Goldman Sachs profits surge; EU car sales in record fall – as it happened

Graeme Wearden

from on 2021-01-19 16:57 (#5D0R4)

Rolling coverage of the latest economic and financial news, as European Union car sales slump 23.7% last year

4.57pm GMT

Time for a recap.

European car sales have fallen at a record pace, sliding by nearly a quarter last year as the pandemic hit demand.

It will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales."

Growing societal fragmentation - manifested through persistent and emerging risks to human health, rising unemployment, widening digital divides, and youth disillusionment - can have severe consequences in an era of compounded economic, environmental, geopolitical and technological risks."

4.41pm GMT

Janet Yellen's testimony hasn't caused much of a stir in the City, where the FTSE 100 has closed 7 points lower at 6712, down 0.1%.

Ladbrokes owner Entain was the top faller, down almost 12% after MGM abandoned its takeover bid. Advertising group WPP (-3.3%), and banks Barclays and Standard Chartered (both down 2.9%), were also in the fallers.

The backdrop to the session's trading was Janet Yellen's confirmation hearing in front of the Senate Finance Committee, an appearance that is the initial litmus test for the Biden administration's stimulus package - a package that has so far failed to set the markets on fire.

Cautious after being burned by past experiences, investors appear to be in wait and see mode over the likelihood of the $1.9 trillion deal escaping the Senate intact.

4.35pm GMT

On debt burden of $1.9T package

Yellen: "Scarring due to this pandemic...can really harm the long-run potential productivity of our economy...that would make it difficult to get back on the growth path we were on. & it's really critically important to provide this relief now."

4.09pm GMT

More highlights from Janet Yellen's confirmation hearing (being streamed here):

.@JanetYellen's confirmation hearing begins today.

First, @SenFeinstein w/ this zinger: "Some have joked that Janet's husband of 42 years, George, won the Nobel Prize in Economic Sciences yet he is regarded by many as the 2nd most accomplished economist in his own home."

Yellen speaking now on her vision for recovery & Biden's Rescue plan.
"Neither the president-elect nor I proposed this relief package w/o an appreciation for the country's debt burden. But right now, w/ interest rates at historic lows, the smartest thing we can do is act big."

On bipartisan cooperation, Yellen: "My husband & son are watching us on C-SPAN from the other room...They're also wonderful & opinionated economists themselves. So, I'm used to debate about these issues in the house. And I'd welcome it in the Senate."

4.06pm GMT

On the US dollar, Yellen says she believes in market determined exchange rate -- the US does not seek a weaker dollar to gain a competitive advantage, she insists.

And on climate change, the Treasury secretary nominee says it poses an existential threat", that requires investment in clean technology, renewable energy and electric vehicles.

@JanetYellen -prepared to use full array of tools to challenge China's abusive/unfair/illegal practices; climate change poses existential threat, requires investment in clean tech, #renewableenergy #ElectricVehicles ;US doesn't seek a weaker $ to gain a competitive advantage

4.06pm GMT

Janet Yellen, in her confirmation hearing, said she sees small business aid, unemployment insurance, SNAP benefits, vaccine funding, as among the pandemic relief provisions that yield the biggest bang for the buck

4.03pm GMT

Asked about competing with China, Janet Yellen tells the Senate Finance Committee that America needs to work with allies - and strengthen its own economy so it can compete better.

President-elect Biden will bring forward a package to improve competitiveness, including investing in infrastructure and in our people, she says.

Yellen says "China is clearly our most important strategic competitor."

She says China has been stealing intellectual property and engaging in forced technology transfers.

3.58pm GMT

Janet Yellen is now explaining to the Senate Finance Committee that her core focus as Treasury secretary will be the needs of Americas workers and small businesses.

Yellen says she wants to deliver a competitive economy that offers good jobs and good wages. She points out that the pandemic has disproportionately hit the services sector, especially minorities and women.

.@JoeBiden nominee for Treasury Secretary, Janet Yellen, says economics is often viewed as a dry science, but she sees it, as her father, a physician, saw his work: "as a means to help people," and cites the many needs to help Americans in the pandemic

"Over the next few months, we're going to need more aid," Yellen says, underscoring a major point in her testimony today.

