Global crises threaten economic ‘perfect storm’: Davos update

‘We’ve had big crises in the past but coming from so many different dimensions this may be quite unique,’ Standard Chartered Plc Chairman Jose Vinals said.
Bill Gates in Davos, Switzerland, on May 24. Image: Bloomberg

The current combination of threats to the global economy represents “a bit of a perfect storm,” Standard Chartered Plc Chairman Jose Vinals said, adding to a series of dire warnings about the outlook from the World Economic Forum in Davos.

“We’ve had big crises in the past but coming from so many different dimensions this may be quite unique,” he said in an interview with Bloomberg TV. US Commerce Secretary Gina Raimondo said more needs to be done to control inflation, adding that lowering tariffs could be an option and that the Federal Reserve may have to take further action.

Ukraine Foreign Minister Dmytro Kuleba, who is speaking at several events at the gathering in the Swiss Alps on Wednesday, said Kyiv will not trade territory for peace and the goal of the international community should be a complete victory over Russia. The war in Ukraine has overshadowed the first in-person Davos meeting in two years. Surging inflation, food shortages, climate change and migration risks have also been high on the agenda.

Key Developments

  • Climate Change Is Easiest to Talk About at Davos: Green Insight
  • Europe Should “Flex Muscles” on World Stage, Lagarde Says
  • Cyber Attack on Genome Projects is the new Nuclear Threat
  • Klitschko Boxing Heroes Warn That Returning to Kyiv Is Dangerous
  • Pfizer Slashes Drug Prices for Poorest Nations, Expanding Access

All times CET:

ECB’s Knot Supports Lagarde’s Policy Plan (12:20 p.m.)

European Central Bank Governing Council member Klaas Knot said he endorses President Christine Lagarde’s new policy timetable, which foresees an exit from negative rates by the end of the third quarter.

“I’m fully on board, I fully support everything that is in the blog,” the Dutch central banker said at panel discussion. “It nicely charts the policy course.”

The comments by Knot, a hawkish voice on the Governing Council, contrast with his Austrian counterpart Robert Holzmann, who on Tuesday called for a half-point hike in July. That’s double the magnitude implied by Lagarde. The ECB’s deposit rate has been negative since 2014 and currently stands at -0.5%.

Genome Manipulation Is New Nuclear Threat (12 p.m.)

Bioterrorists using cyber attacks to target national genome projects pose a bigger threat than a nuclear strike, the global head of healthcare at KPMG LLP has warned. Were malicious hackers able to infiltrate gene editing experiments and manipulate a virus, the consequences would be worse than the Covid-19 pandemic, KPMG International’s Anna van Pouke said in an interview.

“Imagine that there is someone who finds out how to manipulate a genome,” she said. “We had a mutated virus. We don’t know where it mutated, whether it was in a market or a research lab in China, but you know what it did to the world,” she said.

“Just imagine if we have several cases even more severe than that because of genome manipulation in medication, coming from a lab,” van Pouke said. “If someone hacks the genome project with malicious intentions — a nuclear bomb is nothing compared to that. We need to have cyber security working very hard.”

Greece’s Mitsotakis Shrugs Off Erdogan Jab (12 p.m.)

Greek Prime Minister Kyriakos Mitsotakis brushed off a statement by Turkey’s President Recep Tayyip Erdogan, saying there’s no one named Mitsotakis for him anymore. “We’re neighbors, we always need to talk and we always need to keep channels of communication open,” he said in a one-on-one discussion.

Lagarde: Europe Should ‘Flex Muscles’ (11:45 a.m.)

The war in Ukraine has shown Europe doesn’t understand how powerful it could be on the world stage and the bloc should “flex its muscles” more than it does, ECB’s Lagarde said.

World Economic Forum

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‘When its muscles are flexed, Europe is an incredible force.’ – @Lagarde. Watch the full session here: weforum.org/events/world-e… @ecb #wef22

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She said the EU’s “monumental market” means it can set the conditions of trade and its competition laws mean it can block mergers around the world. She also noted potential strength as a unified purchasing group and huge pension fund resources that could be better deployed.

Siemens Energy Sees Grids Critical to Green Transition (11:35 a.m.)

Germany’s transition away from cheap Russian gas should take about three to five years with power infrastructure essential to speed up the process, Siemens Energy AG Chairman Joe Kaeser told Bloomberg TV. “If it takes eight years to build a grid, then you have a problem,” he said. “Construction of grids is the critical component to connect renewable energy supply.”

Wind-turbine suppliers such as Siemens Gamesa are currently stuck with a negative profit pool after the industry was caught out by massively rising input costs, Kaeser added. Siemens Energy over the weekend offered to buy the remaining shares in the loss-making unit for $4.3 billion.

