This article titled “Davos 2018: Justin Trudeau blasts gender inequality; Modi warns against protectionism; Blanchett on refugees – as it happened” was written by Graeme Wearden in Davos and Nick Fletcher in London, for theguardian.com on Tuesday 23rd January 2018 23.57 Asia/Kolkata
Time for a quick recap of the main events from the first day of Davos:
Trudeau also announced that the ten members of the trans-pacific partnership have agreed to extend their agreement.
Oxfam’s Winnie Byanyima has also hailed campaigners against sexual harrassment, saying they have helped people worldwide.
Davos also heard that parents need to teach their sons not to hit women, rather than simply how to hit baseballs.
India’s Narendra Modi has warned that globalisation is under threat, and also cited climate change and terrorism as key threats to the global economy.
The mood at Davos has been optimistic, although bank bosses have warned against complacency.
An MIT economics professor has predicted that Facebook will barely exist in 20 years.
That’s probably all for tonight. Thanks for reading and commenting. GW
Mixed day for European markets
A positive start following news that the US government shutdown had been resolved, for the moment at least, soon faded, leaving European markets a mixed bag by the close.
Sterling rose above $1.40 to a new post-Brexit vote high, partly due to hopes that a successful trade deal can be negotiated, but also thanks to continuing weakness in the dollar. The US currency has been under pressure on worries that the Trump tax cuts would increase the already hefty US national debt. And the dollar has become less attractive as other central banks begin edging up interest rates and gradually removing their long standing stimulus programmes.
And despite a resolution to the government shutdown, the problem has only been postponed until early next month. Chris Beauchamp, chief market analyst at IG, said:
Renewed dollar weakness is the revival of yet another familiar friend from 2017. Post-shutdown euphoria has been replaced by a weary acceptance that we will probably have to do this all over again in just over two weeks. Why buy the greenback, when so many other economies can show solid growth without the government disruption so prevalent in the US at the moment?
So with the stronger pound, the FTSE 100 came off its best levels. But Germany’s Dax hovered around record levels, following upbeat consumer confidence figures and signs that a coalition government could be moving closer. In the US, the Dow Jones Industrial Average fluctuated between positive and negative, but Nasdaq was lifted by the positive Netflix update.
The final scores in Europe showed:
- The FTSE 100 finished up 16.39 points or 0.21% at 7731.83
- Germany’s Dax rose 0.71% to 13,559.60
- France’s Cac closed down 0.12% at 5535.26
- Italy’s FTSE MIB fell 0.22% to 23,836.60
- Spain’s Ibex ended up 0.24% at 10,609.5
- In Greece, the Athens market added 1.62% to 872.00
On Wall Street, the Dow Jones Industrial Average is currently down 28 points or 0.11%.
Here’s a video clip of Justin Trudeau laying down the law on sexual harassment:
Justin Trudeau’s speech has caused quite a stir, with its trenchant criticism of greedy, uncaring businesses and gender inequality.
Adam Parsons of the BBC thinks it was a punchy speech:
John Stackhouse of Royal Bank of Canada says Trudeau is shaking up the idea of what ‘Davos Man’ acts like:
Ian Bremmer says Trudeau showed how gender equality is an important economic issue:
But Jamie Drummond of campaigning group One isn’t convinced Trudeau will deliver:
Justin Trudeau also made an important point about trade.
He tells Davos that Canada is trying to convince U.S. President Donald Trump that the NAFTA trade agreement was in the interest of the United States as well as other countries.
“We’re working very hard to make sure that our neighbour to the south recognizes how good NAFTA is and that it has benefited not just our economy but his economy and the world economy,”
Trudeau: Time is up for sexual harrassment
Justin Trudeau moves onto another vital issue – campaigns such as #MeToo and Time’s Up.
The Canadian PM declares:
These movements show us we must have a critical discussion on women’s rights, equality and the power dynamics of gender.
Sexual harassment in business and in government is a systemic problem and it is unacceptable.
As leaders, we must recognise and act to truly show that time is up.
Trudeau: We must tackle gender inequality.
Justin Trudeau now urges business chiefs at Davos to help fight inequality by hiring, promoting and retaining more women.
Getting more women into the workforce isn’t just the right thing to do, or the nice thing to do, it’s the smart thing to do, he tells the World Economic Forum, Studies show it can provide a significant economic boost.
Firms need to address gender pay, and he warns that many firms aren’t doing as well as they think. Just paying men and women the same doesn’t go far enough, unless you also tackle the barriers faced by female workers.
Women do more part-time work, and more unpaid work than men.
Parental leave and childcare policies must be reexamined, Trudeau tells WEF. Firms should implement policies to improve gender balance.
