Europe’s biggest economy is back on track after the forced transition away from the Russian gas on which it so heavily depended.
(Bloomberg) — German Chancellor Olaf Scholz struck an upbeat tone in his address to the World Economic Forum, telling delegates that Europe’s biggest economy is back on track after the forced transition away from the Russian gas on which it so heavily depended.
Former US Treasury Secretary Lawrence Summers earlier joined the Davos crowd in highlighting brightening prospects for the global economy, but was one of a number of voices warning that US political battles over the debt ceiling are a concern. The impact of China’s recovery was another major topic, with the head of Abu Dhabi’s $284 billion wealth fund flagging a new pivot to Asia and his Norwegian counterpart warning a Chinese bounceback could spark a fresh inflation surge.
Before leaving for Davos, Scholz sat down with Bloomberg for an exclusive TV interview. He discussed the prospects for Europe’s largest economy, Germany’s energy crunch and the possibility of supplying battle tanks to Ukraine.
Key Developments
- US Debt-Crisis Worries Sour Davos Optimism on Global Economy
- European Executives Eye US Green Plan With Envy in Davos
- Harvard’s Hausmann Warns Wall Street Underestimating China Risks
- Bain Veteran Says 20% Private Equity Returns Have Decades to Run
- Banker Bonuses to ‘Absolutely’ Fall Says JPMorgan’s Raghavan
(All times CET)
ChatGPT Will Be ‘Calculator for Writing’ (5:30 p.m.)
ChatGPT, the artificial intelligence system that can produce sophisticated essays on complex subjects in seconds, will become the “calculator for writing,” according to a leading economist.
Erik Brynjolfsson, professor of economics and information technology at Stanford University, said the chat bot “will get rid of a lot of routine, rote type of work and at the same time people using it may be able to do more creative work.”
French Eggs in Africa ‘Sign of Too Much Global Sourcing’ (5 p.m.)
There is too much global sourcing, Hanneke Faber, head of Unilever’s nutrition unit, said during a panel, pointing to food imports into Africa.
“We have factories in Africa but until two years ago only 20% of our crops, our raw materials were coming from Africa,” she said. “We were sourcing eggs from France to use in our African factories like there’s no chickens in Africa. Completely crazy!” The food chief of the Knorr maker said now it sources 65% of the raw materials for production on the continent, but there needed to be more innovation to localize sourcing further.
Scholz Touts ‘Entirely New German Dynamic’ (4 p.m.)
Scholz, the only Group of Seven leader attending the WEF, said Germany’s transformation toward a climate-neutral economy, which he called “the fundamental task of our century,” was taking on “an entirely new dynamic.”
“Not in spite of, but because of the Russian war and the resulting pressure on us Europeans to change,” he said. “The past year challenged us as seldom before, yet at the same time we changed and moved things forward as seldom before.”
Malaysia Growth ‘Key for Ringgit’ (3:45 p.m.)
Malaysia’s economic expansion will have the biggest influence over how the southeast Asian country’s currency fares this year, according to Trade Minister Zafrul Aziz.
“We have to look at the growth of the economy,” he told Bloomberg TV. “Malaysia’s growth will have a bearing on the strength on the ringgit this year, I think. That will be the key determinant.”
Cisco ‘Not Planning Additional Job Cuts’ (3:30 p.m.)
Cisco doesn’t have any further job cuts planned, according to CEO Chuck Robbins. The company previously announced a workforce reduction in November. As for layoffs throughout the tech industry, Robbins said he hopes the “worst is behind us.” He added that while enterprise technology isn’t “completely resistant” from downturns, customers are particularly hesitant to cut IT spending after the pandemic.
Robbins said Cisco is researching how to connect quantum computers to one another, and said it was “amazing” how quickly OpenAI’s ChatGPT has spread. “My guess is at my next board meeting, we’ll have a conversation about ChatGPT.”
Summers Has ‘A Little More Hope’ (3 p.m.)
Summers said he was a bit more optimistic about the outlook for the US economy than a few months ago. Speaking on Bloomberg TV, for whom he is a paid contributor, he said the “figures are better” than he would have expected three months ago.
“It’s still a very, very difficult job for the Fed, but the situation does look a bit better,” he said. “I’m still cautious, but with a little more hope than I had before.” Still, he expressed concern over the fight among US lawmakers over raising the debt limit. “At the end of the day, we will meet our obligations and not cause substantial disruption but God, I wish we could move past this,” he said.
Disease Prevention Is a Climate Fighter: Sanofi CEO (2:40 p.m.)
Sanofi’s chief executive officer talked about the role of disease prevention in fighting the climate crisis. While the average carbon footprint of a healthy adult in the developed world is between 10 and 15 tons, someone with diabetes generates roughly triple the emissions in part because of greater demands on health systems.
“Helping people not to make the journey from pre-diabetic to diabetic can have a mind-boggling effect,” not just for the well-being of an individual but for the environment too, Paul Hudson said during a panel discussion.
Tech Needs Efficiency Lessons, Microsoft CEO Says (2:35 p.m.)