Microsoft, Salesforce Add $300 Million for Carbon Removal (11:15 a.m.)

Microsoft Corp. and Salesforce Inc. are committing $200 million and $100 million, respectively, toward buying offsets using carbon-removal technologies before 2030. That adds to $2 billion committed to the sector last month, including investments from Stripe Inc. and Alphabet Inc.

The US government and WEF announced the expansion of First Movers Coalition, a buyers’ club that is supporting technologies to cut emissions from industry. It now boasts 50 global companies and eight countries partners, including India, Japan and the UK. The group is setting out advanced market commitments for green technologies in sectors such as aviation, shipping, trucking, aluminum, steel, cement, chemicals and carbon removal.

Green Shift Needs to Address Inequality, Spain Says (10:30 a.m.)

The climate transition has to address social aspects and inequality in order to ensure popular support, Spanish Minister for the Environmental Transition Teresa Ribera said. “We need to ensure that people benefit from the very first day from the changes,” she said. “Otherwise it’s going to be hard to have the support of the people.”

Ribera warned about a gap of understanding among those calling for climate action and implementing changes, and the workers that will be affected by these changes. “There has been no preparation to create the space for building consensus on how to change.”

EU Must Be More ‘Proactive’: Irish PM (11 a.m.)

The European Union needs to be more proactive in “promoting and supporting” countries that share its values and Albania and North Macedonia should be members of the bloc, according to Irish Prime Minister Micheal Martin.

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.@MichealMartinTD discusses the heavy impact of Brexit. Watch the full session here: weforum.org/events/world-e… @merrionstreet #wef22

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Speaking on the same panel, Dutch Prime Minister Mark Rutte urged the EU to become a genuine “player” on the global stage and called for a short-term boost in military spending. “The problem we have is that the EU has for too long been a playing field instead of the player,” Rutte said. “I believe we should now step up our game.”

Raimondo Says Tariffs Can Combat Inflation (10:55 a.m.)

Raimondo said the administration is “looking at” reducing tariffs to help combat America’s “untenable” inflation rate. “Tariffs are obviously a tool in the toolbox that any president has to bring down costs,” Raimondo said in a Q&A. “It’s something we are analyzing.”

The US Federal Reserve has the most powerful tools to deal with inflation and “may need to take more action,” she said. “I’m glad I’m not Jay Powell. It’s a very hard job that he has to try to land the plane on inflation, which is is necessary, without putting the brakes on the economy.”

Accenture Sees Training Countering Great Resignation (10:50 a.m.)

The boss of Accenture says the firm is spending $1 billion on training staff in the increasingly competitive market for white-collar workers.

“That’s great for our current employees, but it’s really attractive if you’re going to join Accenture,” Julie Sweet said in an interview with Bloomberg TV. The firm has 700,000 employees, having added 200,000 in the past two years as businesses look to spend more on IT. “Wage inflation is real and paying market is absolutely critical. However, in a tight labor market it’s not all about wages,” she said.

Standard Chartered Chairman Sees ‘Perfect Storm’ (10:45 a.m.)

“What I worry about is the accumulation of different issues and crises,” Vinals told Bloomberg TV, citing challenges including stagflation, food and energy crises, “fragmentation in the global order of trade and capital flows,” and “cracks in global governance.”

“We’ve had big crises in the past but coming from so many different dimensions this may be quite unique,” he said.

HSBC Touts ‘Massive’ Climate Opportunities (10:40 a.m.)

The head of sustainability at HSBC Holdings Plc said the bank is repositioning itself for the “massive value creation” that’s set to come as the global economy decarbonizes.

Celine Herweijer, chief sustainability officer at HSBC in London, said achieving net-zero carbon emissions is “the focus of pretty much every single board meeting since I joined a year ago, every single executive meeting. It’s a huge transformation job across the bank,” she said during a panel.

Water Needs a Price to Be Valued, Coca-Cola CEO Says (10:20 a.m.)

Water needs to be attached to the climate discussion and be given value, Coca-Cola Co. CEO James Quincey said in a panel. One of the great barriers is that some 70% of the water is used by small-scale agricultural farmers and imposing a price on them would be very economically damaging, he said.

“But unless water has a value, it’s going to be difficult,” Quincey said. “If we could value water in the same way we could value carbon, then the market will be the mechanism to drive the results.”

Gates: Risk of War Pulling Focus from Health (9:50 a.m. CET)

Russia’s war in Ukraine may pull the world’s focus away from key global health issues, exacerbating challenges that linger due to the Covid-19 pandemic, according to Bill Gates, co-chair of the Bill and Melinda Gates Foundation.

