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Today’s top stories
Germany is to supply 14 Leopard 2 tanks to Ukraine as well as allowing allies to send their own, marking a significant increase in western military aid. Russia’s ambassador to Germany said the move was an “extremely dangerous decision” that “raises the conflict to a new level of hostilities”.
US states stepped up efforts to entice European clean energy businesses such as Germany’s Marvel Fusion, with the promise of deep tax breaks, despite opposition from Brussels. The Netherlands opposes new EU money for subsidies, but the FT editorial board said the two blocs needed to find common ground on subsidies and avoid beggar-thy-neighbour measures.
MSC and Maersk, the world’s two largest container shipping lines that together control two-fifths of seaborne freight, are ending their alliance as competition for transporting global trade heats up. Meanwhile, in China, weaker international demand for its goods has led to a rise in shipping cancellations at its biggest ports, limiting the economic boom expected from its reopening.
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Shares in the low-cost carrier surged 10 per cent, spurring rises in other airlines such as Ryanair, Wizz Air and BA owner International Airlines Group. EasyJet chief executive Johan Lundgren said customers appeared to be “prioritising spending on holidays” and added that the company was selling enough seats to fill five aircraft every minute during the busiest periods of its recent winter sale.
Ryanair told a similar tale last week, reporting record bookings at the start of the year. “All the indicators are very strong,” company boss Michael O’Leary told the FT. “There is a lot of spending going on out there. Hotels are full, restaurants are full.”
The global picture is equally encouraging. Last week Avolon, the world’s second-largest jet lessor, said that China’s reopening would help drive air traffic to pre-pandemic levels by the middle of the year. For every two seats of airline capacity added worldwide, one is in Asia, the company said. Company chiefs until recently had warned that a recovery to 2019 levels would not come before 2024 at the earliest.
The return of the globetrotting Chinese, the world’s largest tourism population that had been cut off by zero-Covid restrictions, is probably the single best piece of news for the world’s airlines so far. In 2019, before the pandemic hit, 155mn travelled abroad and spent $255bn. The China Outbound Tourism Research Institute estimates 18mn will travel internationally in the first half of the year, followed by 40mn in the second.
Asian airlines had already begun to expand their flight options at the end of last year, forming new partnerships to cash in on the expected boom in demand. Bain Capital, meanwhile, is preparing to relist Virgin Australia after it had collapsed during the pandemic.
Profits at aerospace companies such as Raytheon are also soaring as demand for jet engines and parts takes off. Today Boeing reported that a flurry of jet deliveries last month was helping to repair its finances after the blow of two fatal crashes.
However, there could still be some turbulence ahead. Air travellers in Europe face “major” disruption as skies become congested because of the war in Ukraine, while volatile oil prices could pose a problem. But as airline results season gets under way, easyJet is unlikely to be the only carrier forecasting blue skies ahead.
Need to know: UK and Europe economy
As we wrote in Monday’s DT, economic indicators for the eurozone are now mainly pointing in the right direction. The S&P Global PMI survey showed an unexpected return to growth in business activity for the first time since June, while German business confidence is bouncing back.
The UK economy, however, continues to diverge from the brightening outlook in the EU and the US. The Treasury is trying to damp down calls for tax cuts after a new downgrade to growth forecasts. The UK PMI reading has hit a two-year low, businesses face a growing risk of insolvency and public borrowing has hit its highest level since monthly records began in 1993. Meanwhile, producer price inflation has fallen to its lowest rate in almost a year.
Damage from Brexit continues to become more apparent. The Eurostar boss said peak trains were being left a third empty because of new border arrangements.
Italian petrol station owners have shut their pumps in a dispute with the government over the ending of fuel subsidies that shielded motorists from surging costs.
Need to know: Global economy
Chinese households managed to save a record $2.6tn last year as pandemic restrictions crushed consumer demand, but it is unclear so far if this may lead them to splash the cash in “revenge spending”.
US Treasury secretary Janet Yellen said China was a “barrier” to ending the debt crisis in Zambia. The restructuring of the debt is seen as indicative of how China, the biggest creditor to the developing world, will respond to a wave of defaults.
Argentina will be transformed by gas and mining exports, according to its economy minister. The country is suffering almost 100 per cent inflation and is cut off from international markets after its ninth debt default in 2020.
Australian inflation hit a 33-year high of 7.8 per cent in the final quarter of last year, dashing hopes of a pause in interest rate rises.
Need to know: business
The “Big Three” international oilfield services groups — Halliburton, Baker Hughes and SLB — reported their most profitable 12 months since the height of the US shale boom as high energy prices led to global drilling activity.
Amazon workers in Coventry are striking today over pay, the first time the company’s UK employees have taken industrial action. British unions have hitherto struggled to recruit in sectors such as logistics that account for a growing chunk of the country’s workforce — often on insecure terms and in difficult working conditions.
Tensions are growing in the UK, Europe and the US between governments and pharma companies over drug pricing. An industry spokesperson said authorities had gone from appreciating rapid innovation during the pandemic to needing to “squeeze” drugmakers because of financial pressure elsewhere.
The head of Europe’s largest chip company ASML, which plays a critical role in the global industry and has been caught up in US-China tech tensions, said demand for semiconductors would recover in the second half of the year as it reported a record order backlog and forecast sales to increase 25 per cent in 2023.
Microsoft gave a downbeat forecast for the current quarter, reporting that demand for its cloud services fell noticeably in December as customers grew more cautious on economic prospects.
New “generative” AI systems that can produce content to order are raising concerns about potentially far-reaching social effects including the ability to produce large volumes of misinformation as well as making jobs disappear, as our new Big Read explains.
The World of Work
There are lots of stereotypes about millennials (those born between 1981 and 1996), the biggest one suggesting they have an overwhelming sense of entitlement. The new Working It podcast discusses whether the tropes are really true.
Some good news
The British Heart Foundation has sold an 18-carat gold Cartier watch found in a bag of donations for almost £10,000. The sale is a record for BHF, which raises funds for research into heart and circulatory disease.