The technology industry must learn to become more efficient as demand slows following rapid growth during the Covid pandemic, Microsoft Corp.’s chief executive officer said during a Q&A. “We will have to do more with less,” Satya Nadella said. “We will have to show our own productivity gains with our own technology.”
Read more: Microsoft’s Nadella Says Tech Needs Efficiency as Job Cuts Loom
Bloomberg earlier reported that Microsoft plans to cut jobs in a number of engineering divisions, joining the ranks of technology giants that are scaling back. Still, tech spending should accelerate after the current economic cycle, Nadella said. He touted technologies such as artificial intelligence as being able to boost growth.
EU Eyes Half-Full Gas Storage in Spring (2:10 p.m.)
The EU will end this winter with gas storage facilities half-full after mild weather and supply concerns helped reduce demand, EU Energy Commissioner Kadri Simson said during a panel discussion.
She also attempted to reassure Davos participants that the bloc’s emergency energy measures — like joint gas purchasing — would be temporary and would not signal long-term EU intervention in the market. A so-called gas-buying cartel is “temporary, it’s not something that will impact our belief in the market economy,” Simson said.
Nigeria Rules Out Eurobond Sale (1:40 p.m.)
Yields on international bonds are too high for Africa’s biggest economy to consider selling eurobonds this year, according to Finance Minister Zainab Ahmed.
The West African nation will only consider returning to the market if yields fall back to the levels they were at in 2021, Ahmed said in an interview with Bloomberg Television. “We are consistently monitoring the bond markets, monitoring the performance of our bonds, so when it gets to that comfortable level, we will explore it,” she said.
Record Funds for Property Opportunists Eyed (1:30 p.m.)
Rising interest rates are causing a rapid repricing of real estate markets and setting the stage for record fundraising for investment funds positioned to take advantage, Cantor Fitzgerald Chief Executive Officer Howard Lutnick said on a panel.
Read more: New York’s Old Offices Should Become Cheap Housing, Lutnick Says
With asset prices falling because of higher financing costs, investors will pour more money into so-called opportunistic funds — which make riskier real estate bets — in the next 18 months than ever before, he predicted. That will help accelerate a rebound in commercial real estate markets, he said.
EGA IPO ‘May Happen This Year’ (1:05 p.m.)
Emirates Global Aluminium, the Middle East’s biggest producer of the metal, may sell shares to the public as soon as the third quarter of 2023, according to the head of one of its biggest shareholders.
“It will happen maybe this year. We’ll see how markets react,” Mubadala Investment Co. CEO Khaldoon Khalifa Al Mubarak told Bloomberg on the sidelines of the WEF. “If it’s appropriate and makes sense for us and the shareholders, we might go in the third quarter or fourth quarter.”
StanChart ‘Has Not Engaged With Bidders’ (1 p.m.)
Standard Chartered CEO Bill Winters said the lender had not held talks with Abu Dhabi’s largest bank over a possible takeover, in his first public comments on the potential deal since First Abu Dhabi Bank PJSC confirmed this month it had explored a bid.
Winters told Bloomberg TV that while it was “quite logical” for Middle Eastern banks to be interested in buying European financial institutions, he didn’t think a deal was likely. “This is not something we’ve either engaged with, or been interested in,” Winters said. “We are doing very well all by ourselves. Everything is on track for us.”
Labor Market Still Tight Despite Layoffs: EY (12:30 p.m.)
EY Chief Executive Officer Carmine Di Sibio said “it’s business as usual” when it comes to hiring, with a tight jobs market even as several big firms begin to axe staff.
“We’re not struggling to source talent, but it’s not like we’re seeing a rash of talent that’s all of a sudden available,” Di Sibio said in an interview. “If you just read the headlines around what’s going on, you might think, there’s all kinds of people who know technology out there.”
Schwarzman Wants New Generation of Leaders (12:20 p.m.)
Blackstone Inc. Chief Executive Officer Steve Schwarzman said the US needs a new raft of leaders in both political parties.
“I think we need to move on for both parties to the next generation,” Schwarzman, 75, told Bloomberg TV, saying it was particularly important for the Republicans after a series of electoral setbacks. Schwarzman is a major Republican donor and said in November he won’t be backing Donald Trump’s new bid to become president.
Bain Eyes Football Deals in England (12 p.m.)
Bain Capital senior adviser Stephen Pagliuca remains on the lookout for investments in football, having missed out on England’s Chelsea FC last year.
Read more: Bain’s Stephen Pagliuca Eyes More Football Deals in England
The US investor is looking at many clubs but is wary of overpaying at a time when the price of deals in the sport is rising, he told Bloomberg TV. “We want to invest in a great club but we want to stay disciplined so we can invest in the club over the future,” Pagliuca said. “My fear is that some of these prices are getting so high that there might be disinvestment.”
Thailand Still on Expansionary Path: Minister (11:50 a.m.)
Thailand is still using an expansionary fiscal policy approach to support its economy while seeking to limit its budget deficit by boosting revenue collection, according to Finance Minister Arkhom Termpittayapaisith.