“The Ukrainian situation is stretching the world’s resources,” Gates said at a news conference, adding that the pandemic had already pressured budgets, with malaria deaths rising and routine vaccination rates down. “We see that both in terms of resources for health, resources for food, availability of fertilizer. The tragedy of the war goes far beyond the battlefield.”

Siemens Sees Green Investment Opportunities (9:40 a.m.)

Green is the best investment opportunity now, Siemens AG Chairman Jim Hagemann Snabe said on a panel on globalization’s role in decarbonization. Following technological advances over the past two decades — such as generating cheaper electricity with solar — a dramatic boost in investments in energy and food systems as well as transportation needs to happen, he said.

“We need a healthy inflation rate of 2%, then we need to shift investments to green,” Snabe said. “I am optimistic. We have the technologies to shift investments to decarbonization. It’s a leadership moment.” Putting a price on CO2 is the sharpest knife to decarbonize, he said, while high prices for coal and oil are helping too.

Looming Oil Boom ‘Will Wreck the Amazon’ (9:30 a.m.)

Ecuador is about to experience an expansion in oil production that will further damage the Amazon, according to environmental and human rights activist Helena Gualinga.

“Legal and illegal mining have expanded incredibly in Ecuador and there’s an oil expansion coming,” Gualinga told a panel. “We don’t know exactly where that oil will be coming from, but we know the Amazon will be affected.”

Improper drilling for oil means the Ecuadorian Amazon is currently seeing two to five spills per week, she said. Indigenous people are disproportionately affected by the pollution, with children suffering rashes on their bodies as authorities and companies fail to alert communities.

Drug Companies Lobby for Biotech (9:30 a.m.)

Europe needs to do better to promote biotech development, according to pharmaceutical executives. Regulators in Europe “should rather take an opportunity-focused stance. In North America, this is much better,” Bayer AG CEO Werner Baumann said at a panel. Governments need “to play a role and have an open mindset to bring forward biotech as great source of health for the planet,” Royal DSM NV CEO Dimitri de Vreeze said at the same panel.

Baumann pointed to Bayer’s BlueRock unit that is potentially developing a first curative treatment for Parkinson with stem-cell therapy and has already enrolled a number of patients in early-stage trials. “About 1 out of 100 stage one projects is successful” and that type of research need to be incentivized properly, he said.

IMF’s Gopinath See Uneven Recoveries (9:30 a.m.)

Advanced economies will recover more swiftly from the impact of the coronavirus pandemic than emerging and developing countries, according to the IMF’s Gopinath.

“We have the advanced economies that based on our projections will basically get back to where they would have been in the absence of pandemic in 2024, so literally no output losses,” Gopinath said on a Bloomberg panel. “But we have emerging and developing economies that will be around 5% below where they would have been in the absence of the pandemic.”

Nasdaq CEO Expects IPO Market to Pick Up in 2H (9:15 a.m.)

Nasdaq Inc. Chief Executive Officer Adena Friedman says the moribund IPO market may bounce back in the second half of the year if inflation is tamed by the Federal Reserve. She said Nasdaq has a pipeline of about 270 companies that have shown interest in listing at some point.

War Clouds Ownership of Europe’s Biggest Nuclear Plant (9:10 a.m.)

The head of the world’s nuclear watchdog said that Russian demands that Ukraine begin paying for electricity generated at an occupied atomic plant is adding new layers of complexity to the conflict. Russia wrested control over the Zaporizhzhya Nuclear Power Plant — Europe’s biggest such facility — in the early days of the war and has maintained control ever since.

“The plant is in Russian hands but is operated by Ukrainian people and is feeding the Ukrainian grid,” International Atomic Energy Agency Director General Rafael Mariano Grossi told Bloomberg TV. “That brings a lot of problems that are not technical but political in nature.”

While the Kremlin has yet to officially confirm its intentions, comments last week by Russian Deputy Prime Minister Marat Khusnullin suggested to some that the Kremlin may be preparing to hold onto the plant for the long term. IAEA monitors continue trying to gain access to Zaporizhzhya, in order to account for the 30,000 kilograms of plutonium and 40,000 kilograms of enriched uranium last reported at the site.

EU Oil Embargo Seen in ‘Coming Week’ (9 a.m.)

The European Union is pushing to overcome Hungary’s resistance to a ban on Russian oil imports, with Economy Commissioner Paolo Gentiloni hopeful of a deal within a week.

“We are all discussing that Hungary is not supporting the oil embargo, and it’s true but we are working on this,” Gentiloni told Bloomberg TV. Asked if the EU could move to halt Russian oil imports without Hungary, he added: “I don’t like to discuss Plan B when we are working on Plan A.”

