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Uber and Hyundai team up to develop electric air taxi

US ride-hailing company Uber Technologies Inc and South Korean automaker Hyundai Motor plan to jointly develop electric air taxis, they said today, joining the race for flying cars to ease urban congestion.

Hyundai will unveil a concept electric aircraft developed with Uber at the Consumer Electronics Show (CES), which kicks off in Las Vegas later in the day, with the model designed to carry up to four passengers with a pilot and fly on trips of up to 100km.

Uber has pledged to begin demonstrator urban flights in 2020 and commercial operations in 2023 as part of its project, which also counts Boeing subsidiary Aurora Flight Sciences as one of its partner firms. Hyundai is the first carmaker to team up with Uber on the project.

“Hyundai will produce and deploy the air vehicles, and Uber will provide airspace support services, connections to ground transportation, and customer interfaces through an aerial ride share network,” the two companies said in a joint statement.

“The overall cost to produce and operate UAM (urban air mobility) vehicles should be really low enough for everyone to enjoy the freedom to fly,” Shin Jai-won, Executive Vice President and Head of Urban Air Mobility Division at Hyundai Motor, said at a CES presentation.

Shin, a former NASA engineer hired by Hyundai last year, said the mobility industry believes that once the everyday flight market matures fully, it will exceed the current number of commercial airplanes flying around the world – about 25,000.

Last year, Hyundai pledged to invest 1.8 trillion won (RM6.2bil) in what it called “urban air mobility” by 2025.

Hyundai will continue to collaborate with industry leaders on future projects, Euisun Chung, executive vice chairman of the group said at the presentation.

Plane makers, car manufacturers and technology firms are jumping into the flying car segment, although significant technological and regulatory hurdles remain to be addressed.

US planemaker Boeing said in October it was working with Volkswagen’s sports car brand, Porsche, to develop a concept electric flying vehicle capable of transporting people in urban areas.

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ECB holds rates as strategic review gets underway

The European Central Bank (ECB) on Thursday held interest rates steady as it launched its first strategic review since 2003, in a bid to establish whether its inflation target is still appropriate.

In its first rate decision of the year, the central bank’s Governing Council voted unanimously to keep the main deposit rate at a historic low of -0.5%, in line with market expectations. The marginal lending facility remained at 0.25% and the main refinancing operations rate stayed at 0%.

In a press conference following the decision, ECB President Christine Lagarde said rates will “remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”

Lagarde added that the Governing Council “stands ready to adjust all of its instruments as appropriate” in order to guide inflation towards target.

Net asset purchases as part of the quantitative easing program started in November at a monthly rate of 20 billion euros ($22.3 billion), and the ECB reiterated on Thursday that this will continue to run “as long as necessary” to reinforce the accommodative policy stance.

Review to conclude in 2020

The strategic review launched Thursday was one of the first moves announced by Lagarde upon starting her tenure, with the central bank’s persistent low interest rate stance under fire from market participants who say it has become detrimental to economic growth.

In a press release on Thursday afternoon, the ECB revealed that the review will be concluded by the end of 2020, and will encompass “quantitative formulation of price stability, monetary policy toolkit, economic and monetary analyses and communication practices.”

It will also assess financial stability, employment and environmental sustainability, and will be based on “thorough analysis and open minds, engaging with all stakeholders.”

In September last year, Lagarde’s predecessor Mario Draghi cut the ECB’s deposit rate by 10 basis points to its current level and launched a massive new QE program in a bid to stimulate the euro zone economy and push towards the central bank’s inflation target.

Lagarde inherited an inflation rate of 1.0% in the euro zone upon taking the reins in November.

“Declining trend growth, on the back of slowing productivity and an ageing population, as well as the legacy of the financial crisis, have driven interest rates down, reducing the scope for the ECB and other central banks to ease monetary policy by conventional instruments in the face of adverse cyclical developments,” the ECB said.

It added that the “threat to environmental sustainability, rapid digitalization, globalization and evolving financial structures” have further transformed the monetary policy environment, including inflation dynamics.