He also reminds us that he introduced Canada’s first gender-balanced cabinet, and the performance of those female ministers has proved the naysayers wrong.
Trudeau: We’re failing to fight inequality
Justin Trudeau has warned that businesses and politicians are failing to help their workers and citizens in today’s “rapidly changing world”.
People have been taken advantage of, losing their jobs, the Canadian PM warns:
Governments and corporations, we haven’t done enough to address this.
He also blasts corporate greed, saying:
Too many corporations have single-mindedly put the pursuit of profit ahead of the well-being of workers.
The gap between the rich and the poor is staggering, Trudeau points out, adding
All the while, companies avoid taxes and boast record profits with one hand while slashing benefits with the other.
Our priority must be the people who are struggling the most, and who will never get to Davos, Trudeau says.
And he warns that if we operate on the basis of business as usual, “the system will break down and we will all fail.”
Trudeau: A new TPP deal has been agreed
Canadian prime minister Justin Trudeau is now speaking to Davos. He begins by thanking the seven all-female co-chairs for organising this year’s WEF.
He then makes an important announcement: The 10 remaining members of the Trans-Pacific Partnership have concluded a new agreement that will maintain their alliance.
The agreement reached today in Tokyo is the right deal, Trudeau insists. It will create growth, prosperity, and middle class jobs in Canada today and for generations.
This is significant, as Donald Trump pulled the US out of the TPP.
Trudeau challenged to deliver on his words
In an hour’s time, Canadian prime minister Justin Trudeau will give a special address to the World Economic Forum.
As a liberal, feminist leader, Trudeau is a Davos favourite. But that shouldn’t mean he gets a free pass.
Jamie Drummond, executive director of the development group One, says that Trudeau isn’t actually delivering on pledges to make the world a better place.
As Drummond puts it:
“It’s so exasperating that prime minister Justin Trudeau will make another great speech today while the facts point in a shocking direction.
Smart aid rates under Trudeau are lower than under his conservative predecessor Stephen Harper, the money he loudly promised would be new to fight aids, TB and malaria was in fact not new, and his feminist foreign policy is not backed by new funds.
This can and must change now. Not in 2020, or some vague theoretical far-off point after the next election.
Drummond urges WEF delegates to put Trudeau under pressure to deliver.
This week in Davos he must be asked when and by specifically how much he will increase funding for girls education and women’s economic empowerment; and please, he must do it this year.
If we want him be a great leader on these issues, we must withhold praise until we see the quality of his action not just his delightful adverbs.
Trust Trudeau – but verify. And if Davos doesn’t pressure leaders like Trudeau to be the best they can be, or hold them accountable, this gathering is a self-defeating backslapping waste of time the world doesn’t have.”
The Greek prime minister Alexis Tsipras is among the world leaders who have lined up to get to Davos, reports Helena Smith from Athens:
Tsipras, who arrived only hours after Athens wrapped up a third bailout compliance review – edging ever closer to ending dependence on international bailout loans when the programme expires this summer – is meeting investors also gathered in Davos.
The leftist–led government, in an about–turn of its previous antagonism, is now keen to attract foreign capital as it prepares the country’s return to capital markets. This afternoon’s meeting is much in the vein of luring investors to fund projects in Greece with an eye to slashing unemployment – at 21% still the highest in the EU and by far the nation’s biggest social ill.
Monday’s eurogroup meeting saw euro area finance ministers agreeing to disburse €6.7bn to the debt -stricken nation in two instalments. The first chunk of €5.7bn will be released in February, once outstanding reforms are implemented, to cover debt servicing needs, arrears and creation of a cash buffer that will support Greece’s return to markets.
Talks on debt relief are expected to begin soon – along with a fourth compliance review which included 88 creditor-mandates reforms being taken by June.
Sounding a note of optimism, EU Financial Affairs Commissioner Pierre Moscovici said the single currency bloc should prepare for “a successful conclusion, which means Greece being back as a normal member of the eurozone and the final signal – the end of the Greek crisis.”
After the better than expected German consumer confidence figures, there is more positive news from Europe.
Eurozone consumer confidence rose from 0.5 points in December to 1.3 points in January, according to the European Commission. This was well above forecasts of a figure of 0.6.
In the wide European Union, confidence jumped 1 point to 0.4 points.
ING economist Bert Colijn said:
With inflation still low, job growth surprising on the upside, house prices increasing and growth forecasts adjusted upwards, there is a lot to like for consumers and that’s evident. The current mood among consumers is nothing short of ecstatic and current levels of confidence are generally associated with further acceleration in household consumption growth. Uncertainty about possible Eurozone reform, Italian elections and the success of the German coalition negotiations clearly take a backseat to improved economic factors.