Pfizer Slashes Drug Prices for Poorest Nations (9 a.m.)

Pfizer Inc. plans to sell its entire portfolio of brand-name drugs at cost in as many as 45 lower-income countries, one of the most comprehensive and ambitious drug-access programs ever announced by a large pharmaceutical manufacturer.

The initiative will start in five African countries with 23 drugs for cancer, rare illnesses, inflammatory conditions and infectious diseases. It will eventually include all of the New York-based company’s future therapies or vaccines. The drugs will be sold at the cost of manufacturing, Pfizer said, typically a fraction of their price in U.S. or European markets. Chief Executive Albert Bourla plans to speak about the drugmaker’s effort at Davos.

Ukraine Seeks Return of All Territories (8:55 a.m.)

“Ukraine will fight until it returns all of its territories,” President Volodymyr Zelenskiy said at a breakfast organized by the Victor Pinchuk Foundation. The war may turn into a diplomatic dispute after Russia withdraws its forces where they were before the full-scale invasion on Feb. 24. Ukraine won’t make concessions, he said, adding that talks with Russia have stalled.

Russian President Vladimir Putin doesn’t “realize to the very end what is happening, he lives in his informational world,” Zelenskiy said via video link.

Ukraine Says West Shouldn’t Push Partial Victory (8:50 a.m.)

Ukraine’s Kuleba said the transatlantic alliance was “reinvigorated” only because of his nation’s efforts to withstand the Russian invasion and should in turn fully back Ukraine’s desire to achieve a complete victory. The government in Kyiv has previously expressed concern that some allies would prefer it agree to cede some territory in order to bring the war to a quick end.

“We need the West primarily to finally accept the idea that the ultimate goal of this war should be the victory of Ukraine,” Kuleba said at the Victor Pinchuk Foundation event.

“Even some very good friends of Ukraine who help us really a lot they are are still hesitant,” he said. “What is the end goal of their support for Ukraine? Is it not to allow Russia to win? Is it not to allow Ukraine to fail? No, the goal should be very simple and clear — Ukraine must win. Full stop. Period,” Kuleba said.

Inflation Is Top Concern for Ontario Pension Board (8:45 a.m.)

Inflation is the biggest concern for the Ontario Teachers’ Pension Plan Board, according to Chief Executive Officer Jo Taylor.

The board, which manages the retirement savings of about 330,000 teachers, has increased its holdings of commodities and inflation-sensitive assets to deal with that challenge, Taylor said in an interview with Bloomberg Television. It has also reduced its holdings of publicly traded equities, he said.

Ukraine Doesn’t See NATO Securing Grain Passage (8:15 a.m.)

Ukraine’s Kuleba said he saw no desire from NATO now to help secure safe passage of grains through the Black Sea, an effort seen as crucial to counter concerns about food shortages and rising prices.

“If NATO did not close the Ukrainian skies in the most tragic moments of the war, why should they dare to close the Ukrainian sea to allow the free passage of vessels with Ukrainian agricultural products,” he said. “I would wholeheartedly welcome the decision, but I just don’t see the stamina and the bravery to take all the risks associated with this operation.”

The interruption of the agricultural cycle of Ukraine risks a multi-year global food crisis, Kuleba told a breakfast organized by the Victor Pinchuk Foundation, “but in the end, the problem is that you cannot trust Russia even if they sign papers guaranteeing safe passage.”

Randstad Cites Upward Pressure in Wages (8:10 a.m.)

There’s upward pressure in wages in all markets and more so in the US than in Europe, said Randstad NA Chief Executive Officer Sander van’t Noordende in an interview with Bloomberg TV. Van’t Noordende said wage inflation is reaching 5% in US and is around 3% in Europe.

Now that “everybody knows that virtual working works” more people are looking for flexibility and to be able to work from home some of the time, he said. “Spending time together is still important, but it depends on what team you’re part of and what the moment is to be together.”

The head of the employment services provider said 70% of Millennials are looking for a new job as opposed to 40% of older generations.

Inflation May Be Here for Years, Vestas CEO Says (8 a.m.)

Inflationary pressures aren’t going to ease any time soon, Vestas Wind Systems A/S CEO Henrik Andersen said in an interview with Bloomberg TV.

“I don’t see it easing,” according to Andersen, who runs the world’s largest manufacturer of wind turbines. “We have to now get used to that this could continue not only for quarters to come but also for years to come.” Higher costs for materials and transport have erased profits for the wind-turbine industry just as it’s needed to ramp up to achieve global climate goals. Andersen said his company will return to making money once supply chain issues have been normalized.

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