Risks ‘tilted to the downside’

Lagarde told the press conference on Thursday that the risks surrounding the euro area growth outlook “related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is decreasing.”

Inflation is expected to increase over the medium term, but she reiterated that other policy areas must “contribute more decisively” in order to “reap the full benefits” from the ECB’s accommodative policy measures.

“The implementation of structural policies in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience,” Lagarde added.

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Calls for a US ‘digital dollar’ rise as China powers ahead with a digital yuan

DAVOS, Switzerland — A growing number of voices are calling for the U.S. to issue a “digital dollar” as China continues to work on a digital version of its own currency.

Users of the U.S. dollar are “underserved by an analogue currency in a digital world,” Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), said during a side event at the World Economic Forum in Davos.

“I think it’s very much worth considering,” Neha Narula, director of the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT), told CNBC at Davos.

The comments come as China is working on a digital yuan which some experts believe could come this year.

Why digital currencies?

It’s unclear what form a central bank issued digital currency could take. It could be built on blockchain-like architecture. Blockchain is the underlying technology behind the cryptocurrency bitcoin. But it doesn’t necessarily need to be.

The promise of a central bank digital currency (CBDC) is that it could make cross-border movement of money easier and improve traceability to fight corruption or money laundering, according to Henri Arslanian, global crypto leader at PwC.

“The potential traceability features of CBDCs could, for the first time, give us a good fighting change against corruption and money laundering. CBDCs also could allow policymakers to measure the impact of certain policies accurately and immediately,” Arslanian told CNBC at Davos.

Digital dollar

Giancarlo, who has been dubbed by the media as “Crypto Dad” for his open views to blockchain technology while at the CFTC, advocated that the U.S. issue a digital dollar.

He recently set up the Digital Dollar Foundation along with Accenture to work on the design and potential framework for a digital dollar.

“If it (U.S. dollar) remains an analogue currency the challenges of using it in a digital world are very complex,” he added.

“What we are proposing is a digital form (of that dollar) that would be minted by the central bank … And it would be made available to users through the traditional banking system and other banking enterprises,” Giancarlo said.

Explaining a bit more about his vision and privacy issues, Giancarlo said the digital dollar could be “set up in a way that … (the) federal government doesn’t have the ability to check if you’re shopping at Target or Selfridges.”

MIT’s Narula said the U.S. Federal Reserve needs to boost its knowledge of digital currencies.

“I think the Fed needs to gain expertise in this space. They cannot rely on the private sector for expertise, they need to build their own in-house expertise,” Narula said.

Federal Reserve Chairman Jerome Powell acknowledged that the central bank is looking into the possibilities of a CBDC. While the Fed hasn’t developed its own digital currency, it is continuing to “carefully analyze the costs and benefits of pursuing such an initiative in the U.S.,” Powell said in a letter to lawmakers in November.

Digital dollar timeline

The digital dollar could be 10 to 15 years away, according to Jeff Schumacher, CEO of 55 Foundry, a company incubator and investor.

“The advantaged position of the dollar as the global reserve currency is very powerful and the Fed wants to protect that position. A digital dollar may introduce volatility to the dollar which is undesirable in the short term,” Schumacher told CNBC.

“The U.S. will likely not be the first mover on a centralized digital currency, but will want to have the tech ready once the kinks and pitfalls have been worked out by someone else,” he added.

Giancarlo echoed that view. “The U.S. will not be first nor does it need to be, but it does need to get it right,” Giancarlo said.

China’s push

The People’s Bank of China (PBOC) has said that it’s working on a digital version of the yuan, but has not given a timeline about when it could be issued.

Some experts say that a digital yuan could help China’s currency internationalize and challenge the dominance of the U.S. dollar.

“Ultimately I expect the digital yuan to play an important strategic role in China’s ongoing efforts to become a global financial superpower and compete with the U.S. dollar as the world’s number one reserve currency,” Garrick Hileman, head of research at Blockchain and researcher at the London School of Economics, told CNBC in a recent interview.