Over the past few months, consumer confidence improved most notably because of a much more positive view on the general economic situation, modest improvements in assessments of the financial situation and increased amounts of current and expected major purchases. This indicates that optimism and stronger consumption are going hand in hand, spurring the household consumption component of GDP growth. While unemployment expectations have become slightly less favourable over the last months of 2017, this is actually at odds with businesses indicating that hiring expectations remain very high.
With such a favourable outlook, it could well be that the record for consumer confidence could be breached a few more times in 2018. This, in turn, confirms the rosy short-term picture for Eurozone growth.
Dacher Keltner, Professor of Psychology from the University of California, is also on the sexual harassment panel alongside Winnie Byanyima.
Men tend to take more risks, they tend to be a lot more aggressive, and they tend to sexualise thing.
So if you give a man power, those default tendencies will be expressed.
Women tend to be more collaborative, co-operative, empathetic. You give them power, studies show it will amplify those pro-social tendencies.
Lisa Sherman, President and Chief Executive Officer of the Advertising Council, says parents can do more to help boys treat women with respect.
You teach your son how to hit a baseball, how to hit a jump shot, how to hit the net. But we should really be talking to them about who not to hit, and why.
Peggy Johnson, executive Vice-President for Business Development at Microsoft, says the younger generation are helping to force change.
She explains that her daughter recently started her career, and told her that ‘when there’s an inappropriate joke at work, I don’t laugh’.
I thought back and thought, when I was her age I always laughed, says Johnson. My daughter said to me that she’d learned not to laugh at these jokes from me, but she actually learned it from me in my 50s, not my 20s.
Oxfam: #MeToo campaign has helped women around the globe
Winnie Byanyima, the executive director of Oxfam International, is speaking powerfully about sexual exploitation against women around the globe.
All the women in the world should be grateful to American women for taking a stand, and saying “Me Too”, Byanyima says, referring to the campaign that spread around the globe after the Harvey Weinstein scandal.
It has brought new attention to a problem that is deep.
Women in the developing world are at the bottom of the supply chain of big business. Oxfam hears stories of their lives, Byanyima explains, such as hotel housekeepers.
All of them told us that they had faced sexual harassment or knew someone who had faced sexual harassment. It goes on with impunity.
Domestic workers globally suffer abuse, she continues, and some of them are like slaves in the homes where they work. Only a few countries have ratified a new convention for domestic workers.
It is not an accident that women are abused sexually at work or at home. It’s due to the social norms that are there to justify their economic exploitation.
That is why it is so important to tackle economic inequality, as this will also help tackle violence against women.
Byanyima says there are three ways to tackle this problem:
- Remove all the laws that discriminate against women in the economy
- Tackle the social norms that justify sexual exploitation. Businesses have an important role to play here – they can use their factories, supply chains, advertising. Unilever are doing it, so others can too.
- Bring women into every level of decision-making and leadership, so they can drive change.
Mixed open for US markets
In the wake of the resolution to the US government shutdown, the Dow Jones Industrial Average was initially expected to open higher.
But when trading began the Dow dipped 27 points or 0.1%, with investors moving on to worry about the impact of Donald Trump’s move to impose steep import tariffs, including possible retaliation. South Korea and China both protested at the duties on washing machines and solar panels.
The S&P 500 however edged up 0.03% and the Nasdaq composite climbed 0.23%.
The uncertainty has taken some of the shine off European shares, with the FTSE 100 now up just 0.11% and France’s Cac virtually unchanged. Germany’s Dax is now up 0.76%, off its best levels.
David Autor, Ford Professor of Economics at MIT, has predicted that today’s giant tech companies – such as Facebook – will suffer the face of previous dominant companies.
He’s on a panel asking ‘can we live with monopolies’.
Autor explains that we currently live in an environment of ‘winner takes most’ markets, where having a small edge over your competitor gives you a massive advantage.
So firms like Amazon and Facebook are growing organically (people are on Facebook because their friends are on Facebook), but that doesn’t mean that this growth is healthy. Or sustainable, in the long run.
We did have these monopolies in the past, Autor points out, citing the US railroads, and AT&T which was broken up by regulators.
Also, companies which appear indomitable can fade pretty fast, he says – and then makes a bold prediction:
I would guess that Facebook will be almost non-existent 20 years from now.
Autor is also critical of the US model where employees are not treated as stakeholders (unlike shareholders).
This situation has created a level of inequality that has led to political upheaval, he says.
Elsewhere in Davos, the head of the Red Cross has warned that fresh humanitarian crises could break out this year.
Peter Maurer, president of the International Committee of the Red Cross, says there are a lot of fragile situations that could develop into “full-fledged” conflicts (as we saw with the Rohingya crisis in 2017).
