Good morning. Donald Trump takes world financial markets on a rollercoaster ride. The race to lead Germany is diverting through Davos. And the UK government may be poised to back a third runway at Heathrow. Listen to the day’s top stories.
A reduction in interest rates next week by the European Central Bank is all but certain and two to three more will probably follow, according to Governing Council member Peter Kazimir. "For me personally, the deal is done,” he said, referring to the next gathering.
European car sales barely grew last year as persistent inflation, higher borrowing costs and apathy toward electric models led consumers to hold off on buying. New-car registrations in the region edged up 0.9% to 13 million units in 2024 after a bounce last month. Renault sold more vehicles across Europe than Stellantis for the first time in December, a month that began with the latter ousting Carlos Tavares as chief executive officer.
UK Chancellor of the Exchequer Rachel Reeves will struggle to convince the City of her fiscal credibility if she announces more delayed spending restraint, according to economists. Reeves will launch a charm offensive in Davos this week, including meeting with JPMorgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon. Separately, Bridgewater’s Ray Dalio told the Financial Times that the UK may be heading for a “debt death spiral,” in which it has to borrow more and more to service its rising interest costs.
The race to lead Germany is diverting through Switzerland, with a campaigning push in Davos set to showcase competing visions for how to revive the struggling economy. Both Social Democrat Chancellor Olaf Scholz and his rival, the Christian Democrat frontrunner Friedrich Merz, will seek the blessing of the global business elite at the mountain resort gathering today. And here’s more on how Germany’s parties are seeking to win over skeptical voters.
Deep Dive: Expansion Push
Planes queueing to take off at Heathrow airport in London. Photographer: Mike Hewitt/Getty Images
The move is part of a push to spur growth that’s become more urgent after international markets cast doubt on the credibility of the country’s economic plans.
Ministers are set to publicly signal support for a long-sought third runway at Heathrow, sign off on plans to bring the second strip at Gatwick into full-time use and allow an increase in the capacity at Luton Airport.
Other projects poised to be signed off include a road tunnel beneath the Thames River and a Universal Studios theme park north of the capital.
Rachel Reeves might be breathing a sigh of relief that 10-year gilt yields have fallen, but that would be premature, Marcus Ashworth writes. Economic momentum and confidence have evaporated with pretty much every step Labour has taken.
