Economists and consumers join in eurozone optimism

Today’s top stories

• UK prime minister Rishi Sunak ordered his ethics adviser to investigate the tax affairs of Nadhim Zahawi, the Conservative party chair. The government also faces a crisis over allegations BBC chair Richard Sharp helped former PM Boris Johnson secure a private loan.

• Brazil and Argentina, South America’s two biggest economies, will announce the start of work on a common currency this week and invite other Latin American nations to join. The “sur” (south) as Brazil would like it to be known, could boost regional trade and reduce reliance on the US dollar, and would initially run in parallel with the Brazilian real and Argentine peso.

• Music streamer Spotify became the latest tech company to announce job cuts (as well as a management shake-up) to reverse its pandemic-era hiring spree.

For up-to-the-minute news updates, visit our live blog

Good evening.

After a week of positive noises from Davos about global recovery, a closely watched survey of economists has suggested the eurozone will avoid recession this year, adding to signs in financial markets that Europe is bouncing back.

The Consensus Economics report says the bloc will grow 0.1 per cent in 2023, thanks to falling energy prices, government support and the boost to the global economy from the earlier than anticipated reopening of China. The easing of supply chain disruptions and a strong labour market have also helped, while fears of gas rationing have been greatly reduced. JPMorgan has gone even further, raising its 2023 eurozone GDP forecast to 0.5 per cent.

Optimism is also slowly spreading among consumers. New EU confidence data today showed sentiment in January up by 1.1 percentage points in the euro area and 1.4 points in the wider EU, hitting the highest level in nearly a year, although well below long-term averages.

The euro has been gaining ground against the dollar as the outlook improves, rising about 13 per cent over the past three and a half months, aided by the greenback’s retreat.

Fund managers are starting to turn from China to Europe in their hunt for growth. “Europe remains an attractive market . . . it is the largest institutional and wholesale market outside of the US. It also has a strong responsible investment focus, supported by the regulatory regime,” said one fund chief.

Investors are also looking forward to the EU’s plans for “unprecedented” investments in clean energy technologies as Brussels tries to assuage fears that Joe Biden’s huge green subsidies might tempt European businesses across the Atlantic.

At the same time, policymakers — as expressed in the FT by the Bundesbank’s Sabine Mauderer — are confident that the eurozone can beat inflation while keeping markets stable.

Some economists in the Consensus survey still expect a recession, albeit not as deep as previously thought, while new data today showed the cost of supporting consumers and businesses on energy bills was a sharp widening in the eurozone budget deficit.

Need to know: UK and Europe economy

The UK needs a new green strategy to prevent investment haemorrhaging to the US as a result of president Joe Biden’s package of subsidies, according to the head of the CBI employers’ group.

CBI chief Tony Danker also hit out at government’s plans to cull EU laws, which he said would create “huge uncertainty for UK firms”. The parlous state of local government finances in England is laid bare in our new Big Read: the budget cuts that are threatening ‘levelling up’.

In better UK economic news, a Deloitte survey showed UK consumer confidence edging up for the first time in 15 months.

The National Grid will start paying UK households and businesses to use less power during the peak hour for demand between 5pm to 6pm this evening to reduce the strain on the grid. Regulator Ofgem is to investigate suppliers which forcibly switch vulnerable customers to prepayment meters.

On February 5 the EU will be cut off from its main provider of diesel when new sanctions on Russian energy take effect, sparking more turmoil in global oil markets. Brussels is looking at using confiscated Russian assets for Ukraine’s reconstruction.

Need to know: Global economy

Covid cases in China are surging as the country celebrates the lunar new year, while drug shortfalls that hit Beijing and Shanghai last month are now affecting rural areas.

The €1.38tn luxury goods market is in rude health as the ultra-rich keep on spending, according to a new report from Bain & Company. The data also highlight that it is the US, rather than China, that is fuelling the boom, and that key drivers are Gen Z and Gen Y, rather than older consumers.

Climate and sustainability issues crept into a surprising number of debates at the World Economic Forum in Davos. Our Moral Money newsletter (for premium subscribers) looks back at an eventful week.

Can you predict the year ahead better than superforecasters? Try our interactive quiz.

Need to know: business

Banks are gearing up for the biggest round of job cuts since the global financial crisis, following a collapse in investment banking revenues. “The job cuts that are coming are going to be super brutal,” said one headhunter. “It’s a reset because they over-hired over the past two to three years.”

Microsoft confirmed a multibillion-dollar investment in OpenAI, one of the world’s leading artificial intelligence start-ups and developer behind chatbot ChatGPT and image generator DALL-E.

Ken Griffin’s Citadel made $16bn profit for investors last year — the biggest dollar gain by a hedge fund in history — fuelled by the sell-off in government bonds.

Shares in Italy’s Juventus plunged after football authorities docked 15 points from the club following alleged false accounting practices. The deduction makes it unlikely the team will qualify to take part in lucrative European competitions such as the Champions League.

Join LaLiga President Javier Tebas, AC Milan owner Gerry Cardinale, super agent Rafaela Pimenta and more at the Business of Football Summit in London on March 1-2 to discuss the new wave of investment flowing into the game. Scoreboard newsletter subscribers can register here for their complimentary digital pass or discounted in-person ticket. Premium subscribers can sign up to receive our weekly newsletter on the business of sport here.

The World of Work

Hating your job for a long period can only harm your mental and physical health. Here’s some guidance on what to do should you find yourself stuck.

Burnout might be one reason. Here’s how artificial intelligence is being deployed in new tools for employee wellbeing.

Work and Careers editor Isabel Berwick shares four great podcasts about women and the world of work.

Pandemics and other disasters such as the Great Fire of London have long fuelled urban change. As cities struggle to revive, some argue it’s time to recast central business districts as central social districts, writes columnist Pilita Clark.

Some good news

To anyone who has lived in New York, the thought of dolphins returning to the Bronx river may seem a little far-fetched. Think again!

It’s true—dolphins were spotted in the Bronx River this week! This is great news—it shows that the decades-long effort to restore the river as a healthy habitat is working. We believe these dolphins naturally found their way to the river in search of fish.
(Video: Nick Banco) pic.twitter.com/40ZNgBjJZs

— NYC Parks (@NYCParks) January 19, 2023