Maurer says there are plenty of places on the brink of war, violence and disruption.
He cites Southern Philippines (which is under martial law), Myanmar, Afghanistan, the Middle East, and large parts of Africa as places where the Red Cross sees fragility – but “we don’t know which one will blow up in our face”.
So what can Davos do about it?
Top business leaders have the skills and resources to help businesses in those fragile areas, and help them tipping into conflict.
Maurer also warns that humanitarian organisations need more money:
In 2018 we face a big gap between the needs of people and the capacity of the international system as a whole to respond.
The gap can only be bridged by more and better finance.
Ultimately, Blanchett says, we must remember we are all citizens, and stand up for what we believe in.
Cate Blanchett is close to tears, as she talks about one refugee family she met in Jordan. They had fled conflict with five of their children, being shot at by all sides.
Eventually, the father had to choose between carrying his suitcases and carrying his children (he chose the children). No-one should be put in that position, she says.
Q: Aren’t politicians taking a hard line on refugees because they are reacting to the concerns of their populations?
Cate Blanchett argues that they’re actually reacting to populist media and the news cycle.
We are at a fork in the road, she says.
We try to teach our children to be compassionate, to be tolerant, to accept diversity, to share. But all the structures that are around them are not doing the same, so it’s quite a schizophrenic world they’re living in.
And taking a swing at populist politicians, she says she don’t understand how turning people in a boat back became an election winner.
Cate Blanchett criticises ‘shameful’ treatment of refugees
Australian actor Cate Blanchett is talking about the refugee crisis now (yesterday she was handed a WEF award for her work on this issue).
She explains how she went backpacking through Europe in her youth, which opened her eyes to economic inequality.
I was staying in youth hostels that were more like Turkish prisons, She explains, seeing people who didn’t have anywhere else to go
Q: There’s been a lot of criticism of Australia’s policy to refugees….
Blanchett says she was ‘bewildered’ to see the generous, openhearted, multi-cultural Australia she grew up in “flouting the UN humans rights convention”
I was very distressed that Australia was reverting back to practices that made us a fortress again.
This drove Blanchett to become a goodwill ambassador to UNHCR
I think it’s shameful. There’s so much misinformation about refugees.
They are forced to flee, and then they are vilified in the media.
Blanchett says the misinformation about refugees is “very distressing”, and doesn’t connect with the actual people she has met.
There are 65 million displaced people in the world, 22 million are refugees, half are women and children. But just 1% have been resettled in advanced developed economies.
It’s the developing world that is shouldering the deep burden of refugees.
She cites the Lebanon, where a quarter of the population are now refugees.
Blanchett also criticises the way refugees are reported in the media:
People are told this narrative that these people, who have so much to offer, are going to be a burden on us or become a terrorist threat.
Q: But have some people in developing economies been encouraged to travel to countries such as Germany, because they hoped to be given asylum?
Should we not talk about it, Blanchett replies rhetorically. The problem is not going to go away.
These are not terrorists. These are innocent people, who want to return home.
She’s also calling for more burden-sharing between countries, to help address the refugee crisis.
The problem with all this optimism at Davos is that business leaders, economists and politicians have a nasty habit of missing impending disaster.
WEF veterans point out that the mood is often particularly upbeat shortly before a crisis.
Barclays CEO Jes Staley summed it up this morning, on the financial crisis session when he said Davos feels “a little bit like 2006 when we were all talking whether we’ve solved the riddle of economic crises.”
The Carlyle Group David Rubenstein agreed, saying:
Generally, when people are happy and confident, something wrong happens.
Back with the UK public finances, and a Treasury spokesperson said:
We have made great progress in reducing the deficit by three quarters since 2010, but government debt is still far too high. Our balanced approach to government spending is getting debt falling, while investing in key public services and keeping taxes low.
And the Office for Budget Responsibility said:
It appears that the underlying improvement in borrowing so far this year is a little faster than would be consistent with our November forecast.
Christoph Franz, the chairman of Roche, agrees that spirits are high at Davos this year – and with good reason.
Speaking to CNBC, Frans argues that ‘healthy’ economic growth is boosting optimism among top execs.
Basically, I have been here for more than ten years, I share your perspective, there’s a very positive mood right now among business leaders here in Davos, and I think the reason is, we see a growth perspective in, not only some specific countries, but on a global scale, and the growth is achieving numbers which we have seen only before 2007.
So, the economy is taking up, and for the time being, it is growth which has been created by a lot of investment.
UK manufacturers optimistic but worried about skills shortages
Britain’s manufacturers continue to be optimistic about business prospects and exports, but are increasingly worried about skills shortages.
The CBI’s latest industrial trends survey for the three months to January showed 27% of firms were more optimistic about the general business situation that three months ago, while 14% were less optimistic. The balance of +13% is up from -11% in the previous quarter.