3.36pm GMT

You can watch Janet Yellen's confirmation hearing online here:

Wyden, who will be chair of the finance committee, says at Yellen's hearing that unemployment insurance benefits should not just expire and should be tied to economic conditions.

"Congress cannot go on with this snooze button legislating."

Are long-winded people drawn to the United States Senate, or does the United States Senate make people become long-winded?

Because we're 33 minutes into Yellen's confirmation hearing and she hasn't spoken yet.

3.32pm GMT

Over in the Senate, incoming Finance Committee chair Ron Wyden (a Democrat) is arguing for Joe Biden's administration to drive through a major economic relief package, as Janet Yellen's confirmation hearing gets underway:

Wyden at Yellen confirmation hearing: "This Biden administration is not going to begin with inaugural balls, it's goin to begin with all out triage."

"Chair Yellen knows that going small on economic relief would be a mistake" Ron Wyden, top Democrat on Senate finance, says.

Senate Finance Committee ranking member Wyden: Nobody deserves more credit than Yellen for longest US economic expansion.

2.56pm GMT

Nearly three-quarters of the UK pubs promised a 1,000 grant by the prime minister to help them survive the loss of Christmas sales in England are still waiting for the money.

The British Beer and Pub Association (BBPA) said it was scandalous" that many of its members were still awaiting cash promised in December, warning that much of the industry was on the verge of financial ruin.

2.37pm GMT

Stocks have opened higher on Wall Street, with the Dow Jones industrial average up 228 points or 0.75% at 31,042.

It looks like the reflation trade is back on with most risk assets rising, including crude oil, copper, silver and US index futures.

In recent months, investors have been piling into value stocks and other risk assets, betting that, with the roll out of COVID vaccines and coupled with ongoing central bank and government support, the global economy will expand this year. President-elect Joe Biden, who will start his premiership in Washington on Wednesday, has already unveiled a $1.9 trillion stimulus package plan which (will undoubtedly be opposed by some Republicans in the senate) should help to fuel the recovery if passed.

2.06pm GMT

Here's some early reaction to MGM Resorts scrapping its takeover plans for Ladbrokes owner Entain, from the FT's Alice Hancock:

MGM is walking away from its proposed 8bn bid for Entain just a week after Entain's CEO left and two week's after Entain's board rejected an initial offer. Wonder what this does to the joint venture relationship now...

Story coming on @FT soon

Would love to be a fly on the wall of the MGM/Entain talks.

The prevailing narrative is that US casino operators, lacking the expertise of their JV partners at seasoned UK sports betting firms, can just buy them out.

Entain says otherwise.

MGM: WE WIL NOT MAKE A FIRM OFFER FOR ENTAIN

eek pic.twitter.com/Mw1QEWd7f8

1.50pm GMT

Just in: US hospitality and entertainment company MGM Resorts has abandoned its bid to take over the gambling company behind Ladbrokes and Coral.

Casino operator MGM told the City that it has decided not to make a new offer for Entain, after its 8.1bn proposal was rebuffed two weeks ago.

MGM today announces that, after careful consideration and having reflected on the limited recent engagement between the respective companies regarding MGM's rejected all stock proposal at an exchange ratio of 0.6x, it does not intend to submit a revised proposal and it will not make a firm offer for Entain.

Since the US supreme court legalised sports betting in 2018, a flurry of British firms have established beachheads in the US, exploiting expertise gleaned from years of operating freely in the UK.

But state laws have required them to do so in partnership with local US casino operators that typically hold the limited number of sports wagering licences to be awarded.

MGM walking away from Entain deal

pic.twitter.com/cCHNDgKAOW

1.30pm GMT

By more than doubling its profits in the last quarter, Goldman Sachs has shown that a year that delivered great despair and economic pain will also go down as one of the most lucrative environments in Wall Street history, reports Bloomberg:

Goldman Sachs Group Inc.'s dealmakers capped their record year with a fourth-quarter revenue jump that helped profit more than double.

