Elsewhere in Davos, PricewaterhouseCoopers has reported that many bosses are losing faith in globalisation (a journey that many people took a while ago).

My colleague Larry Elliott explains:

Executives running the world’s leading companies share public scepticism about the benefits of globalisation and doubt whether breaking down barriers to trade has helped tackle climate change or inequality.

The annual health check of global boardrooms conducted by the consultancy firm PwC found the mood more upbeat than a year ago, despite the shockwaves caused in 2016 by the vote for Brexit and the victory of Donald Trump in the US presidential election.

But the survey, published to coincide with the World Economic Forum in Davos, found that the bullishness about the benefits of globalisation had diminished in the 19 years since PwC first polled executives at the end of the 1990s.

Here’s the full story:

WEF’s final Crystal Award goes to actor Forest Whitaker, for his work on conflict resolution in the developing world.

The star of The Last King of Scotland explains that his Foundation helps young people to become the change they want to see in the world (hat-tip to Gandhi).

These ‘youth peacemakers’ are working on the front line to achieve humanitarian breakthroughs. For example, in Uganda, former child soldiers are now setting up electronics shops and salons.

In Mexico, they are leading skills-building sessions in prisons and tackling bullying in schools.

And in one case (I missed the country, sorry), they even negotiated with an army occupying a school, persuading them to leave.

Over in the WEF congress hall, violinist Anne-Sophie Mutter is receiving a crystal award from the Forum for her work helping young musicians.

She says that music can play a role in making a better, more peaceful world as it has no ideology.

Then she turns to the world’s hunger crisis; 24 children have died through malnutrition in the last four minutes. Eight million people die from hunger each year; that’s one every three seconds.

She reminds the audience that the UN’s sustainable development goals includes the total eradication of hunger by 2030. but not enough is being done.

There’s no shortage of talk, Mutter says pointedly, as:

If one could eat resolutions and words, no-one would starve.

Everyone in this audience can help, she concludes. You must ignore the sirens of ever greater wealth, and instead do more to protect the poor and the weak.

The Davos security people aren’t taking any chances this year -- Bloomberg reports that they’re carrying guns to shoot down any drones that approach WEF.

The pound has stabilised a little after its plunge to a three month low earlier in the day. But the fears of a hard Brexit, prompted by comments from the UK government ahead of prime minister Theresa May’s speech on Tuesday, mean that sterling is still down around 1% against the dollar.

It is currently down 0.8% at $1.2078 against the dollar and 0.6% against the euro at €1.1384.

But despite the boost to overseas earners from the weak pound, the FTSE 100 has fallen back from its record intra-day level and is now down 0.11% at 7327. If the index closes lower it will end an unprecedented winning streak, with 12 successive days of record closes and fourteen days of rises. Financial shares are leading the fallers, hit by worries that a hard Brexit would cause problems for their ability to operate in Europe in the future.

On that note, we’ll close for the moment. But Graeme Wearden will be back later with the first reports from this year’s Davos gathering.

The UK Treasury has welcomed the upgrade to its forecasts by the IMF. It said:

The fundamentals of the UK economy are strong, and today’s IMF forecasts confirm their view that the UK was the fastest-growing major advanced economy last year. We have reduced the deficit by almost two thirds, cut taxes for millions of working people, and employment is at a near-record high. The Autumn Statement reaffirmed the government’s commitment to return the public finances to balance as soon as practicable, while providing flexibility to support the economy as we exit the EU.

Britain’s business community has weighed into the Brexit debate ahead of an update by Theresa May on Tuesday:

Britain risks a “disorderly crash landing” if it assumes it can safely walk away from troublesome Brexit talks, business leaders have said, in a last-ditch plea for a negotiated settlement with Europe.

As Theresa May prepares to reveal an uncompromising set of UK objectives on Tuesday, pressure is mounting on the prime minister to take a firm line with other member states and ultimately fall back on World Trade Organisation tariffs if no deal can be agreed.

But the CBI is calling on politicians to wake up to the limitations of the WTO and dangers of a disorderly or “train crash” Brexit, despite the long and painful concessions that may be necessary if the UK is to obtain a replacement free-trade agreement when it leaves the single market.

“The practicalities of a disorderly crash-landing need to be understood,” said Carolyn Fairbairn, director general of the CBI, in an interview with the Guardian. “We have had conversations with some of the proponents of just walking away and we will again talk to them about what we see from our members about the consequences of that.

“An exit into WTO at the stroke of midnight without the proper planning and preparation in place would be very serious for the UK economy. There are some signs that there is more conversation around that being an outcome. Our job is to demonstrate how difficult that would be because of all of these unanswered questions.”

The full story is here:

Now over to Greece. The prospect of further instability in the eurozone is mounting as consternation grows over the inability of Greece and its creditors to complete a second bailout review of the debt-stricken economy. Helena Smith reports from Athens:

Fears are growing in Greece and abroad over continued friction between Athens and its creditors. Prolonged foot dragging over completion of a second bailout review has triggered mounting speculation that the debt-stricken country could be headed for new polls if it fails to come to some accord with lenders.

