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Europe is hitting back at Donald Trump. The head of the European Council, Donald Tusk, responded to the US president’s repeated criticism of the EU by ranking the Trump administration as one of the biggest forces for uncertainty facing the union. After one of Mr Trump’s top trade advisers accused Germany of using a “ grossly undervalued” euro to “exploit” the US and its EU partners, German Chancellor Angela Merkel rejected the accusation, saying the German government has long upheld the ECB’s independence. But Germany’s exporters still fear the Trump effect on trade.

Meanwhile, Mr Trump’s controversial travel ban continues to reverberate, with US security officials admitting that its implementation has been problematic, and some Republicans doubting the competence of the president’s inner circle. In Iran, one of the country’s named in Mr Trump’s order, President Hassan Rouhani criticised the ban and dismissed Mr Trump as a “political novice” in a live television address, warning that his unfamiliarity with global politics will “cost the US a lot”. (FT, Bloomberg, BBC, Reuters)

In the news

Gorsuch for Supreme Court “Was that a surprise? Was it?” President Trump quipped after he unveiled his Supreme Court nominee, Judge Neil Gorsuch, in a primetime White House ceremony reminiscent of one of his reality television shows. The son of a Reagan-era cabinet official, Mr Gorsuch has been praised for his lucid and occasionally lyrical writing style and has a reputation for adhering closely to constitutional tradition. (FT, WaPo)

Volkswagen agrees US settlement Volkswagen has agreed to pay at least $1.26bn to settle claims related to 75,000 3.0-litre engine diesel cars equipped with illegal emissions test-cheating software in the US. VW will give owners of these cars “substantial cash compensation” in addition to repurchasing their cars or fixing them to be compliant with US emission standards. Damages in the US for the emissions scandal alone are now about $22.5bn. (FT)

Chinese billionaire seized Xiao Jianhua, a billionaire financier with links to the family of China’s President Xi Jinping, was abducted from his residence in the Hong Kong Four Seasons Hotel and taken to mainland China on the eve of Chinese new year. The famed “bagman” denied media reports in 2014 that he had fled the mainland to avoid the president’s corruption crackdown. His disappearance will add to fears that Hong Kong is losing its autonomy. (FT)

More West Bank settlements Days after approving 2,500 homes in the occupied West Bank, Israel announced plans to build another 3,000 in West Bank settlements, pressing forward with a construction binge that began after the inauguration of Donald Trump as US president. The settlements are illegal under international law. (Guardian)

Le Pen defies Brussels Far-right French politician Marine Le Pen is refusing to return more than €300,000 that the European Parliament says was misspent because it was used to pay an aide at the National Front’s headquarters in Paris. Ms Le Pen says she is the victim of a politically-motivated vendetta. (BBC)

It’s a big day for

The US Fed The Open Market Committee is expected to hold its policy steady when it meets this week, but investors will be watching today’s statement for its view on the economy and inflation. (FT)

Facebook The company releases its fourth-quarter results. (WSJ)

Food for thought

A test for Polish democracy Parliament finally returned to work last week following the biggest political stand-off in the country for years — sparked by a ban on journalists’ access. Can Poland, a success story of post-communist transition and democracy, withstand the ruling Law and Justice party’s ambition to roll back social liberalism and shift the country back to more conservative roots? (FT)

Blaming the foreigners Despite Donald Trump’s rhetoric, China played an insignificant role in the decline of US manufacturing. Instead a number of domestic factors are at play, writes Martin Wolf. (FT)

Business booms for Mosul’s mechanics Fierce fighting to push Isis out of the Iraqi city of Mosul means that IEDs, car bombs and air strikes are a way of life for city residents. But the damage they inflict means business is booming for Mosul’s mechanics, who keep the city’s bomb-damaged cars on the road. (Reuters)

Decline of the analyst The ranks of investment bank research analysts have fallen by one-tenth since 2012, as tighter regulation and falling profits have forced financial institutions to cut their brigades of economists. Incoming EU regulations are expected to deepen the research cull. (FT)

Romance with robots A Chinese chatbot named Xiaoice has been told “I love you” nearly 20m times, and has conversations with some 89m people on smartphones and other devices, leading some robotics experts to predict that robots and humans could become life partners in the future. (NAR)

Video of the day

Why bond yields may again become political With 2017 awash in politics, the FT’s Dan McCrum examines whether recent movements in the European bond markets are a taste of what may be to come. (FT)

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