ADVERTISEMENT

Davos Latest: Scholz Says Germany Back on Track After Gas Shock

The business and financial elite are in Davos to discuss global issues including the climate crisis, the end of the era of cheap money and food and energy security.

Gita Gopinath in Davos on Jan. 17.
Gita Gopinath in Davos on Jan. 17.

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.

Here are some of the top takeaways from Davos todaySource: Bloomberg
Here are some of the top takeaways from Davos todaySource: Bloomberg

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

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.”

Olaf Scholz speaks at the World Economic Forum in Davos, Switzerland, on Jan. 18.Source: Bloomberg
Olaf Scholz speaks at the World Economic Forum in Davos, Switzerland, on Jan. 18.Source: Bloomberg

“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.

WATCH: Malaysia’s trade minister discusses the outlook in an interview with Bloomberg TV.Source: Bloomberg
WATCH: Malaysia’s trade minister discusses the outlook in an interview with Bloomberg TV.Source: Bloomberg

“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.

WATCH: Former US Treasury Secretary Summers says he’s more optimistic about the US economy.Source: Bloomberg
WATCH: Former US Treasury Secretary Summers says he’s more optimistic about the US economy.Source: Bloomberg

“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.

WATCH: Nigerian Finance Minister Zainab Ahmed says the trajectory for the nation’s debt is sustainable.Source: Bloomberg
WATCH: Nigerian Finance Minister Zainab Ahmed says the trajectory for the nation’s debt is sustainable.Source: Bloomberg

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.

WATCH: Bill Winters says Standard Chartered is “doing very well all by ourselves.”Source: Bloomberg
WATCH: Bill Winters says Standard Chartered is “doing very well all by ourselves.”Source: Bloomberg

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.)

Carmine Di Sibio in Davos, Switzerland, on Jan. 18.Source: Bloomberg
Carmine Di Sibio in Davos, Switzerland, on Jan. 18.Source: Bloomberg