Summers Sees Brighter Outlook Amid US Debt Cloud

(Bloomberg). Lawrence Summers was the former US Treasury Secretary. He spoke out at Davos about the brightening prospects of the global economy and warned that the US political fights over the debt limit are a concern.

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The impact of China’s recovery was also a major topic on the second day of the World Economic Forum, with the head of Abu Dhabi’s $284 billion wealth fund flagging a new pivot to Asia and his counterpart in Norway warning a Chinese bounceback could spark a fresh a surge in inflation. 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.

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.

The Key Developments

• European Executives Eye USGreen Plan With Envy at Davos

• Kerry says that climate-change fight is being hindered by a lack of generous loans

• Harvard’s Hausmann Warns Wall Street Underestimating China Risks

• Bain Veteran Says that 20% Private Equity Returns are a Success Story for Decades

• Banker Bonuses to ‘Absolutely’ Fall Says JPMorgan’s Raghavan

(All times CET).

Summers Has ‘A Little More Hope’ (3 p.m.)

Summers indicated that he is more optimistic than a few month ago about the US economy’s prospects. 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.

Sanofi CEO, Disease Prevention Is a Climate Fighter (2:00 p.m.

Sanofi’s chief executive officer talked about the role of disease prevention in fighting the climate crisis. A healthy adult can produce between 10 and 15 tonnes of carbon in the developed world. But, a person with diabetes will generate roughly triple that amount due to increased demands on the health system.

“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 reported earlier that Microsoft intends to lay off employees in a variety of engineering departments, joining other technology giants who are cutting back. Nadella stated that tech spending should increase after the current economic cycle. He cited artificial intelligence technologies as being able boost growth.

EU Eyes Spring Half-Full Gas Storage (2:10 p.m.).

After mild weather and supply worries helped lower demand, the EU will finish winter with half of its gas storage facilities full, said Kadri SIMSON, EU Energy Commissioner.

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.

Ahmed stated that the West African nation would only consider returning to market if yields drop back to 2021 levels. “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 Available for Property Opportunities (1:30 p.m.

Howard Lutnick (Cantor Fitzgerald Chief Executive Officer) stated that rising interest rates have caused a rapid repricing on real estate markets. It has also set the stage for record-breaking fundraising for investment funds positioned for success.

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. He said that this will accelerate the rebound in commercial real-estate markets.

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 a new generation of leaders (12:20 p.m.

Steve Schwarzman, Blackstone Inc. Chief Executive officer, said that the US requires a new wave of leaders in both 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 United Nations’ top diplomat offered a somber assessment of global affairs. He compared it with 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.”

Bain Eyes Football Deals In England (12:01 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

According to Bloomberg TV, the US investor is considering many clubs but is cautious about overpaying in a market where the prices for deals in the sport are rising. “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 is still on the expansionary path: Minister (11.50 a.m.

Arkhom Termpittayapaisith from Finance Minister Arkhom Termpittayapaisith said that Thailand continues to use an expansionary fiscal approach to support its economy, while also seeking to reduce its budget deficit through revenue collection.

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.)

According to Raghuram Rajan, former Chief Economist at the International Monetary Fund, public borrowing has increased in the US and other countries due to overspending partly fuelled by fragmented politics.

“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.

European Banks are 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.

Colm Kelleher, chairman, said that although the path to success is not clear, Europe still needs a banking system that is market-based. 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.”

To stem the growing trend of increasing salary packages, the fund will closely monitor executive pay. “Particularly in the US, corporate greed has just gone too far,” he said.

Aramco sees an increase in oil demand (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 Suffers High Energy Prices: BASF (10.30 AM)

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 AM)

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.”

Al Mubarak indicated that the $284 million Abu Dhabi wealth fund will continue investing in semiconductors, technology and energy transition in the short to medium term. It is also interested in potential investments in venture capital and technology globally.

WTO Chief Upbeat about E-Commerce Rules (10:15 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. WTO members have been trying to negotiate rules for the $26.7 trillion ecommerce market over the past three year. A digital-trade agreement would create a framework for 21st-century trade and lower cross-border obstacles if it is successful.

Villeroy: 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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