Davos latest: Chinese recovery prompts mix of optimism, caution

The impact of China's recovery was a major topic on the second day of the World Economic Forum in Davos, with the head of Abu Dhabi's $284 billion wealth fund flagging a new pivot to Asia and his counterpart in Norway warning it could unleash a surge in global inflation, Bloomberg reported.

The International Monetary Fund's No. 2 official earlier said the global economy has shown "signs of resilience," and European Central Bank Governing Council member Francois Villeroy de Galhau predicted that the euro region should avoid a recession this year, in line with the general tone of cautious optimism at the event in the Swiss Alps.

A speech by German Chancellor Olaf Scholz, the only Group of Seven leader due to attend the event, is one of Wednesday's highlights. Scholz spoke with Bloomberg Editor-in-Chief John Micklethwait in Berlin on Tuesday and said he's convinced Europe's biggest economy won't contract in 2023 and that he is in talks with allies about sending battle tanks to Ukraine.

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.

UN Head Warns of 'Perfect Storm' (12:15 p.m.)
The top official at the United Nations offered a somber view of the state of global affairs, likening it to a category five hurricane.

"Our world is plagued by a perfect storm on a number of fronts," UN Secretary-General Antonio Guterres said. "We are in the worse situation I can remember in my lifetime."

Elba Flags 'Polarizing' Celebrity Advocacy (12 p.m.)
Climate activism can be "polarizing" when celebrities get involved, Actor Idris Elba said in a Bloomberg TV interview. "I think there is a consumer and someone at home that does not find it appealing, might find it a little patronizing," he said, while urging people to show support for measures to protect the environment in any way they can.

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.

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.

US Has Overspent Due to 'Fractured Politics' (11:45 a.m.)
Public borrowing in the US and elsewhere has swelled because of overspending partly fueled by fractured politics, according to former International Monetary Fund Chief Economist Raghuram Rajan.

"The size of the debt has gone up tremendously," Rajan said on the same panel. "Part of the problem that's going on is clearly there is a fractured political consensus in many industrial countries — I mean, that is part of the reason the US overspent. Every constituency got a share of the spending, simply because they couldn't make choices."

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.

Gentiloni Warns on Inflation (11:15 a.m.)
European Union Economy Commissioner Paolo Gentiloni said it will be tricky to end measures to support households during the cost-of-living crisis.

"It is not easy to phase out these measures, of course, from a social point of view," he said on a panel. "But the longer you keep them and you keep them universal, the riskier their phasing out is. This is a political challenge."

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.

Aramco Sees Oil Demand Picking Up (10:30 a.m.)
The world's biggest oil company is confident demand will pick up strongly this year as China reopens its economy and the aviation market recovers.

"We are very optimistic in terms of demand coming back to the market," Saudi Aramco's chief executive officer, Amin Nasser, said in an interview at Davos. "We are starting to see good signs coming out of China. Hopefully, in the next couple of months, we'll see more of a pickup in the economy there."

Europe Still Exposed High Energy Costs: BASF (10:30 a.m.)
A drop in European gas prices won't provide immediate relief to Europe's energy-intensive industries, Martin Brudermueller, CEO of chemicals giant BASF, said in an interview.

"We think the volatility will go out of gas prices this year, but we are in a structural environment of higher energy costs in Europe," Brudermueller said. The company buys "most" of the gas it needs on the spot market and has been exposed to "distortions" in the value chain, 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.

"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.

Countries 'Must Stay the Course' Against Covid (10:05 a.m.)
Governments must keep investing in health care in order to fight the Covid-19 pandemic as well as prepare to do better against future outbreaks, said Stephane Bancel, chief executive officer of vaccine maker Moderna Inc.

"A lot of people are dying every day, but a lot of governments have moved to other things," Bancel said during a panel discussion. "That's a problem, because we need investment in public health infrastructure, in health-care workers, in genomic surveillance. Industry can do so much, but we need the governments to really keep at it, because we all know that there's going to be other outbreaks."

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.

State Street 'Not Pursuing M&A' (9:20 a.m.)
State Street Corp.'s chief executive officer said the US lender isn't actively looking at M&A opportunities, a couple of months after the firm decided not to pursue an acquisition of Brown Brothers Harriman & Co.'s investor-services business.

"We are not actively looking," Ronald O'Hanley told Bloomberg TV, while stressing the bank would still consider opportunities as they arise. He said he was surprised at the optimism expressed at Davos, saying he expected inflation to persist thanks to tight labor markets and continuing geopolitical risks. "It's still early to say that it is all over," he said.

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 Says Japan Risks Missing Price Target (8:25 a.m.)
Japan's central bank faces a different challenge from global peers because of the high risk that inflation there will end up below target, according to the International Monetary Fund's No. 2 official.

"The Bank of Japan has a pretty complex decision to deal with," Gita Gopinath, the IMF's first deputy managing director, said an interview with Bloomberg TV. "Unlike the major economies of the world, they have inflation going up, but the risk of inflation sliding back well below their target remains high."

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."