Investment banking revenue climbed 27% from a year earlier as fees from equity underwriting nearly tripled. The firm's stock traders delivered a 40% revenue increase, making up for fixed-income trading that fell short of analyst estimates.

"A year that delivered great despair and economic pain will also go down as one of the most lucrative environments in Wall Street history." https://t.co/hF2FFbQUPv

More from @sridinats: "Goldman Sachs dealmakers capped their record year with a fourth-quarter revenue jump that helped profit more than double... JPMorgan Chase & Co. also flourished, closing out the most profitable year ever for its trading and investment-banking division."

1.14pm GMT

Goldman Sachs' 150% surge in profits in the last quarter was shockingly good', says Octavio Marenzi, CEO of Opimas, a capital markets management consultancy,

Goldman Sachs' earnings were shockingly good. We were expecting a strong performance, but Goldman outperformed in almost every business line.

While other banks, such as JP Morgan and Citigroup had to contend with retail and corporate banking units that were a bit soft, Goldman's activities are squarely focused on investment banking and trading-areas that did well everywhere, but especially well at Goldman Sachs."

1.10pm GMT

Reuters points out that Goldman benefitted from some big recent stock market floats:

Goldman's performance was in line with broader gains for trading units across Wall Street banks, with JPMorgan Chase also reporting stronger-than-expected results as financial market volumes remained consistently high.

The Wall Street giant also benefited from record levels of capital markets activity during the quarter, as it generated handsome underwriting fees from a number of high-profile IPOs including Airbnb, Doordash, Lufax and Root.

1.09pm GMT

Bloomberg's Sonali Basak has more details of Goldman Sach's strong financial results:

Goldman is proving that it can become a COST CUTTING MACHINE. Efficiency ratio of ~50% is beating peers by a landslide -- it helps that it has major regulatory hurdles out of the way.

M&A fees also beat Wall Street expectations by a landslide.

Fixed income trading fell short.

Goldman keeps costs down, even as headcount is actually slightly higher. They added to new business lines and boosted technology staffing.

And after ending last year as the No. 1 adviser on mergers, their advisory fees soared past Wall Street estimates.

12.42pm GMT

Tackling the existential risk posed by the climate crisis will be made harder by the growing gap between rich and poor triggered by the Covid-19 pandemic, the World Economic Forum has said.

The body that organises the annual gathering of the global elite in the Swiss town of Davos said warning signs of the threat posed by infectious disease had been ignored for the past 15 years, with disastrous results.

In 2020, the risk of a global pandemic became reality. As governments, businesses and societies survey the damage inflicted over the last year, strengthening strategic foresight is now more important than ever."

12.41pm GMT

Goldman Sachs has posted a jump in profits, as its investment banking, wealth management and bond, currency and commodities trading divisions all thrived despite the pandemic.

12.13pm GMT

The oil price has risen today, despite the IEA's cutting its oil demand forecast for 2021.

Brent crude is up 1.3% at $55.50 per barrel, still below the 11-month high above $57/barrel hit last week.

Crude prices are rallying following a weaker dollar but are nothing to brag about considering the slide seen at the end of last week. COVID new variants from the UK and Denmark have the energy markets nervous that the short-term outlook could get a lot worse. Both new variants are more infectious than the original virus and that could lead to the tightening of restrictions across the globe over the next couple of weeks.

Crude demand forecasts will see many updates over the first half of the year as no one can get a handle on when the tightening of virus restriction will end. The IEA monthly report trimmed their 2021 global oil demand forecast by 0.3 million barrels, bringing the recovery a 5.5 million barrel per day boost to 96.6 million this year. Vaccine rollouts have mostly disappointed across the globe and new virus variant risks will hurt the recovery in the first quarter.

11.36am GMT

Bitcoin and Tesla shares are more likely to halve in value than double over the next 12 months, according to Deutsche Bank's latest poll of investors.

The monthly survey found widespread agreement that there are some bubbles in the markets (which have rallied strongly since crashing last spring).

