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European natural gas prices — which soared after Russia's invasion of Ukraine — have tumbled back to pre-war levels, Matt writes.

Why it matters: If sustained, declining gas prices could ease a series of inflation, cost of living, and economic crises across Europe — and help preserve public support for the sanctions against Russia.

• Europe’s economic health, or lack thereof, also has consequences for one of its biggest trading partners — the U.S.

By the numbers: Benchmark prices for natural gas — using a Dutch gas trading exchange known as the Title Transfer Facility (TTF) — fell below €75 per megawatt hour yesterday.

• They're down about 80% from their August peak of nearly €350.

Driving the news: The price drop is part policy, part good luck.

• European nations stockpiled significant amounts of natural gas from Russian sources before Russia shut down its key Nordstream 1 gas pipeline to Europe.
• Norway, Algeria, Qatar and the U.S. boosted exports of gas to Europe.
• A recent run of warm weather in Europe reduced heating demand.
• The European Union also moved last month to institute price caps on wholesale natural gas prices if they exceed certain levels.

The big picture: Russia's brutal invasion of its neighbor was a major shock to the European economy, which relied heavily on steady, affordable supplies of Russian natural gas to heat homes, illuminate cities and power factories.

• The war forced shutdowns among energy-intensive European industries, such as chemical and metal production.
• Countries nationalized utilities and spent billions to subsidize energy prices for households.
• Even so, prices have still surged for consumers, driving inflation sharply higher across the continent.

The latest: Fresh data out yesterday showed German consumers, for example, paid 24% more for energy in 2022 than they did the previous year.

Yes, but: While Germany's inflation numbers were the largest year-on-year increase since the country reunited in the early 1990s, there was a glimmer of hope.

• Over a shorter timeline, price increases seem to be slowing fast — from over 10% in October and November, to 8.6% in December — largely due to the impact of falling energy prices.
• That was partly because of a one-time payment of consumer utility bills in December, the government statistical agency said, but gas futures prices were also down roughly 50% over that period.

The bottom line: The interaction of energy prices and inflation will continue to be a — or perhaps the — major economic issue to watch in 2023.

🇨🇳 China is pausing its investments in building a chip industry that competes with the U.S. (Bloomberg)

🔍 Microsoft is working to incorporate OpenAI's ChatGPT technology into its Bing search engine. (Axios)

🛑 Crypto firm Wyre said to shut down. (Axios)

🚗 U.S. auto sales in 2022 are expected to show a decline. (WSJ)

Millions of Americans got a raise this week, as minimum wage increases in 23 states and Washington, D.C. went into effect, Emily writes.

Why it matters: The biggest factor driving the increases was inflation — 13 states tie their minimum wage rate to the Consumer Price Index, as Wolters Kluwer notes in a new analysis. Other states had increases set by legislation or ballot initiatives.

• While the federal wage floor remains stuck at $7.25, a growing number of states now have minimum wages of at least $15 an hour, including Washington ($15.74), California ($15.50) and Massachusetts ($15).
• In the coming years, more states will reach $15 an hour — once a long-shot goal of activists — including Connecticut (June 2023), New Jersey (2024) and Illinois (2025).

Zoom out: These wage increases are part of a bigger trend in the workforce, where lower-income, lower-skilled workers are grabbing bigger wage increases than higher earners (in terms of percentage).

• Wages for the lowest-skilled workers have risen more than for high-skill workers over the last 12 months, per the Atlanta Fed's wage tracker.

Stocks stumbled in the first session of 2023, Matt writes.

Driving the news: The S&P 500 ended the day down 0.4%.

• It was an inauspicious start for the index following the 19.4% drop it suffered in 2022, its worst year since 2008.

Details: The worst S&P performer was Elon Musk's Tesla, which plunged 12.2% on the day after reporting disappointing fourth-quarter production and delivery numbers.

• A year ago — Jan. 3, 2022 — Tesla's share price hit an all-time high, giving it a market value of more than $1.2 trillion.

The bottom line: Tesla's shares have collapsed by roughly 73% over the last year, destroying almost $900 billion of shareholder wealth during that period.

• If things keep going like this, it won't be long till Musk will have overseen $1 trillion worth of value destruction.
• To be fair, Apple shed roughly $1 trillion in value over the same period — though its percentage decline from about $3 trillion to about $2 trillion was smaller.