Davos Latest: Germany Sees ‘High Risk’ of Renewed Trade Tensions

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(Bloomberg) — European Central Bank Governing Council member Mario Centeno said the euro-area economy is holding up and Credit Suisse Chairman Axel Lehmann said a global recession can be avoided in signs of optimism from the global elite in Davos. 

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Not everyone seems in a good mood though. Billionaire Elon Musk — who’s not a fan of the World Economic Forum — also seems to be down on the ESG movement. In a reply on Twitter to author Michael Shellenberger, who ran in the primary race to be California’s governor last year, he said: “The S in ESG stands for Satanic.”


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Despite signs of economic resilience, the lack of snow on the slopes is a reminder of the climate crisis that will dominate much of the discussions. Concerns about political stability are also high on the agenda and other topics will include the end of the era of cheap money and food and energy security.

While the business and finance elite are back in their regular January slot after a three-year hiatus due to the Covid pandemic, there are fewer heavy hitters from politics. Russia’s war in Ukraine and tensions between the US and China have made feel-good appearances at the event in the Alps awkward.

The only leader from a Group of Seven country traveling to the event will be German Chancellor Olaf Scholz. He’ll be speaking to Bloomberg TV later on Tuesday from our studio in Berlin. 

Key Developments

China Stirs Hope for Global Growth in 2023 Even as Davos WorriesUBS CEO Says Bank Is ‘Bucking the Trend’ as Rivals Fire BankersOPEC Chief Is ‘Cautiously Optimistic’ About Global EconomyUK Jumps Into the Top Three Countries for Growth, Bosses SayECB’s Centeno Says Euro-Zone Economy Is Surprisingly Positive

(All times CET)

CS Bonuses ‘Won’t Look Great’ (11 a.m.)

Credit Suisse bankers ought not to expect significant bonuses after last year’s performance, Chairman Lehmann said in an interview with Bloomberg TV. “Obviously we had such a poor year, it was a horrifying year for Credit Suisse so I think people will have realistic expectations that it will not look great.”

Read more: Credit Suisse Weighs 50% Cut to Bonus Pool After Tough Year

Bloomberg reported last week that the Zurich-based bank is weighing cutting the bonus pool by about half compared with 2021. After a string of quarterly losses, the bank was forced to raise $4 billion in capital to fund a broad restructuring. The bank also suffered historic outflows of client funds, which Lehmann said had now “basically stopped.” “I’m rather optimistic for the remainder of the year,” he said.

EY Boss Warns Politics Driving US-China Rift (10:50 a.m.)

The growing threat of a major rift between the US and China is being driven by politicians, according to Carmine Di Sibio, global chairman and CEO of EY.

Business leaders are keen to retain links between the two countries, but Democratic and Republican politicians in the US are taking a harder stance and similar pressures are visible in the UK and Canada, Di Sibio said during a panel discussion. Anne Richards, chief executive officer of Fidelity International, said the West’s relationship with China has changed but there are important signs that the two sides want to retain links despite obstacles. Business is adapting to the greater risks by looking to secure suppliers alongside their Chinese ones, Richards said.

Downturn ‘Playing on Minds of CEOs’ (10:50 a.m.)

The size of the looming downturn is the biggest worry for company bosses this year, according to the boss of professional services group Marsh & McLennan Cos Inc.

“Everyone’s worried about the risks of a recession — not just a mild recession but a hard landing later in the year,” John Doyle told Bloomberg TV. “Things look OK right now but it’s quite obvious that central banks’ top priority is tamping down inflation and that’s going to have an impact.” Marsh & McLennan is also seeing growing interest in cyber risks, particularly since the invasion of Ukraine. “We need to bring more investors to the game to really deal with tail risks in cyber,” said Doyle.

OPEC Chief ‘Cautiously Optimistic’ (10:40 a.m.)

OPEC’s top official said he’s “cautiously optimistic” about the outlook for the global economy, as a recovery in oil demand in China is tempered by signs of fragility elsewhere.