For example, the digital yuan could be used in trade and infrastructure deals along China’s Belt and Road Initiative.

Central banks eye digital currencies

China and the U.S. are not the only countries looking at issuing their own digital currencies.

The central banks of Britain, Japan, the euro zone, Sweden and Switzerland have grouped up with the Bank for International Settlements (BIS) to assess potential use cases for such currencies.

CBDC’s have gained momentum recently as central banks look to innovate in the face of competition from China and Facebook’s digital currency called libra.

But the Facebook-led project has faced intense regulatory pushback, with central bankers from Powell to European Central Bank Board Member Benoit Coeure warning on the potential risks of libra to global financial stability.

“The future of money is a big topic being discussed this week in Davos. And libra and China’s DCEP (digital currency) have probably been the catalysts that have brought this topic on the top of the agenda,” Arslanian said.

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Hedge fund giant Seth Klarman says the ‘rocket fuel’ feeding this rally will soon ‘run out’

Billionaire hedge fund manager Seth Klarman is warning this rally that has taken stocks to record highs could soon end.

Klarman, who runs Baupost Group in Boston, wrote in a letter to investors that the “the rocket fuel that has propelled markets in 2019 will run out,” according to a Bloomberg News report. A Baupost spokeswoman confirmed the contents of the Bloomberg report to CNBC, but declined to comment further.

Klarman noted that about 31% of the fund’s portfolio was in cash to end 2019.

Stocks are coming off a blockbuster year as the S&P 500 surged nearly 29% in 2019, its best annual performance since 2013. Hopes around a possible U.S.-China trade deal, which was signed earlier this month, and the rate cuts from the Federal Reserve were major contributors to the rally.

But Klarman noted in the Jan. 15 letter he is worried about a possible “liquidity trap” as low rates don’t seem to jolt economic growth, especially in Europe. That’s where “interest rates go to die,” he wrote.

To be sure, Klarman issued a similarly dire warning at the start of 2019, citing the impact of global tensions on the global economy along with rising debt levels and a pervasive political divide.

The hedge fund manager, who’s drawn comparisons to Warren Buffett for his disciplined value style, as of a few years ago was managing about $30 billion after racking up years of market-beating returns. However, according to this latest report, Baupost managed only high-single digit returns last year, citing a “few mistakes” he made along with “conservative positioning,” according to the Bloomberg account.

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EU has ‘no choice’ but to sign a new trade deal with US

US President Donald Trump says Brussels will inevitably agree to negotiate a new trade agreement with Washington as talks between the two sides have long been at a standstill.

“They’re going to make a deal, because they have to. They have to. They have no choice,” Trump told CNBC on Wednesday, on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland.

The EU and the US have been locked in a trade row since 2018, when the US hit European steel and aluminum imports with additional tariffs. Brussels retaliated with extra duties on a range of US imports, from agricultural products to steel, aluminium items, and manufactured goods.

“We’ve had a tremendous deficit for many, many years, over $150 billion with Europe,” Trump said on Wednesday.

After the World Trade Organization announced that the EU provided unfair subsidies to planemaker Airbus, thus hindering sales by US rival Boeing, Trump imposed additional tariffs on $7.5 billion worth of goods from the EU last year.

The US has been threatening to hike existing levies and include new items in its tariff list. Last week, Trump reportedly vowed to slap sensitive European industries, like Germany’s auto exports with 25 percent tariffs. He repeated the threat during the annual meeting in Davos.

“We expect to be able to make a deal with Europe. And if they don’t make a deal we’ll certainly give that very strong consideration,” Trump said on the sidelines of the WEF, when asked about the plans to impose auto tariffs on EU imports. He also did not miss the opportunity to again mention how “badly” the US has been treated “as a country for many, many years on trade.”

On Tuesday, Trump met with European Commission President Ursula Von der Leyen to discuss the tense trade relations between the two sides. The meeting did not bring any tangible results, however, with the EU official saying that she hopes to “engage in a positive US-EU agenda in trade, as well as on technology, energy and much more besides.”

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