Growth in manufacturing output and domestic and export orders all picked up, compared with the previous three-month period, although the monthly order book figure showed a fall from +17 in December to +14 in January.
And the number of firms saying a lack of skilled labour was likely to limit output over the next three months was the highest for more than four decades. Rain Newton-Smith, CBI chief economist, said:
It’s good to see manufacturing going from strength-to-strength with growth up and the buoyant global economy boosting export orders. But the past depreciation in Sterling continues to leave its mark on firms’ costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.
Capacity pressures are ramping up and skill shortages are a big concern, underlining the importance of establishing a future immigration system that provides companies with access to talent and labour. The building blocks of a new system that meets economic needs and public concerns must start with scrapping the net migration target, which has never been fit-for-purpose.
Modi wraps up his speech by identifying three priorities:
- The world economy must be more inclusive
- Policymakers must remain committed to a rules-based world order
- Reforming the major institutions of the world, connected to politics, the economy and securtry
He talks about the Indian soldiers who died in world wars in the 20th century, to help create “peace and humanity”.
India can be a humanising and harmonising force in an uncertain world, Modi promises, citing Indian prayers and poetry which advocates a free and peaceful world.
Together we can create a ‘heaven of future’, he promises, in a somewhat gushing conclusion.
Alas, he’s not taking any questions.
On climate change, Modi says India is making big progress towards hitting its goals for renewable energy.
Modi says India will achieve strong growth over the next few years.
Kenneth Roth of Human Rights Watch suggests Modi isn’t living up to the glowing ideals he’s preaching today:
(remember, Modi was once banned from visiting the US following claims he had supported Hindu extremists during Hindu-Muslim riots. He was later cleared by the Indian Supreme Court).
Modi is now encouraging businesses to invest in India, citing the hundreds of laws and regulations which have been stripped out to make te economy more competitive.
Instead of red tape, we offer you a red carpet, he jokes.
Democracy isn’t just a political system, says Modi – it is a life view and a lifestyle.
He cites India’s proud democracy and diversity, declaring:
For a society with diverse religions, cultures, languages, attires and cuisines, democracy is not just a political system but a way of living:
Modi: Globalisation is under attack
Thirdly, the world is threatened by the rising attacks on globalisation, says Modi.
We must accept that globalisation is slowly losing its lustre, he says. And he pits some of the blame on the institutions created after world war 2, such as the United Nations.
Do the structures and action plans of these organisations match the aspirations and dreams of mankind, Modi asks rhetorically.
Then he takes aim at protectionism, saying:
Forces of protectionism are raising their heads against globalisation. They want to reverse its flow.
The world risks new tariff and non-tariff barriers, he continues, cautioning that “bilateral and multilateral trade negotiations have come to a kind of standstill’.
The second major threat is terrorism, Modi continues.
He says there is an artificial distinction between ‘good and bad’ terrorism, and a worrying radicalism of young people.
The world has moved from needs-based to greed-based consumption, says Modi seriously.
This does not live up to the ideals of Gandhi, or the teaching of Buddha.
Modi cites climate change as a major threat.
Glaciers are melting, islands are disappearing under the sea, and in Davos we have the worst snow in 20 years, he says.
And he criticises the leaders of advanced economies for not showing more solidarity
Everyone talks about reducing climate emissions, but there are very few countries who back their words with their resources to help developing countries to adopt appropriate technology.
Very few of them come forward to help.
Here’s some instant reaction to Modi’s call for co-operation to build a better future, rather than descending into isolationism.
Modi: We must build a beautiful shared future
Narendra Modi now turns to the “fractures” in the global economy, citing unemployment, inequality, lack of opportunities.
Some important questions come to mind, which require answers, he says.
Is our global order widening these fault lines, increasing these differences, and giving preference to isolationism over harmony and conflict over co-operation, he asks, adding:
What paths can we follow, to eliminate rifts and differences.
How can we realise the dream of a beautiful shared future.
Modi is speaking in Hindi, incidentally, so the audience are getting a realtime translation.
Today, data is the world’s biggest asset, Modi declares.
We are accumulating mountains and mountains of data, he continues. There is now a race to control data, because it is believes that whoever is able to control the data can dominate the world.
Indian PM Modi’s speech
Narendra Modi takes the stage, to another round of applause.
He begins with a history lesson.
The last time an Indian PM was at Davos was in 1997, when H. D. Deve Gowda visited.
Back then, India’s GDP was $400bn – it is now six times larger.
WEF’s theme in 1997 was ‘building the networked society’.
Today, it is not just a networked society. We are living in the world of big data, artificial intelligence and robots.