“China is a big economic powerhouse” and there are “good signals” as it ends Covid-related lockdowns, OPEC Secretary-General Haitham Al-Ghais said in an interview with Bloomberg Television at the World Economic Forum in Davos on Tuesday. The oil producers’ group will do “whatever it takes” to keep world crude markets in balance, he said. 

HK’s Chan Sees ‘Very Strong Rebound’ (10:40 a.m.)

Hong Kong’s economy will rebound “very strongly” this year as tourism and consumption revives after the border reopened, Financial Secretary Paul Chan told Bloomberg TV. “The first quarter may be slower, but then will pick up very fast,” he said, adding that there are also “signs of a stabilization” in the city’s property market after a decline in 2022.

The financial secretary is “optimistic” about the city’s market for initial public offerings recovering, and is seeking to lure companies in Southeast Asia and the Middle East to list in the city. “We are casting our net very wide, hopefully to attract more to come,” said Chan, who added that he will “never give up” in his pursuit of Saudi Aramco after the city’s attempt back in 2018.

Managers ‘Should Tackle Quiet Quitting’ (10:35 a.m.)

It’s the responsibility of managers and business leaders to prevent quiet quitting after the pandemic fundamentally changed working conditions, according to a panel of managers and human resources professionals.

Read more: It’s Down to Managers to Stop Quiet Quitting, Davos Leaders Say

“It’s a top-down leader’s job to solve this problem,” Vimeo Chief Executive Officer Anjali Sud said. “We need to communicate very differently,” she observed, adding that she doesn’t believe most leaders feel equipped to do so.

Gore Wants Climate Finance Reform (10:30 a.m.)

Al Gore, the former US vice president who now chairs Generation Investment Management, called for an urgent rebalancing of climate finance to ensure the developing world doesn’t get left behind.

The current mechanism, whereby poorer nations have very restricted access to the private finance needed to help them deal with the fallout from climate change, is “absolutely insane,” Gore said during a panel discussion. Failing to help poorer countries will ultimately hurt their richer peers, Gore said, because “88% of the projected increase in emissions comes from developing countries. But “they do not have practical access to private capital today.”

DP World Cautiously Positive (10:30 a.m.)

Container terminal giant DP World took a cautiously positive view on the global economy, saying pessimism may be overblown. Chairman and CEO Sultan Ahmed Bin Sulayem told Bloomberg TV that companies developed a resilience during the Covid pandemic that should help them cope with the slowdown.

The reopening of China will be the key factor in boosting world trade, though the impact won’t be immediate, with cargo volumes building toward the fourth quarter as backlogs of export goods are addressed, he predicted. DP World continues to view the UK as a focus for investment, despite financial and political upheaval, with the company spending £300 million ($366 million) on a fourth berth at its London Gateway container hub.

China Stirs Hope for Growth (10 a.m.)

China’s reopening and the resilience of advanced economies provide hope for the world to weather 2023 even if some struggle to grow, according to a panel on the prospect of a recession.

“If we look at the key event this year so far, definitely the reopening of China has to be the major event,” said Laura M Cha, chair of Hong Kong Exchanges and Clearing. “The lockdown of the last three years has created pent-up demand domestically, so I would see increased domestic consumption and of course the manufacturing sector will pick up. All those will be good factors for global growth.”

Hamers Says High Inflation Here to Stay (9:40 a.m.)

UBS CEO Ralph Hamers said that 2023 will be the year of inflation and that even as it recedes each month, he expects it to remain much higher than in the past.

“Higher inflation rates are here to stay,” he told Bloomberg TV, adding that if Europe does fall into recession, it’s likely to be short and shallow. The Swiss bank is still in hiring mode, even as some competitors cut jobs, though is looking more at filling its most important vacancies, he added. “We are not in retrenchment mode on staff, we are hiring for critical jobs,” Hamers said.

Man U Targets the Davos Crowd (9:30 a.m.)