More than half of people surveyed by Deutsche Bank think Bitcoin and Tesla are more likely to halve than double. pic.twitter.com/LAL4kCy9A5

11.08am GMT

Sky News is reporting that the City's last-remaining open outcry trading ring, at the London Metal Exchange (LME), could be consigned to history.

Sky News has learnt that the LME is expected to propose the end of its open outcry structure in a consultation document to be published later on Tuesday.

It will be regarded as a historic moment for one of the most identifiable practices in the City of London, and is likely to meet stiff resistance from some LME brokers.

Revealed: The London Metal Exchange's plan to close its historic trading Ring will be unveiled this afternoon, framed in the context of an effort to modernise a City tradition dating back to the 1800s and improve the market's transparency. https://t.co/mXDrd76Sje

10.34am GMT

The Boeing 737 Max will be approved to fly once more in the EU from next week, another critical step in its return to service after two fatal crashes.

10.19am GMT

German economic sentiment has picked up this month despite the ongoing pandemic, according to the latest healthcheck from the ZEW Institute:

Good news for the Eurozone business morale: German ZEW Economic Sentiment rises to 61.8 in January, from previous 55.0 and more than expected 60.0@graemewearden

German ZEW Survey Expectations Jan: 61.8 (exp 59.4; prev 55.0)
- ZEW Survey Current Situation Jan: -66.4 (exp -68.3; prev -66.5)

10.14am GMT

Shares in online electricals retailer AO World have dropped 6% this morning, as the pandemic drives up its costs and forces customers to cancel contracts

AO, which sells washing machines, freezers, laptops etc over the web, reported its strongest ever peak trading period" over the Black Friday period and in the run up to Christmas.

We have incurred significantly higher costs as we negotiate some of the operational challenges of working in a Covid compliant environment, particularly in the reverse supply chain.

We have also seen a slightly increased rate of cancellation of individual consumers' long term contracts in mobile and warranties, driven by Covid impacts on customers behavior.

AO's costs have increased significantly' due to the Covid-19 environment, which appears to be weighing on the share price. The company is investing in its business - warehouses, vehicles and staff - so it is clearly optimistic in its outlook.

9.50am GMT

Taking a long position on bitcoin is now the most crowded trade in finance, overtaking long tech".

#Bitcoin overtakes "Long tech" as most crowded trade in BofA fund manager survey. Long Bitcoin jumps to top w/36% of FMS investors saying it is the most crowded trade" dethroning Long tech" for first time since Oct'19. #2 Long Tech, #3 Short US dollar, #4 Long Corporate Bonds. pic.twitter.com/dmXe9E8I6e

BofA Fund Manager Survey:

- Long bitcoin most crowded trade, then long tech, short USD
- Vaccine rollout issues, taper tantrum & wall st bubble top tail risks
- >83% expect steeper curve
- 41% (record) see small caps > large caps over nxt 12 mths

9.19am GMT

Oil demand also saw an unprecedented collapse" last year, according to the latest monthly report from the International Energy Agency.

The IEA says that demand dropped by 8.8 million barrels per day (bpd) in 2020.

For now, a resurgence in Covid-19 cases is slowing the rebound, but a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year.

The global vaccine roll-out is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020's unprecedented collapse.

But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales. This has contributed to us revising down our forecast for global oil demand by 0.6 mb/d for 1Q21 and 0.3 mb/d for 2021 as a whole.

Our January Oil Market Report is out now:

Global oil demand is expected to increase by 6% to 96.6 mb/d in 2021 after an unprecedented drop in 2020

Global supply is set to rise by 1.2 mb/d this year, with OPEC+ driving the growth

Read more https://t.co/bY3S6vNJlt

IEA cuts 2021 oil demand forecast https://t.co/vntBmlhLxk

9.04am GMT

European stock markets have opened higher, with the FTSE 100 index up 26 points or 0.4% at 6746 points.

Travel stocks are among the risers, amid reports that demand for holidays is rising as Covid-19 vaccines are rolled out.