The prospect of the IMF not participating in the current programme - mooted last week by Germany’s powerful finance minister Wolfgang Schauble who suggested the European Stability Mechanism could assume the role instead – may have elicited thinly disguised euphoria in Greece but has been met with angst elsewhere. Schauble also hinted that departure of the IMF could mean even stricter terms for Greece – in short, a fourth bailout programme for a country now in its eighth year of austerity-induced depression.

This morning the ESM’s managing director Klaus Regling highlighted concerns saying whatever happened the German Bundestag would have to ratify the move. Berlin is the biggest contributor of the three rescue programmes that since 2011 have kept Greek bankruptcy at bay and had originally said it would only continue disbursing funds if the IMF was on board.

If the review’s conclusion is delayed for much longer officials worry Greece will miss the next target: of getting Greek bonds included in the European Central Banks QE programme in March. All off which has put Athens’ leftist led administration under additional pressure to come up with alternatives to the “illogical” demands it says the IMF is now making – starting with the body’s insistence that it legislate further multi-year pension cuts and income-tax hikes worth €4.5bn to ensure that primary surplus targets are met. Speculation of euro exit is once again gaining currency despite fiscal adjustment and the immense sacrifices the country has already made. Amid talk of the drachma returning, the government has signalled it is now working on new proposals for lenders which it will present at the next euro group of euro area finance ministers on January 26.

The World Economic Forum has also found that incomes across many advanced countries shrank since 2008; another sign that economic policies need to change.

WEF’s new report on economic inclusivity (see last post) shows that median income shrank by almost 2.5% between 2008 and 2013 across the 26 advanced economies where data is available.

And 51% of countries saw a decline in their inclusion score during the same period; driven by a surge in wealth inequality since the financial crisis.

With public anger against the the political and economic establishment on the rise, WEF is urging politicians to do more to improve living standards, boosting quality of life and making people feel more secure.

Richard Samans, a member of the Forum’s Managing Board, argues:

“To respond more effectively to social concerns, economic policy needs a new compass setting, broad-based progress in living standards, and a new mental map in which structural reform is reimagined and reapplied to this task, with chief economic advisers and finance ministers prioritizing it every bit as much their traditional focus on macroeconomic, financial supervisory and trade policy.”

We may hear more about this issue tonight, when Davos gets underway.

More on the eurozone trade figures from IHS Markit chief economist Howard Archer:

An improved traded good performance in November is supportive to belief that Eurozone GDP growth improved in the fourth quarter of 2016. While it is still questionable as to whether net trade contributed positively to fourth-quarter 2016 Eurozone GDP growth, November’s improved trade performance at the very least dilutes the likelihood that net trade was an appreciable drag on activity. Net trade made a marginally negative contribution to Eurozone GDP growth in the third quarter, therefore being a factor limiting GDP growth to 0.3% quarter-on-quarter. In real terms, exports of goods and services edged up just 0.1% quarter-on-quarter in the third quarter while imports rose by 0.2% quarter-on-quarter.

We believe that Eurozone GDP growth may well have improved to 0.5% quarter-on-quarter in the fourth quarter of 2016 (from 0.3% quarter-on-quarter in both the third and second quarters).

It’s a thin day for data but there have been some eurozone trade figures, showing an increase in the trade surplus:

The European banking sector is also losing ground after agency DBRS cut Italy’s credit rating on Friday, a move which could raise borrowing costs for the country’s financial businesses. UBS said:

The downgrade will impact haircuts applied to Italian govies [government bonds] used as collateral by banks in monetary policy operations with the ECB. Haircuts are calculated based on the best available rating for an issuer and DBRS had the last A rating on Italy (S&P: BBB-, Moody’s: Baa2, Fitch: BBB+). As a consequence and depending on the maturity of the Italian govies pledged, we estimate the downgrade could lead to the need for a 6-9% top-up of the govies used as collateral.

The comments from Theresa May over the weekend are nothing new, says Berenberg. Its senior UK economist Kallum Pickering said:

While UK prime minister Theresa May has previously stated that she doesn’t recognise the concept of a ‘hard Brexit’ the market clearly does. Comments by May hinting at a hard Brexit sent the pound lower over the weekend. But is any of it new information? No, not really. May has stated on several occasions that she will prioritise regaining control of the UK’s borders and laws over access to the single market. In May’s speech tomorrow we expect her to reiterate the same message, again.

While the prime minister hasn’t gone so far as to plainly state the potential impacts of such an arrangement, her broad aims for post-EU Britain have been consistently clear for some time now. The commonly heard ‘uncertainty’ about May’s intentions is hard to justify. Unless May does a complete U-turn from here, any hope of full single market access for post-EU Britain is more or less out of the question. We can presume also, given that May has gone to the effort of setting up a trade department, currently headed by MP Liam Fox, and has stated on a number of occasions that the UK should be able to strike its own trade deals independently of the EU, that an exit from the EU customs union is likely too.

We do not expect May’s speech to alter our base case by much, if at all. We currently expect the UK and EU27 to agree a deal in which the UK maintains a good level of access to the EU’s goods markets and limited access to the less developed services markets. Crucially, we expect the UK to lose its EU financial services passport. This follows from the UK raising some modest barriers to migration from the EU.

