Davos Live: Schwarzman Sees Rate Cuts Spurring ‘Animal Spirits’

(Bloomberg) -- Blackstone’s Steve Schwarzman sees “animal spirits” returning to the finance sector and bankers including Morgan Stanley’s Ted Pick anticipate lower interest rates unlocking deals, the latest upbeat signals from the business elite at the World Economic Forum.

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Financiers appear to be shrugging off wars and political volatility at the gathering in Davos. Bank of America CEO Brian Moynihan said he expects the Fed to cut rates eight times over the next two years and Carlyle Group’s David Rubenstein declared that “the recession fears are gone.”

Bloomberg’s team of reporters is bringing you the highlights of what’s happening on the ground. You can sign up for our daily newsletter here. And if you’re in Davos, don’t forget to drop by Bloomberg House. Register here.

(Times CET)

Talk of the Town

Tech Push (5:45 p.m.)

A Labour government will work with technology firms that want to list their shares in London, the party’s business spokesman told us, as the UK’s main opposition seeks to burnish its business credentials ahead of an election expected in the fall.

Jonathan Reynolds said he had spoken to several tech companies wishing to list in Britain and was open to introducing incentives, citing measures deployed in France by President Emmanuel Macron.

What Crisis? (5:30 p.m.)

German Finance Minister Christian Lindner dismissed a suggestion that the government in Berlin is in crisis and said there’s no danger the unwieldy three-party coalition will split apart just over two years into its four-year term.

The ruling alliance under Chancellor Olaf Scholz has managed the budget turmoil — triggered by a November court ruling that deprived the government of a critical funding tool — and is working hard to lift Europe’s biggest economy out of its current slump, Lindner told Bloomberg TV.

“Of course growth is not satisfying, but others thought there would be a huge economic crisis in Germany and there hasn’t been anything like this.” he said. “Frankly the process of decision making could be more silent, could be faster, but in the end they are good decisions.”

Market Harmony (5 p.m.)

The boss of Germany’s biggest bank said Europe needs to push ahead with a project that has dragged on for decades to create a harmonized European capital market.

Europe needs “the Capital Markets Union not only as the financing port for traditional industries, but actually as our chance to attract new industries like the tech industry,” Deutsche Bank CEO Christian Sewing said on a panel moderated by Bloomberg’s Stephanie Flanders.

Sewing, who also heads the European banking lobby EBF, has long been urging politicians to complete the project as a way to deepen the pool of potential investors across national borders.

Buoyant Bankers (4:30 p.m.)

It’s been a steady stream of positive messaging from finance executives. Goldman Sachs’ Richard Gnodde talked expansion, Andrea Orcel said he’s certain UniCredit will hit profitability goals and Carlyle’s Rubenstein — a Bloomberg contributor — predicted an M&A rebound.

Morgan Stanley’s Pick told Bloomberg TV that he expects the Federal Reserve to be “prudent” and “thoughtful” when it comes to rate cuts, adding “that kind of predictability is very good for the core investment banking business.”

Read more about the financial mood here:

• Morgan Stanley and Carlyle Add to Forecasts of M&A Rebound

• UniCredit CEO Certain of Hitting Targets Amid Global Turmoil

• Barclays CEO Defends Investment Bankers Ahead of Investor Day

Uranium Stockpiles (10:45 a.m.)

Back in the world of politics, it’s much less positive. The head of the International Atomic Energy Agency said Iran has continued accelerating its accumulation of uranium enriched close to weapons grade and now has enough of the material to produce several nuclear warheads.

While the IAEA hasn’t detected any uranium diverted for weapons, the Persian Gulf nation’s stonewalling of investigators raises suspicions, Rafael Mariano Grossi told Bloomberg TV. “It is a very frustrating cycle,” he said. “We don’t understand why they don’t provide the necessary transparency.”

Red Sea Turmoil (10:15 a.m.)

The cost of insuring ships sailing through the Red Sea has gone up about tenfold, Marsh & McLennan CEO John Doyle said in a Bloomberg TV interview.

Some shipowners aren’t willing to put their crew and their vessels through the vital waterway, he said. Doyle described the shipping sector globally as a major challenge at the moment for the clients that Marsh advises.

Long Haul (9 a.m.)

Speaking at the Ukraine breakfast discussion Thursday morning, Polish President Andrzej Duda warned Europe to be prepared to support Ukraine for a long fight against Russia, and that help should include confiscating Russian assets.

Ukrainian Foreign Minister Dmytro Kuleba said the country’s leaders were “encouraged and reassured” after meetings in Davos. He added that if frozen assets in the UK, Luxembourg and Switzerland were seized, there would be enough money to fix all of Ukraine’s damaged infrastructure. British Foreign Secretary David Cameron reiterated that UK is with Ukraine for as long as it takes and said he hopes EU and US will unlock funds soon.

‘Grow Up’ Democrats (9 a.m.)

Dimon’s comments in a CNBC interview praising aspects of Donald Trump’s record in office will sting in the corridors of power in Washington and might reflect Wall Street’s openness to Trump 2.0.