Back in 1997, Modi continues the eurozone didn’t exist, the Asian financial crisis wasn’t expected, and there was no sign that Brexit might happen.
Very few people had heard of Osama Bin Laden, and Harry Potter was also an unknown name.
Back then, Google didn’t exist, a web search for Amazon would bring up a river or jungle, and tweeting was done by birds, Modi declares.
Davos’s founder, Klaus Schwab, is introducing Narendra Modi now.
Globally we are moving to a multipolar, and multi-conceptual world, says Schwab.
In a seemingly fractured world, India presents a bright image of optimism, he adds. It also presents an investment opportunity (something that business leaders at Davos will be interested in)
There’s a buzz on the floor of the World Economic Forum as India’s prime minister Narendra Modi prepares to give the opening speech.
Modi is a big draw – the main hall is filling up fast with delegates keen to hear his words.
The speech should be streamed live here:
IHS’s Behravesh: Optimistic mood at Davos this year
Nariman Behravesh, chief economist at IHS Markit says the mood at Davos is very different this year than in 2017.
He tells us:
“It is a lot more optimistic and the optimism is broad based. Last year the Americans were upbeat but the Europeans were gloomy. A year ago the feeling was that politics was going to overwhelm economics but the opposite has happened. An improving economy may make populism less compelling”
Behravesh says that Donald Trump’s arrival in the White House a year ago led to an increase in business confidence. Corporate America was not keen on Barack Obama, he says.
“Business finally got a president it thought was business friendly and the reduction in regulation has been received well.”
Business also likes the package of tax cuts Trump finally pushed through Congress at the end of 2017 and which are weighted in favour of the well off and corporations.
“Our estimate is that the tax cuts will add 0.3 percentage points to growth in 2018, 2019 and 2020” Behravesh says.
There are two risks, he adds.
“The US and global economy may be running too hot. We think unemployment in the US will go as low as 3.5%, which is well below estimates of full employment. The question is how soon wage inflation and price inflation picks up.
If inflation surprises on the upside we could see the Federal Reserve and other central banks step on the brakes a lot harder. The stock market could take a hit and that would be bad.”
The other risk is that Trump starts making good on his protectionist threats.
“So far his bark has been worse then his bite, Behravesh says.
“But I think China is going to come under a lot of pressure from the US this year. The US is very unhappy about the China’s unwillingness to toe the line on intellectual property.”
Over in Germany, consumer confidence remains strong.
The ZEW institute economic sentiment index came in at 20.4 points in January, up from 17.4 the previous month and better than the forecasts of a reading of 17.8.
And this came amid uncertainty over the country’s political future and before the weekend’s agreement to take another step towards a coalition government.
The index remains slightly below the long-term average of 23.7 points, but it is still a positive outcome. Meanwhile the current conditions index rose from 89.3 points o 95.2. ZEW president professor Achim Wambach said:
The latest survey results reveal an optimistic outlook for the German economy in the first six months of 2018. With 95.2 out of 100 points, this is the most positive assessment of the current economic situation since the introduction of the survey in December 1991. Private consumption, which was the most important driver of economic growth in 2017, is likely to continue to stimulate growth in the coming six months according to the survey participants. The assessment of the global economic environment in Europe and the USA is also much more favourable than it was at the end of 2017.
European markets head higher
Despite the warnings from Davos, investors are pushing markets higher again this morning.
There is renewed confidence following the IMF raising its growth forecasts on Monday (albeit not for the UK), as well as relief that the US government shutdown has been resolved, at least for another couple of weeks.
Meanwhile there were no surprises from the Bank of Japan, which recently unnerved markets by reducing its monthly bond buying programme by $10bn. This time it left monetary policy unchanged.
So the FTSE 100 is up 0.31%, France’s Cac has climbed 0.11% and Germany’s Dax is 0.86% better and at new highs. Connor Campbell, financial analyst at Spreadex, said:
It’s taken a while for the DAX to join in with the all-time high hitting performances of the FTSE and the Dow Jones seen in 2018. However, with German coalition talks steadily moving along, a stop-gap deal to end the US government shutdown, and a subsequent pullback from the euro against the dollar, the bourse seems ready to bulge, shooting up by 130 points to tease a 13600 record peak.
In the US the Dow Jones Industrial Average, which jumped 142 points or 0.55% after the news of the impasse over the government shutdown had been resolved, is expected to open 84 points higher. Fiona Cincotta at City Index said:
The FTSE bounced on the open this morning, following a record session in the US overnight. The Dow surged over 140 points, whilst the S&P and the Nasdaq tagged on 0.8% and 1% respectively, all hitting unchartered territory. The rally took place after the Democrats and the Republicans passed the funding bill to end the US government shut down, 72 hours after it started.