If the growth rate generated by government investment in infrastructure or people exceeds the cost of borrowing, it is a worthwhile exercise. Given the structural changes ahead, investing in people may be more important.

European car registrations fell again in December-it will be interesting to see whether transport demand shifts if more people work from home and shop online.

8.50am GMT

The drop in European car sales last year will go a little way towards fighting the climate emergency....

...and so will a new technological breakthrough - a fast-charging battery that could help the electric car industry replace petrol and diesel cars.

Batteries capable of fully charging in five minutes have been produced in a factory for the first time, marking a significant step towards electric cars becoming as fast to charge as filling up petrol or diesel vehicles.

Electric vehicles are a vital part of action to tackle the climate crisis but running out of charge during a journey is a worry for drivers. The new lithium-ion batteries were developed by the Israeli company StoreDot and manufactured by Eve Energy in China on standard production lines.

Electric car batteries with five-minute charging times produced

- first factory production means recharging could soon be as fast as filling up petrol or diesel vehicles

Story by mehttps://t.co/PNEaJqS2P7

8.23am GMT

VW Group (which includes Volkswagen, Skoda, and Audi) sold the most cars across the EU last year, with sales down 21.6 % at 2.54 million.

PSA Group (including Peugeot, Citreon and Opel/Vauxhall) saw its sales slump 29% to 1.5m, followed by Renault Group (Renault, Dacia, Lada) with 1.1m cars sales (down 25%).

Passenger #car registrations: 24% in 2020; -3.3% in December.

"2020 saw the biggest yearly drop in EU car demand since records began, with new-car registrations falling by 3 million units compared to 2019."

PRESS RELEASE: https://t.co/7fjYQwpPmW pic.twitter.com/vtk6hlA4Wq

8.04am GMT

Across Europe as a whole, car sales slumped by over 24% last year -- with almsot four million fewer new vehicles hitting the road.

Some 11,961,182 car registrations were recorded in total across the EU, the UK, and Iceland, Norway and Switzerland -- down from 15.8m in 2019.

7.55am GMT

Europe's car industry only managed one month of sales growth in 2020, Bloomberg point out:

Carmakers managed to better cope with government measures to contain the spread of the coronavirus as the year rolled on, helped by subsidies and dealers embracing online-ordering tools.

But the collapse in sales in March, April and May proved difficult to come back from, with the industry managing a single month of growth all year. By contrast, China's auto market expanded throughout the second half.

Europe Car Sales Drop Most on Record in Year Bedeviled by Virus https://t.co/TLXY7XQAj7

7.50am GMT

Following Brexit, the UK car market isn't included in ACEA's count of EU car sales -- but it suffered an even bigger slump last year.

UK car sales slumped by over 29% in 2020 to 1.63m, from 2.3m a year (according to data from the SMMT earlier this month).

7.37am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Europe's car industry has suffered its biggest ever drop in sales, as the Covid-19 pandemic dealt an unprecedented" to the sector.

Containment measures - including full scale lockdowns and other restrictions throughout the year - had an unprecedented impact on car sales across the European Union.

2020 saw the biggest yearly drop in car demand.

European Car Sales fall 24% in 2020, biggest decline on record..

European new car sales drop by 3.7% y/y in December - ACEA

ACEA said 2020 saw the biggest yearly drop in car demand since records began, with new car registrations falling by 24.3% compared to 2019.

Janet Yellen will lay out the case for President-elect Joe Biden's proposed $1.9tn relief package at her confirmation hearing as Treasury secretary, arguing that the smartest thing we can do is act big".

In prepared remarks obtained by the Financial Times ahead of her appearance before the Senate finance committee on Tuesday, Ms Yellen said the US risked a longer, more painful recession" and long-term scarring" if it did not move quickly to inject more government spending into the economy.

European Opening Calls:#FTSE 6758 +0.55%#DAX 13947 +0.71%#CAC 5654 +0.65%#AEX 654 +0.58%#MIB 22674 +0.78%#IBEX 8289 +0.41%#OMX 1974 +0.59%#STOXX 3623 +0.57%#IGOpeningCall

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