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DAVOS WORLD ECONOMIC FORUM - TALKING POINTS

  • A quiet first day at the annual World Economic Forum
  • Global growth worries and political instability take spotlight
  • Anti-risk assets rise as anxiety over economic slowdown builds

Government leaders and business executives take to Davos, Switzerland for the 2019 World Economic Forum where the world’s most influential economic and financial luminaries convene to share policy ideas and discuss local agendas. Here are the major developments and key takeaways from Day 1 in Davos:

Global Growth Worries and Political Instability Take Spotlight

A deteriorating global economy and flare-ups of political instability look to cast dark shadows over sentiment at this year’s World Economic Forum. Conference panelists and attendees will focus on discussions ranging future economic outlook, Brexit, the US-China trade war, America’s government shutdown, Yellow Vest protests in France and central bank policy decisions among other hot-button topics.

Russian and Saudi Energy Ministers Cancel Talks

Russia and Saudi Arabia Energy Ministers canceled their planned meeting to discuss the oil market and their recent agreement to curb oil production reached last month due to “scheduling conflicts.” The development sent crude oil prices lower as oversupply concerns resurfaced.

Pompeo Sends Anti-Globalism Video to Switzerland

Amid criticism of US politics, Secretary of State Mike Pompeo released a video addressed to Davos touting the White House’s approach to governmental policies as the rudder steering America’s economic ship to success. Pompeo stated “the unleashing of animal spirits has allowed [the US economy to grow] even as the global slowdown looms.”

Brazil’s President Bolsonaro Promises Reform

Brazil’s recently-elected President Jair Bolsonaro spoke to forum attendees about his promised pension and tax reforms as well as his country’s intent on having a more comprehensive involvement in global trade. Bolsonaro has recruited a team of pro-market politicians to help bring proposed economic reform to reality, which sent the Brazilian stock exchange and domestic currency soaring on hopes for future growth .

Ray Dalio Fearful of the Future

Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, projected a fearful message to those tuned in to his panel discussion. The Chief Investment Officer stated “What scares me the most longer term is that we have limitations to monetary policy — which is our most valuable tool — at the same time as we have greater political and social antagonism…So, the next downturn in the economy worries me the most.”

Japan to Proceed with Sales Tax Hike

Turning to Japan, Prime Minister Shinzo Abe’s economic adviser commented that the country must continue with a planned sales tax hike that would increase the rate from 8 percent to 10 percent. Skeptics argue that proceeding with the increase can cause more pain for the country’s GDP, especially when considering how reliant Japan is on trade and exports. However, others counter that the impact will be muted as any adverse effects will be offset by other planned government spending measures.

Market Movers

Typically anti-risk assets like gold, sovereign debt and the Japanese Yen were gaining ground as sentiment soured over the resurfacing of global growth concerns, which correspondingly sent the price of oil lower. Also, the GBP was moving higher as markets digest the latest Brexit news and reevaluate downside risks to the currency while awaiting next week’s second attempt at a "meaningful vote".

S&P500 INDEX, USDJPY, AUDUSD, GOLD AND CRUDE OIL PRICE CHART: 5-MINUTE TIME FRAME (JANUARY 22, 2019 INTRADAY)

S&P500 Index, USDJPY, AUDUSD Currency, Gold and Crude Oil Commodity Price Chart Davos World Economic Forum January 29, 2019

--- Written by Rich Dvorak,Junior Analyst for DailyFX

Follow on Twitter@RichDvorakFX