UK budget deficit better than expected thanks to EU credit and VAT
Britain’s budget deficit came in much better than expected, giving a boost to chancellor Philip Hammond.
Thanks to an unusually large credit from the European Union and the strongest VAT receipts on record, public sector net borrowing fell from £8.25bn in November to £2.6bn last month. This was well below analyst forecasts of a figure of around £5bn.
There was a £1.2bn credit from the EU related to the region’s smaller than expected overall budget and improved economic performance.
With the UK economy holding up despite Brexit vote fears, VAT receipts rose by an annual 4.8% to a record £12.3bn.
Total public borrowing since last April is now £50bn, 12% less than in the same period in 2016 and leaving Hammond on track to meet his full year target of £49.9bn by the end of March.
More highlights from the Davos talk about financial risks:
Anne Richards: Technology crash could trigger next financial crisis
Anne Richards, chief executive of M&G Investments, fears that a devastating IT crash could cause the next financial crisis.
She tells an audience in Davos that policymakers risk ignoring the threat posed by investors’ reliance on technology, and the damage that could be caused if key systems go down.
Richards says she doesn’t buy the argument that a geopolitical crisis will bring the bull market crashing down. After all, markets handle geopolitical events all the time.
Instead, she fears that the “systemic risk” posed by new technology, and the cloud, could provoke an event that changes the “animal spirits” in the markets today.
We all have businesses that are absolutely reliant on a very small number of people who provide the pipes that we put our business though.
There’s a technology thing out there that we’re all somewhat blind to. It would be interesting to think how markets would react if none of us could trade for one, or two or three days”
David Rubenstein, co-executive chairman of The Carlyle Group, is also on the panel.
He’s more worried about political threats – predicting that if there is a geopolitical crisis, markets will be hurt and firms will pull back from capital investment.
Norway PM: We need a MeToo campaign to fight corruption
This year’s World Economic Forum is being led by an all-female group of co-chairs. They’re giving a press conference now:
Erna Solberg, prime minister of Norway, is speaking now – calling for a new crackdown on illegal finance and corruption.
Solberg says this is fuelling terrorism and security threats, and making it harder for emerging economies to develop their economies.
She suggests a MeToo campaign to fight corruption is needed:
We need to see who is taking money, who is bribing others, and show that this is unacceptable in all our societies.
Solberg’s other priority is gender equality — she warns that women are still treated unfairly in many economies.
The barriers to women’s participation [in the labour market] is still large in many societies – it doesn’t make sense economically or politically.
Can Emmanuel Macron really succeed where his predecessors failed, and reform the French economy?
Tidjane Thiam, the boss of Credit Suisse, says the answer is a resounding yes.
Speaking on a panel about ‘global markets in a fractured world’, Thaim says Macron’s programme of labour market reforms would have led to “certain electoral defeat” 20 years ago – not last year’s triumph against Marine Le Pen.
As Thiam puts it:
Macron only got elected because the French public, the French nation, decided to change. That’s how it works in a democracy.
Political scientist Ian Bremmer agrees that market sentiment and political reality have got out of whack….
The usual high security measures are in place in Davos this morning.
Armed guards prevent any non-delegates getting into WEF; even if you’re accredited, you have to negotiate airport-style security before you’re actually allowed in.
The snowdrifts have also provided a new reason to ban protests in Davos this week. Davos officials say “the extremely tight space situation due to the enormous amount of new snow” doesn’t leave any space for a rally….
UBS: Markets are too optimistic
UBS’s chairman, Axel Weber, has warned that sentiment in the market is “too buoyant”.
Speaking on CNBC this morning, Weber said there was a worrying gap between investor optimism and the actual state of the economy.
Investors are taking risks, but I don’t think they’re getting adequate compensation for those risks.
At some time, if it’s got to stop it’s got to stop.
He added that the markets could be in a more difficult position by the time of Davos 2019….
Justin Trudeau says he’ll be batting for middle-class Canadians in Davos this week.
His speech this afternoon is also expected to cover corporate responsibility and the role of women in a changing world.
Davos regular Jamie Drummond says he may not come back, unless this year’s meeting makes real progress towards tackling inequality.
Drummond is the executive director of the development group One, which he co-founded with the rock star Bono.
In a blog, Drummond said he had been stung by the accusation that he had spent so long hobnobbing with the 1% that he was becoming a “Davos man.”
“A feminist activist, and someone I deeply respect, recently commented that I was at risk of becoming that awful thing: ‘a Davos Man’.
Definitions vary but this phrase generally refers to a male who goes to places like Davos and inhabits an elite, unaccountable bubble while determining the fates of those without access to it.
The comment cut deep. It forced me to question any complicity I might have in a system I have tried so hard to change.