Southeast Asia’s second-largest economy is aiming to cap its fiscal deficit at below 3% of GDP each fiscal year from now after running deficit for 20 years, Arkhom said on a panel chaired by Bloomberg’s Stephanie Flanders.
JPMorgan Staff Back to Office (11:20 a.m.)
Vis Raghavan said most JPMorgan Chase & Co. workers have returned to the office, part of Wall Street’s growing trend of rolling back flexible working.
“We have most of our people back in the office,” the firm’s global investment-banking co-head, who also oversees Europe, the Middle East and Africa, told Bloomberg TV. “There is a spring in people’s steps, I think it’s really good having people back.”
He also said that banker bonuses will “absolutely” fall after an anemic year. “All banks pay for performance, so if the performance isn’t there, the compensation isn’t going to be there,” he said.
European Banks Falling Behind US Peers (11:10 a.m.)
European banks are losing out to their US competitors, with governments’ efforts to complete so-called banking union grinding “to a halt” last year, the chairman of UBS Group AG said on a panel.
Chairman Colm Kelleher said that the path forward is unclear, but that Europe needs a markets-based banking system. He noted that regulation put in place globally after the 2008 financial crisis has put the banking system on a better footing and that Switzerland’s UBS hasn’t been impeded by those rules in terms of its global operations.
Norway’s Tangen to Push for Climate Progress (11 a.m.)
Nicolai Tangen, the head of Norway’s $1.3 trillion sovereign wealth fund, said companies need to do more to meet shareholder demands on environment, social and governance issues and the fund will use its votes to push for change where needed.
“Boards generally need to sharpen up,” he said in an interview. They “need to be more on the ball when it comes to the climate, and we will increasingly vote against boards which don’t have a particularly credible plan.”
The fund will also closely monitor executive pay this year to stem the trend of expanding salary packages. “Particularly in the US, corporate greed has just gone too far,” he said.
Norway Fund Chief Highlights China Risk (10:20 a.m.)
Tangen, chief of Norway’s wealth fund, said the big risk for markets is how China’s emergence from pandemic restrictions will pressure prices.
Read more: Norway’s Wealth Fund Chief Warns of Inflationary Push From China
“The big, big uncertainty this year is what will happen with global inflation when China kicks in,” Tangen told Bloomberg TV. “I think it will be inflationary and there is a risk that we could see an acceleration of inflation again on the back of that — that would be really bad for markets.”
Investors will be unable to diversify out of such a scenario and losses are likely to be seen in equities, bonds and real estate, he said, adding that there is “definitely” a risk inflation will persist. “Just the reversal of globalization could add 1 percentage point to inflation — it’s more expensive to produce close to home,” Tangen said.
Abu Dhabi’s Mubadala to Focus on Asia (10:10 a.m.)
The head of Abu Dhabi’s sovereign wealth fund said Asia will be an area of focus this year as China recovers from the pandemic and India continues to grow.
“Asia is very promising, particularly if you see whats happening in the post-Covid era,” Mubadala CEO Khaldoon Khalifa Al Mubarak told Bloomberg TV. “We are seeing very exciting opportunities in Indonesia, South East Asia and even Japan and Korea.”
The $284 billion Abu Dhabi wealth fund will continue to invest in semiconductors, technology, energy transition, digital infrastructure and credit in the short-to-medium term, Al Mubarak said, and is also looking potential investments in technology and venture capital globally.
WTO Chief Upbeat on E-Commerce Rules (10 a.m.)
The head of the World Trade Organization said she’s hopeful nations will reach an agreement to set global e-commerce rules by next year.
“E-commerce is booming but we don’t have rules that underpin it like we have for merchandise trade,” WTO Director-General Ngozi Okonjo-Iweala said during a panel discussion. Over the past three years, WTO members have been negotiating rules to cover the $26.7 trillion e-commerce market. If successful, a digital-trade accord would establish a baseline regime for 21st century trade and reduce cross-border hurdles.
Villeroy Sees Recession Avoided This Year (8:45 a.m.)
European Central Bank Governing Council member Francois Villeroy de Galhau said the euro region should avoid a recession this year and that both headline and core inflation “will probably peak in this semester.”
“But we must stay the course in our battle against inflation, I am very clear about that,” Villeroy, who is also the governor of the Bank of France, told Bloomberg TV. “We will win this battle, let me be extremely straightforward. We will bring inflation back towards 2% by the end of 2024/25.”
IMF’s Gopinath Sees Inflation Peak (8:20 a.m.)
Headline inflation has probably peaked but some of “the more sticky components” such as the services sector are still trending up in some countries, Gita Gopinath, the International Monetary Fund’s No. 2 official, told Bloomberg TV, adding that 2023 will be a “tough year.”
The new IMF forecasts for the global economy, due at the end of the month, will be “in the ballpark of what we put out in October,” she said. “After going through about three rounds of downgrades at least we don’t have a worse outcome we’re looking at this time around.”
“While we have global growth bottoming out this year, it improves towards the second half of this year and then into 2024,” Gopinath added. “That’s because we’re seeing signs of resilience.”
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