European car sales see record fall, as pandemic hits oil demand – business live | Business

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.

Earnings per share rose to $24.74 for 2020, up from $21.03 in 2019. In the last quarter, earning jumped to $12.08 per share, up from $4.69 year ago, and $8.98 in July-September.

Here’s the details:

• Investment Banking generated record net revenues of $9.42 billion, driven by record Equity underwriting net revenues and the second highest annual net revenues in Debt underwriting. The firm ranked #1 in worldwide announced and completed mergers and acquisitions, worldwide equity and equity-related offerings and common stock offerings for the year.
• Global Markets generated net revenues of $21.16 billion, 43% higher than 2019, and its highest annual net revenues in ten years, reflecting strong results in both Fixed Income, Currency and Commodities (FICC), which included the third highest annual net revenues in intermediation and record net revenues in financing, and Equities, which included record net revenues in derivatives.
• Asset Management generated net revenues of $7.98 billion, including record Management and other fees.
• Consumer & Wealth Management generated record net revenues of $6.00 billion, including record Wealth management net revenues and significantly higher Consumer banking net revenues

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.

Ed Moya of OANDA says concerns about the pandemic are weighing on the energy market:

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.

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).

Asset prices look bubbliest in the cryptocurrency market, and in US tech stocks, according to the poll of 627 market professionals. It was conducted last week by Deutche strategist Jim Reid [among readers of his Early Morning Reid daily research note].

It found that:

• Starting with potential bubbles in the financial markets. The vast majority of respondents (89%) see some bubbles in financial markets currently.
• When asked to rate the degree to which an asset class was a bubble, 50% of all readers gave bitcoin a 10 – the highest rating. Only 8% rated the cryptocurrency as a 5 or lower, and it had an average rating of 8.7, which is the highest among assets measured.
• After bitcoin, US tech stocks were seen as the next largest bubble with an average score of 7.9 out of 10, with 8 also being the most answered level. 83% of respondents gave a tech bubble a rating of 7 or higher.

• Non-tech US equities (4.7) and European equities (4.3) were actually the lowest so little sign of investors thinking there is a bubble here.
• When asked specifically about the 12 month fate of Bitcoin and Tesla – a stock emblematic of a potential tech bubble – a majority of readers think that they are more likely to halve than double from these levels with Tesla more vulnerable according to readers

It’s worth remembering that Tesla’s share price rose around 700% last year, while bitcoin quadrupled.

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.

Such a move would end an era of traders gesticulating and calling out buy and sell orders to each other.

That practice has mainly moved to electronic systems in recent years, but carries on at the LME – although the ring has been closed since March due to the pandemic.

Here’s the details:

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.

The LME Ring underpins roughly $50bn of metal trades every day, and has been operational since the 1800s, surviving two world wars in the process.

It has, however, been temporarily shut as a result of the coronavirus pandemic, and had not been scheduled to resume trading until social distancing protocols had been abandoned.

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

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.

UK revenues jumped by over 67% in the last quarter of 2020, and surged 77.4% in Germany, as shoppers turned to online retailers as the high street locked down.

But, AO also warns that complying with social distancing rules is pushing up its costs, particularly as some customers return products (the ‘reverse supply chain’) or cancel warranties as household budgets tighten.

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.

In the long term, AO is still optimistic that the lockdown will boost demand for electrical goods, due to the “structural shift online”, and the move towards home working.

David Madden of CMC Markets says:

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.

AO (-6%) has dropped to the bottom of the FTSE 250 this morning; fellow retailers Next (-3%) and Kingfisher (-2.4%) are also down.

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

That’s the message from Bank of America’s latest monthly fund manager survey, which also showed that taking a short position on the US dollar is the third-most crowded trade.

Bitcoin has more than doubled over the last five weeks, amid signs that some institutional investors are seeing cryptocurrencies as a credible asset class. It’s up around 3% today at $37,400, below the record high near $42,000 set earlier this month.

Fund managers also repored that the top ‘tail risks’ are the possibility of problems with the vaccine rollout (30%), the Federal Reserve easing its asset purchases (29%), and a Wall Street bubble (18%).

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.

And with the pandemic weighing on the global economy, the group has cut its forecast for global oil demand in 2021 by 300,000 barrels per day, to 5.5m bpd.

The IEA explains:

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.

For the first quarter of 2021, it has cut its forecast by 580,000 barrels per day.

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.

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.

Jet engine maker Rolls-Royce is leading the Footsie risers, up 4.5% at 109p, with airline group IAG up 2.3%. Hotel group Intercontinental (+1.4%) and budget airlines easyJet (+5%) and Wizz Air (+3.7%) are also rallying.

Investors are also hopeful of an economic recovery this year as Joe Biden’s administration pushes through its $1.9bn stimulus programme.

As flagged earlier, Treasury Secretary nominee Janet Yellen is expected to argue for more sending at her confirmation hearing today.

As Paul Donovan of UBS Wealth Management puts it:

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.

And on the car sales figures, Donovan adds:

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.

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.

My colleague Damian Carrington explains:

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.

StoreDot has already demonstrated its “extreme fast-charging” battery in phones, drones and scooters and the 1,000 batteries it has now produced are to showcase its technology to carmakers and other companies. Daimler, BP, Samsung and TDK have all invested StoreDot, which has raised $130m to date and was named a Bloomberg New Energy Finance Pioneer in 2020.

The batteries can be fully charged in five minutes but this would require much higher-powered chargers than used today. Using available charging infrastructure, StoreDot is aiming to deliver 100 miles of charge to a car battery in five minutes in 2025.

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%).

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.

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.

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.

Car sales across the European Union slumped by 23.7% last year, new data shows, the worst slump on record.

Just 9.9m new vehicles were registered in 2020, down from 13m in 2019, as lockdown restrictions hammered demand.

Industry body ACEA reports that:

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.

Every EU country saw double-digit sales falls in 2020, ACEA reports. Spain posted the sharpest drop (‐32.3%), followed closely by Italy (‐27.9%). Sales fell by over 25% in France, and dropped 19% in Germany.

The worst slump came in March and April, predictably, when the coronavirus outbreak hit Europe’s economy. But sales have remained weak since.

In December, new registrations fell by 3.3%, the third monthly decline in a row, as the second wave of Covid-19 forced fresh lockdown restrictions.

Also coming up today

European stock markets are set to rise, ahead of Janet Yellen’s confirmation hearing at the Senate.

The Treasury Secretary noninee is expected to explain that – with interest rates so low – the US should spend heavily to ensure the economic recovery.

The Financial Times explains:

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.

The agenda

• 10am GMT: ZEW index of eurozone economic sentiment
• 3pm GMT: Treasury secretary nominee Janet Yellen’s Senate confirmation hearing