So I’m putting my inner Davos Man on notice, and making this commitment: this will be my last World Economic Forum unless this one helps deliver on three crucial areas in the fight against extreme poverty and gender inequality.
Those areas are the global education emergency; women’s economic empowerment; and ambitious financing to back Africa’s huge youth boom.”
Union chief: Davos elite have squandered their opportunity
Philip Jennings, head of the global union UNI, has been one of the strongest voices for labour at Davos for many a year but 2018 will be his last meeting before retiring in the summer.
Speaking to the Guardian, Jennings said the current business model built on the principle of shareholder value was “not fit for purpose” and that the opportunity provided by the financial crisis of a decade ago to build a more inclusive economy has been squandered.
“Donald Trump is Mr Shareholder value”, Jennings said, adding:
“He is exhibit A of the fractured world”.
Jennings said a test for the business leaders in Davos talking about the problems of global inequality was whether they recognised trade unions and collective bargaining at their firms. And he predicted a backlash against three of the new titans of the global economy: Amazon, Facebook and Google.
“These companies were once seen as angelic, seen as our saviours”, Jennings said.
“But the big three has such market influence and power that the world has to wake up and start thinking about the need for anti-trust action. One of the fractures in the global economy is the power of the new monopolies and the danger it represents”.
Davos faces avalanche risks
The huge snowfalls in Davos recently mean the ski resort is now facing a Level 5 avalanche risk – the highest rating.
Some homes have reportedly been evacuated, due to fears that the snow is too unstable.
There has already been big delays getting up the mountain (someone I met last night spent six hours crawling here from Zurich), leading to plenty of chuntering among delegates.
Davos has had an early wake-up call.
PR chief Richard Edelman’s annual trust index shows that Americans have become much less trusting of politicians, business chiefs and the media over the last year.
No country saw steeper declines than the United States, with a 37-point aggregate drop in trust across all institutions. At the opposite end of the spectrum, China experienced a 27-point gain, more than any other country.
The survey shows that people are more worried about the rise of disinformation — and finding it hard to separate truth from ‘fake news’
So, genuine voices of expertise are now regaining credibility.
Journalists have risen 12 points, and CEOs recorded a seven-percentage point gain, since 2017.
The agenda: Modi and Trudeau speak to WEF
Good morning from Davos!
World leaders, business chiefs, trade unions, the heads of charities and NGOs, celebrities and the media are gathering in this small ski resort to discuss the state of the world, and how to improve it.
This year’s WEF is taking place amid the biggest snowfalls in many years. This is already leading to inequality on the streets of Davos: workers are furiously shovelling drifts aside and driving snowploughs as the global elite queue bumper-to-bumper to reach the WEF congress centre and the exclusive hotels and converted shops where events are taking place.
Last night, Pope Francis set the mood by issuing a stern warning not to remain silent in the face of economic inequality and injustice.
In a message read to the Davos attendees, the Pope warned not to allow people to be used as cogs in a machine and then chucked aside.
“New actors are emerging, as well as new economic competition and regional trade agreements.
Even the most recent technologies are transforming economic models and the globalized world itself, which, conditioned by private interests and an ambition for profit at all costs, seem to favour further fragmentation and individualism, rather than to facilitate approaches that are more inclusive,”
Even Sir Elton John weighed in, describing inequality in the world today as ‘disgraceful’ (as we covered in last night’s blog).
Two world leaders will address Davos today, with different priorities.
Narendra Modi, who gives the opening speech, is the first Indian prime minister to visit WEF in 20 years. He’s on a big push to attract more business to his country, billing India as a key growth engine for the global economy. India have sent a large delegation to Davos this year – many of whom found themselves caught up in the transport chaos yesterday.
Canada’s Justin Trudeau is expected to pitch at business leaders. But his speech, this afternoon, may also cover weightier issues such as women’s empowerment.
There’s loads of other stuff coming up too, including debates on the financial markets, capitalism, and sexual harassment.
- 9.30am Davos (8.30am GMT): Opening press conference by the Davos co-chairs
- 9.45am Davos (8.45am GMT): Debate: Are we heading for a new financial crisis?
- 11.15am Davos (10.15am GMT): Indian PM Narendra Modi gives the opening plenary speech
- 2pm Davos (1pm GMT): Actor Cate Blanchett speaks about the global refugee crisis
- 3pm Davos (2pm GMT): Bollywood actor Shah Rukh Khan talks about women’s empowerment in India.
- 3.30pm Davos (2.30pm GMT): Debate on gender, power and sexual harassment
- 5pm Davos (4pm GMT): Debate on capitalism:
- 5.30pm Davos (4.30pm GMT): Canadian PM Justin Trudeau gives a special address
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