Preparations Ahead of The World Economic Forum (WEF) 2023

© Photographer: Stefan Wermuth/Bloomberg
Preparations Ahead of The World Economic Forum (WEF) 2023

Manchester United is trying to score in Davos by taking over one of the shopfronts on the promenade, usually home to Wall Street banks and tech companies. The football club — a partner with the World Economic Forum since 2019 — is bringing goalkeeping legend Peter Schmeichel to meet delegates at a Tuesday nightcap this year.

The American Glazer family that owns the club is looking for an investor and might be prepared to sell up, but that doesn’t seem to be the purpose of the Red Devils’ Alpine adventure. “Manchester United is proud to be the first sports team to partner with the World Economic Forum,” a spokesperson said. “We’re in Davos to explore ways to maximize the impact” of the team’s global fan base.

Poland Sees Germany Under Pressure on Tanks (9:25 a.m.)

Polish President Andrzej Duda said pressure is growing on Scholz’s government in Berlin to give the green light to send German-made Leopard battle tanks to Ukraine.

Poland has pledged to supply about 14 Leopards and the country is talking to “a few allies” to ensure additional vehicles, Duda said during a panel discussion. Shipping them has the potential to start “a new chapter” of the war, he said, adding that Poland already supplied more than 260 of its Soviet-model battle tanks last year.

Musk: S in ESG Stands for ‘Satanic’ (9:20 a.m.)

Elon Musk is not a fan of the WEF — or ESG, it seems.

“The S in ESG stands for Satanic,” the Twitter CEO tweeted in response to author Michael Shellenberger, who ran in the primary race to be California’s governor last year.

Lehmann Doesn’t See Recession (9:15 a.m.)

Lehmann of Credit Suisse said that the bank’s high net-worth clients still have plenty to invest, and he’s optimistic that a global recession can be avoided, with China reopening and “huge growth” coming from India.

“We are entering into a multipolar world, it is not a global recession,” Lehmann said on a panel with Bloomberg TV’s Francine Lacqua.

ECB’s Centeno Upbeat on Economy (9 a.m.)

European Central Bank Governing Council member Mario Centeno said the euro-area economy is performing better than many anticipated in the face of record inflation and the energy crisis that erupted after Russia attacked Ukraine.

“The economy has been surprising us quarter after quarter,” Centeno told the same panel. “The fourth quarter in Europe will be most likely still positive. Maybe we’ll be surprised also in the first half of the year.”

Habeck Says Trade War Risk ‘Very High’ (8 a.m.)

Germany’s Habeck warned that the risk of additional trade wars is “very high” as countries increasingly look inward amid global insecurity and said that the WEF can be an effective forum for discussions that could help avert such disputes.

“We have seen with some countries that they have chosen isolation or confrontation,” Habeck said in an interview with Germany’s Deutschlandfunk radio from Davos, adding that China had pursued “very aggressive policies in recent years.” If other nations in Europe or the Americas chose to do the same “then we won’t be able to solve the world’s problems,” he said.

EU-US Trade War Must be Averted: Sanchez (8 a.m.)

The European Union must reform its industrial state-aid policies while also seeking an agreement with the US to avert a trade war, according to Spanish Prime Minister Pedro Sánchez.

It’s “mandatory for the US and the EU” to reach an agreement on industrial policy, Sánchez said in an interview with CNBC. The EU has some internal “homework” to do, including reducing bureaucracy and reform rules for state-aid to industries, he said.

Climate Must be Priority: Forrest (8 a.m.)

There’s a rump of Davos attendees who are still too focused on inflation, interest rates and temporary economic factors when they should be looking at the climate crisis, according to mining billionaire Andrew Forrest.

Companies that are “going hard into green energy, know full well that that is going to bring down the cost of energy and increase the standard of living and that will bring down inflation,” Forrest told Bloomberg, adding that the worst of Europe’s energy crisis is over. “People have started to get used to it but what they also got used to either subconsciously or consciously is that the era of fossil fuels is over,” the iron ore magnate said.

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