“Just take a step back, be honest,” Dimon said. “He’s kind of right about NATO, kind of right about immigration, he grew the economy quite well.”

“He wasn’t wrong about some of these critical issues and that’s why they’re voting for him,” he added, calling for more respect for Trump voters and urging people to think more about why citizens support him. “I think this negative talk about MAGA is going to hurt Biden’s election campaign,” Dimon said.

Israeli Appeal

Israeli President Isaac Herzog called on the world to “work endlessly” to free the remaining 136 Israeli and foreign hostages held by Hamas in Gaza. He showed the audience a picture of the youngest captive, Kfir Bibas, who was born exactly one year ago on Thursday. Kfir was taken by Hamas during the Oct. 7 attack on Israel, together with his parents and brother, the Israeli president said.

“We know that they are going through hell, and we don’t know their whereabouts,” he said. Herzog traveled to Davos with family members of Israeli hostages in an effort to step up pressure for their release. His appearance there was one of a series of Davos events drawing greater attention to Israeli and Jewish concerns.

In Case You Missed It

• ECB officials who until recently had been wary of even discussing interest-rate cuts now look increasingly open to commencing them in June.

• French President Emmanuel Macron backed the issuance of joint European debt to pay for priorities including defense and technology in order to ensure Europe remains sovereign amid increasing competition with China and the US.

• There’s a repeated refrain from bankers in Davos this week, including the likes of JPMorgan’s Daniel Pinto and Standard Chartered’s Bill Winters: rein in your rate cut expectations.

• Too much debt — and the danger that global economies could take on even more of it — is troubling Davos participants confronting dangers posed by the year ahead.

Davos After Dark

A long queue of attendees waited for a spot at a McKinsey nightcap at the Ameron Hotel. Partners Sven Smit and Liz Hilton Segel enjoyed cocktails and food with global execs as a lively band dressed in silver and neon entertained the crowd, which included Unilever boss Hein Schumacher.

The festivities aren’t all fun and games for some. Samir Mastaki and his partner Irina Biss waited two years to get a room at the Belvedere Hotel to host a party featuring minestrone and other delicacies in a bid to launch a business idea selling Italy-themed networking.

It’s a big gamble. A room at the Belvedere — one of the top locations — can cost about 100,000 Swiss francs ($115,480) for just a few hours. And there’s competition everywhere.

The couple attracted a relatively small crowd compared to a throbbing adjacent event hosted by tech company Hedera. While the entrepreneurs are hoping for big-name sponsors next year, the event on Wednesday only got minor supporters and guests were initially asked for about 5,000 francs for a seat. Many snuck in for free.

AI Buzz

High Stakes (2 p.m.)

Sam Altman said that his dramatic and quickly-reversed firing from OpenAI was less nerve-wracking than the task of making artificial intelligence as capable as humans.

Altman’s ouster by the board in November was “probably not the most stressful experience we ever face,” he said during a panel about technology in a turbulent world. The episode had taught the company to avoid letting “not-urgent problems” linger, the ChatGPT-maker’s chief executive officer and co-founder added.

As the world gets closer to human-equivalent AI, “the stakes, the stress, the level of tension — that’s all going to go up,” Altman said.

Accenture Hubs (8:30 a.m.)

UK Chancellor of the Exchequer Jeremy Hunt is planning to meet with executives from technology giants like Amazon.com Inc. and Alphabet Inc. in Davos later today as part of a push to spur investment in Britain’s tech sector. It sounds like Accenture’s Julie Sweet is already on board.

“The UK is an absolutely critical market for us” and “we see the UK as being a very important place for us to invest over the long term,” Sweet, who leads the consultancy giant’s nearly 750,000-person workforce as chairman and chief executive officer, told Bloomberg TV.

Read More: Accenture to Open 10 AI Hubs Globally, Including One in London

One of the 10 generative AI “innovation hubs” Accenture plans to open globally will be in London, she added. Just months after shedding 19,000 workers, Sweet’s firm announced plans to double the number of staffers that specialize in AI to 80,000, part of a three-year, $3 billion investment in Accenture’s data and AI practice.

In the House

Green Disconnect (9 a.m.)

There’s plenty of money to be made by investing in the green energy transition, and financial professionals who say otherwise aren’t paying attention to the facts, according to Brookfield Asset Management Chair Mark Carney.

Read More: Carney Sees ‘Massive Disconnect’ in Green Finance Rhetoric

During a conversation at Bloomberg House on Wednesday, Carney, a former governor of the Bank of England who is also chair of Bloomberg Inc., highlighted what he called a “massive disconnect” between what some of the heavyweights of global finance are saying and the wave of money flowing into green projects.

--With assistance from Chiara Albanese, Kateryna Chursina, Phil Serafino, Jonathan Tirone, Tom Metcalf, Sabah Meddings, Daryna Krasnolutska, Jessica Loudis, Jenny Surane and Katherine Griffiths.

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