Which is one reason why, as we mentioned earlier, financial shares are coming under renewed pressure, with Royal Bank of Scotland and Barclays among the leading fallers. This in turn has seen the FTSE 100 come off its best levels, with the index currently around 4 points lower.

Donald Trump’s desire for a UK-US trade deal to be ready as soon as Britain leaves the EU came in an interview with Michael Gove, and is being covered by my colleague Andrew Sparrow in the politics live blog:

Theresa May’s speech on Brexit is not the only event which could influence the pound:

The pound has come off its worst levels, but is still down more than 1% at $1.2041. Kathleen Brooks, research director at City Index, said:

After falling below the key 1.20 level on Sunday, [the pound] has since staged a comeback.... The was partly driven by comments from Donald Trump in an interview with The Times newspaper where he said that the UK was at the top of a list for a trade deal with the US, and that the UK did a great thing by leaving the EU.

Other factors that have soothed the pound this morning include some reassurances from the UK Treasury that it will address investors concerns that may arise from Theresa May’s speech on Tuesday. This “recovery” is also typical after a move below a key technical level such as 1.20 in the pound/dollar, and thus may only be temporary.

Looking ahead, we think that the pound is likely to remain vulnerable, and, in the short term, the market could once again test the air below 1.20, and the lows from October’s flash crash. Volatility levels in the pound/dollar as measured by the options market, have risen once again on Monday, taking the 1-month GBP/USD volatility level to a fresh 4-month high. This suggests that investors are expecting further large moves from the pound in the short term.

Some have wondered why the foreign exchange market continues to be “shocked” by news about a hard Brexit, after all the UK’s exit from the single market has always been on the cards and is not a new concept. I would argue that the ‘Brexit theme as bad news for the pound’ is such an ingrained trend at this stage that it really doesn’t matter what May says or fails to say on Tuesday. Instead, it’s all about market dynamics, and right now the balance of market participants are shorting the pound. It’s a bit like a tipping point, once a trend gets critical mass, like the pound downtrend, then news headlines can have big impacts, as they generate another wave of selling.

Ahead of the Davos gathering, the World Economic Forum warned on the risk of rising inequality, and here is more evidence. Larry Elliott writes:

The world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population, according to a charity warning of an ever-increasing and dangerous concentration of wealth.

In a report published to coincide with the start of the week-long World Economic Forum in Davos, Switzerland, Oxfam said it was “beyond grotesque” that a handful of rich men headed by the Microsoft founder Bill Gates are worth $426bn (£350bn), equivalent to the wealth of 3.6 billion people.

The development charity called for a new economic model to reverse an inequality trend that it said helped to explain Brexit and Donald Trump’s victory in the US presidential election.

Oxfam blamed rising inequality on aggressive wage restraint, tax dodging and the squeezing of producers by companies, adding that businesses were too focused on delivering ever-higher returns to wealthy owners and top executives.

The World Economic Forum (WEF) said last week that rising inequality and social polarisation posed two of the biggest risks to the global economy in 2017 and could result in the rolling back of globalisation.

Larry’s full report is here:

With little in the way of economic or corporate news, and the US markets shut for Martin Luther King day, the fall in the pound is likely to dominate investor sentiment.

Sterling could fall as low as $1.10 according to Neil Wilson, senior market analyst at ETX Capital:

Cable is now clinging to the $1.20 handle for dear life and seems to have steadied a little as trading commences in London – pound trading in Asia is often quite volatile because of thin liquidity. We’ve also got the pound trading at its weakest level against the euro since November.

It’s looking more and more like a ‘hard’ Brexit is in the offing and markets are responding. The currency market is the most efficient and swiftest to price it in. However the full effects of a hard Brexit are not yet completely discounted by the markets and so we could have further to run depending on what is said tomorrow.

We now have to assume May will prioritise immigration controls and the price to pay will be to exit the single market. That could send the pound a lot lower still, perhaps towards $1.10 in the coming weeks. The Supreme Court’s ruling on the triggering of Article 50 is another risk factor that is likely to increase volatility in pound crosses.

May probably won’t give everything away and explain the government bargaining position in detail, but it looks like she will sound more hawkish and steer the tone towards a hard Brexit. The PM’s statements have a habit of hitting sterling pretty hard and today’s moves are clear signs of nervousness in the fx market.

The PM could, however, strike a more soothing tone than markets expect and that could spark a significant short-term reversal in cable, although long-term it’s going to be hard to shake the bears.

Here’s the pound’s continuing decline:

The pressure on the pound is only likely to get worse, with volatility increasing, according to economists at UniCredit:

[We] believe that sterling is a sell on any potential rallies. Even in the event of a more “conciliatory” tone (by Mrs. May hinting at seeking out a transitional agreement with the European Union, for instance) the respite on sterling is very likely to be only temporary. As long as control over immigration remains the UK government’s anchoring point, it is virtually impossible to envision anything other than an exit from the EU’s single market.

With the pound weaker, the FTSE 100 is indeed expected to hit new heights: