Closing summary
Time to wrap up.
The head of the European Central Bank has called for bitcoin to face global regulation. Christine Lagarde said the cryptocurrency was a highly speculative asset used for money-laundering and other ‘funny business’.
The criticism had little impact on bitcoin itself, though, which is broadly flat today at $34,600.
Oil has hit its highest level in close to a year, before dropping back. Brent crude traded as high as $57.42 per barrel today, as Saudi Arabia began to rein in supplies.
Rising gasoline price helped to drive US inflation higher last month, with consumer prices up 0.4% in December. Economists said it wasn’t alarming, though.
The pound came close to a 32-month high this morning, hitting $1.37, amid hope that vaccine rollouts will help the UK economy recover this year.
Shares in Intel spiked after it recruited former veteran Pat Gelsinger back to the company.
Here are some more of today’s stories:
And, at the risk of spoiling your appetite...
In the City, the FTSE 100 has ended the day slightly lower - down 8 points at 6745.
Ocado finished as the top riser, up 3.5%, with supermarket rival Morrison gaining 2.7%.
Housebuilder Persimmon led the fallers, down over 6% after warning that the new Covid-10 variant could hit housebuilding operations.
Debenhams’ flagship Oxford Street store in London and five other branches will not reopen after the current coronavirus lockdown.
The department store chain, which is being wound down, said shops in Portsmouth, Staines, Harrogate, Weymouth and Worcester would also shut permanently.
As a result, 320 staff – including 140 at Oxford Street – who are currently furloughed will be made redundant.
The beleaguered retailer, which traces its roots back 243 years and started trading as a drapery and haberdasher from a shop near its Oxford Street store, entered liquidation at the start of December after the JD Sports chain walked away from rescue talks.
Debenhams is letting 320 staff go immediately and says 6 stores won’t reopen when lockdown ends (including Oxford St). Mike Ashley’s rescue bid has yet to materialise. Closing down sale continues online - at this rate, there soon won’t be much of the business left to rescue. pic.twitter.com/E8CW4jwKtO
— Joel Hills (@ITVJoel) January 13, 2021
Speaking of semiconductors....Honda will shut its UK factory for four days next week as global supply chain problems caused by the coronavirus pandemic continue to plague the Japanese carmaker.
The closure is thought to be related to the unavailability of semiconductors, the computer chips used to run cars’ onboard management systems. The problem has affected carmakers around the world. Volkswagen has described it as a “global semiconductor bottleneck”.
Honda UK told workers that some production activities would be suspended between 18 and 21 January because of Covid-related global supply issues, a spokesperson said. The factory will aim to restart production on 22 January, he added.
Intel shares jump as Gelsinger returns
Shares in Intel have surged by over 8% after the chipmaker announced that it has hired VMware’s chief executive Pat Gelsinger as its new CEO, replacing Bob Swan.
The move comes just weeks after activist hedge fund Third Point pushed for immediate action to improve Intel’s performance, having fallen behind rivals like AMD and Nvidia.
Gelsinger is an IT veteran, and former chief technology offices of Intel before leaving to join data storage firm EMC back in 2009. He once cowrote a book on how to programme the 80386 processor - proof of his technological skills.
Indeed, Gelsinger harked back to some of Intel’s pioneers, including co-founders Robert Noyce and Gordon Moore:
“Having begun my career at Intel and learned at the feet of Grove, Noyce and Moore, it’s my privilege and honor to return in this leadership capacity.
I have tremendous regard for the company’s rich history and powerful technologies that have created the world’s digital infrastructure.”
Bob Swan was formally Intel’s CFO before becoming acting CEO in June 2018, and appointed full-time in January 2019.
Intel insists that the change is unrelated to its financial performance, saying that revenue and earnings are ahead of prior guidance:
Intel expects its fourth-quarter 2020 revenue and EPS to exceed its prior guidance provided on Oct. 22, 2020. In addition, the company has made strong progress on its 7nm process technology.
But still, the return of Gelsinger could be a significant move for the company....
Absolutely! @PGelsinger was CTO of @Intel and there’s no one better prepared or proven to take the leadership of this company. I expect that this will mark the rebirth of the company, just like @SatyaNadella at @Microsoft or Steve Jobs returning to Apple! https://t.co/2MxJViQz8Q
— Stephen Foskett (@SFoskett) January 13, 2021
Intel shares surge 8% after sources tell CNBC that CEO Bob Swan will be leaving on February 15th https://t.co/XLPp4Dgass pic.twitter.com/gFhcjtxnir
— CNBC Now (@CNBCnow) January 13, 2021
Updated
US inflation: what the experts say
Economists and investors aren’t alarmed by the pick-up in US inflation last month.
Neil Birrell, chief investment officer at Premier Miton Investors, says the 0.4% rise in consumer prices in December met expectations.
“Inflation is one of the watch words for investors at the moment, with bonds starting to discount a pick-up, all data points will get scrutinised. But the US numbers out today were in line with expectations and still show little by way of upside surprise.
Given the situation with COVID, it is probably unsurprising that prices aren’t moving higher for now. The focus will be on the size of the next COVID relief package and what that might bring.”
James Picerno of The Capital Spectator points out that core inflation is steady:
US consumer inflation at the headline level picked up in Dec, rising 0.4% over the previous month. But if you look past the monthly noise the 1yr trend still shows modest, stable inflation. Notably, the 1yr core CPI change (unadjusted data) was steady at 1.6%: pic.twitter.com/mmRDYbeFEP
— James Picerno (@jpicerno) January 13, 2021
Gregory Daco of Oxford Economics agrees that there’s no reason for concern.
🇺🇸 US #CPI +0.4% in Dec
— Gregory Daco (@GregDaco) January 13, 2021
- energy +4.0% w/ ⛽️+8.4%
- food +0.4%
- core +0.1% w/ shelter cost only +0.1%
⬆️apparel, car insurance, new cars, pers care
⬇️used cars, recreation, medical care
Headline #inflation 1.4% y/y (⬆️0.2pt)
Core inflation 1.6% y/y (↔️)
No reason for concern pic.twitter.com/at8EvMTbEs
https://twitter.com/inflation_guy/status/1349349839117688832
US inflation rises
US inflation has picked up a little - which may interest those who are looking to bitcoin as protection against inflationary money-printing.
U.S. consumer prices rose by 0.4% in December, up from 0.2% in November, partly due to higher gasoline prices.
Food price also rose during the month, but services inflation was subdued and used car price fell.
That’s the fastest jump in monthly inflation since the summer, and lifts the annual inflation rate up to 1.4%.
That’s still below the Federal Reserve’s annual target of 2%, and lower than before the pandemic.
European Central Bank president Christine Lagarde also suggested that a digital euro should be a reality within five years.
“It’s going to take a good chunk of time to make sure it’s safe,” Lagarde told an online forum organised by Reuters, adding “I would hope that it’s no more than five (years).”
“There is a demand” for a digital currency, she added, but that there is a “need to have a system that is secure” and where risks such as hacking are addressed.
The ECB has just ended a consultation on whether to introduce an electronic currency, which it says would ‘complement’ cash, not replace it.
It received over 8,000 responses. Privacy of payments ranked highest among the requested features of a potential digital euro (41% of replies), followed by security (17%) and pan-European reach (10%).
Christine Lagarde also claimed that bitcoin’s recent volatility shows that it won’t evolve into a currency.
She explained:
It is a speculative asset by any account.
When you look at the most recent developments, upward and now the most recent downward trend. For those who had assumed that it might turn into a currency, I’m terribly sorry, this is an asset, and it’s a highly speculative asset.
She then adds that it’s been used for “some funny business, and some interesting and totally reprehensible money-laundering activity”
Here’s a video clip from the Reuters Next conference:
ECB President Christine Lagarde called for global regulation of #Bitcoin, saying the digital currency had been used for money laundering activities in some instances and that any loopholes needed to be closed. Follow #ReutersNext updates here: https://t.co/4MgFy4jnw5 pic.twitter.com/qlBtoDuZLW
— Reuters (@Reuters) January 13, 2021
ECB's Lagarde calls for bitcoin regulation
The head of the European Central Bank, Christine Lagarde, has called for bitcoin to face global regulation to tackle its use by money-launderers.
Speaking at a Reuters conference this morning, Lagarde said the cryptocurrency was ‘highly speculative’, and was being used for illegal activities.
(Bitcoin) is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity,” Lagarde said in an interview at the Reuters Next conference.
Lagarde did not provide specific examples of money laundering cases but said she understood there had been criminal investigations into illegal activity. She did not elaborate.
“There has to be regulation. This has to be applied and agreed upon ... at a global level because if there is an escape that escape will be used,” Lagarde said.
More here: ECB’s Lagarde calls for regulating Bitcoin’s “funny business”
As we wrote back in 2013, bitcoin had been used to buy drugs over the dark web, as the virtual currency allowed anonymous (or more accurately pseudonymous) transactions between digital wallets.
In 2018, when she ran the IMF, Lagarde argued for regulatory frameworks to prevent cryptocurrencies being used for money laundering and terrorist financing, or causing financial instability.
Her remarks today don’t seem to have hit the bitcoin price particularly, though, it’s currently down 1.7% at around $34,100. That’s a gain of 18% this year, but still almost a fifth off last week’s record highs.
Back on Monday, the UK financial regulator cautioned that anyone investing in cryptoassets should be prepared to lose all their money.
Lagarde also warned today that the eurozone recovery would be hurt if national lockdowns are extended beyond March, and if vaccination programmes slowed down or were inefficient.
European Central Bank President Christine Lagarde pushed back against economic pessimism, arguing that a rebound will come as pandemic uncertainty declines and that Europe possesses all the tools needed to overcome the crisis #ReutersNext https://t.co/EUd2XzqrLX pic.twitter.com/XnzDPeFhUQ
— Reuters (@Reuters) January 13, 2021
Updated
FCA extends repossession ban until April amid pandemic
Britain’s financial watchdog is proposing to extending the ban on repossessing homes from people who can’t pay their mortgage, due to the ongoing pandemic.
Under new draft guidance from the Financial Conduct Authority, UK banks would now not be allowed to repossess a home until 1 April this year. The current ban ends on 31 January.
The FCA says the worsening Covid-19 crisis means lenders should not force people out of their homes, even if they are in arrears on their mortgages.
This approach takes account of the worsening coronavirus situation and the government’s tighter coronavirus-related restrictions which mean that consumers could experience significant harm if forced to move home at this time as a result of repossession proceedings.
We recognise that there are also government bans on evictions in some nations, which could also prevent firms from enforcing home repossessions.
However, the FCA is not planning to extend a similar ban on consumer credit, meaning that consumer credit firms will be able to repossess goods and vehicles from 31 January 2021.
It says:
However, this should only be as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding.
Importantly, firms will also be expected to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate.
We have announced proposals to update guidance on mortgages and consumer credit repossessions #coronavirusuk #covid19 #FCAupdatehttps://t.co/WBtOomfZFj pic.twitter.com/JE82jI9Olx
— Financial Conduct Authority (@TheFCA) January 13, 2021
Persimmon: Covid-19 variant could slow housebuilding
The boss of housebuilder Persimmon, Dean Finch, has warned that the new, more contagious Covid-19 strain is “particularly bad” and that “it could well affect output in the spring of this year”.
At the moment, the number of workers who are off sick or self-isolating at Persimmon is only up slightly, but Mike Killoran, the finance director, said: “If we see a substantial increase in absenteeism, then it becomes more difficult to marshal resources” needed to be able to build houses.
Persimmon insisted that its building sites were safe, with strict physical distancing rules in place. It has issued a rule that only one person can work on each floor at any one time, and 500 “contravention officers” are making sure that workers stick to the rules. Persimmon tends to build two-to to three-bedroom houses.
The UK housing ministry said yesterday that while the housing market remained open for now, “it may become necessary to pause all home moves locally or nationally for a short period of time to manage the spread of coronavirus”.
Housebuilder shares fell yesterday and are down again today, with Persimmon dropping as much as 5%.
The property market ground to a halt during the first Covid-19 lockdown last spring when house moves were banned and building sites shut for several weeks, but reopened in June, and Persimmon’s weekly sales per site in the second half were 39% than a year earlier. Sales have been boosted by a stamp duty cut (but this expires at the end of March), as well as people moving to bigger homes in greener surroundings.
Finch, a former National Express chief executive who took the helm in June, said:
“We are clearly seeing customers look at how they want to live, where they want to live and whether they want to live in bigger houses as a result of the pandemic, and Persimmon is a beneficiary of that.”
Persimmon said forward sales were up 25% despite some delays to reservations as first-time buyers awaited the opening of the new help to buy scheme on 16 December. The company completed 13,575 homes in 2020, down from 15,855 in 2019, and revenues also fell, to £3.33bn from £3.65bn, although the average selling price was up 7% to £230,500.
It said in a statement:
“While the Group has achieved pre-Covid build rates since the end of June 2020, including during all subsequent lockdowns imposed in England, Scotland and Wales, we recognise the elevated risk to the Group’s planned build programmes presented by the higher transmission rates of the new variant of the Covid-19 virus.”
Morrisons has been applauded for guaranteeing to pay its store workers at least £10 an hour, becoming the first UK supermarket to do so.
The Bradford-based chain says the new deal will begin in April, and will herald a significant pay increase for its almost 96,000 colleagues. The grocer’s minimum hourly pay currently stands at £9.20 per hour.
The Living Wage Foundation, which sets the voluntary measure based on everyday living costs in the UK, welcomed the move by Morrisons, which also has a London weighting.
But Laura Gardiner, Director of the Living Wage Foundation, would also like to see the supermarket go further, adding:
“We’d love to see Morrisons accredit with the Living Wage Foundation to ensure that all staff earn a wage that covers the true cost of living, including outsourced cleaners, security guards and trolley collectors.”
Highlighting the low pay faced by many shop workers, the Foundation notes that 45% of all supermarket workers earn below the real Living Wage and are struggling to keep their heads above water, according to new figures from Citizens UK.
The real living wage is £10.85 an hour in London and £9.50 an hour across the rest of Britain.
Ed Miliband MP, Shadow Business Secretary, has called on supermarket bosses to do more:
“Every worker should be paid a fair wage they can live on. It’s just wrong that so many of our key workers, including in sectors like supermarkets and care, are being asked to survive on low pay.
Pound hits $1.37 amid vaccine rollout optimism
In the currency markets, sterling has risen close to a 32-month high against the US dollar.
The pound has hit $1.37 this morning, slightly below last week’s highs, a day after Bank of England governor Andrew Bailey sounded cautious about the prospect of cutting interest rates below zero.
Ricardo Evangelista, senior analyst at ActivTrades says the UK’s Covid-19 vaccination programme will help the economy recover this year.
An ambitious, and so far reasonably well deployed, vaccination plan is placing the UK in a privileged position in relation to the EU and the United States in bringing the coronavirus under control and in pole position for the expected post-pandemic economic recovery.
In addition to vaccine hopes, the pound is also being supported by the words of Andrew Bailey, as the Bank of England governor talked down the case for further interest rate cuts during a speech made on Tuesday, also highlighting the dangers of adopting negative rates.
Fawad Razaqzada, market analyst at Think Markets, predicts the pound could hit $1.40 as the Covid-19 pandemic eases.
With the pound starting to look strong at the start of this year, I reckon it could be among the best-performing major currencies in the months ahead now that a no-deal Brexit has been avoided.
With the UK also being among the first countries to roll out the Covid vaccines, this could see the economy rebound sharply once lockdowns end, providing sterling an additional boost.
Sterling has also hit a seven-week high against the euro at €1.1232, meaning one euro is worth 89p.
Europe’s winter lockdown has created a surge in takeaway orders, as people were again barred from visiting the pubs and restaurants.
Takeaway group Just Eat Takeaway.com reported strong sales over the last quarter, notable in the UK where delivery orders were nearly five times higher than in 2019.
My colleague Joanna Partridge explains:
Locked-down consumers across Europe ordered 57% more takeaways from the continent’s biggest delivery group in the final three months of 2020 than a year earlier.
The huge leap in trade reported by Just Eat Takeaway.com was a further acceleration in growth from the 46% jump in the third quarter, as surging coronavirus cases resulted in countries across Europe reintroducing strict restrictions, keeping people at home.
In the UK, delivery orders surged by almost 400% in the fourth quarter of 2020 compared with the same period of 2019, as many consumers were once again asked by the government to stay at home.
Shares in the group have dropped by 4.5% this morning, though, as Just Eat is pledging to “invest heavily and prioritise market share over adjusted EBITDA” (ie, profits).
ASOS eyes £15m hit from Brexit tariffs
ASOS has also flagged up that it expects to incur “Brexit tariff costs” of around £15m this financial year, associated with country of origin rules.
Under the UK-EU free trade deal, products will attract tariffs if more than a certain percentage of their value is neither of British nor EU origin.
ASOS shares +3.5% on positive trading update.
— Daniel Coatsworth (@Dan_Coatsworth) January 13, 2021
Demand is strong, fewer returns, but gross margins down, freight costs up and £15m Brexit tariff costs.
"Asos faces £15m in Brexit tariff costs following booming sales in pandemic"
— Edwin Hayward 🦄 🗡 (@uk_domain_names) January 13, 2021
That's because the tariff-free aspect of the deal doesn't apply to goods imported then exported again - and, like many large firms, ASOS centralises some of its distribution... https://t.co/0q7G1toyax
Updated
ASOS's UK sales surge during lockdown
Photograph: Kay Roxby/Alamy Stock Photo/Alamy Stock Photo
Online fashion chain ASOS has raised its profit guidance after posting strong sales during the pandemic.
UK sales surged by 36% over the last four months of 2020, as ASOS benefitted from the lockdown which forced high street rivals to shut non-essential retail stores.
ASOS says its “exceptional UK growth reflected strength of market position as well as restrictions on non-essential retail stores through the peak period”.
Total retail sales worldwide grew 23% including 18% in the EU and 13% in the US.
ASOS now expects profits to hit the top end of current market expectations (which currently range from £115m to £170m)
But CEO Nick Beighton also flags up that the pandemic is still creating economic uncertainty:
Looking forward, given the uncertainty associated with the virus and the impact on customers’ lives, our cautious outlook for the second half of the year remains unchanged.
However, the strength of our performance gives us confidence in our continued progress towards capturing the global opportunity ahead.”
Updated
Pink prosecco helps Lidl post record Christmas sales
A flurry of UK companies are reporting Christmas trading figures this morning.
Discount supermarket Lidl is toasting a “record” festive period. Total sales surged 17.9% in the four weeks to December 27, with the average basket up almost 25%.
Popular items included pink prosecco - with one million bottles sold, along with traditional favourites such as panettone and mince pies.
Bubbly: Lidl says more than six million glasses of Pink Prosecco were enjoyed by their customers over the festive period. Cheers! pic.twitter.com/HZsg23S5PO
— simon read (@simonnread) January 13, 2021
Lidl says Christmas sales up 17.9% based on same 4 week period year before. Basket size up 24.8%. Pink Prosecco did well with one million bottles sold. Premium range sales up 22%, too.
— Emma Simpson (@BBCEmmaSimpson) January 13, 2021
Lidl’s deluxe range also proved popular, with customers treating themselves to higher-end food and drink (goodness knows they deserve it, after 2020).
Christian Hartnagel, chief executive of Lidl GB, said:
“Despite this Christmas being a difficult time for many across the country, we are pleased to have been able to help our customers enjoy themselves by offering high quality food at the lowest prices on the market.”
Lidl is also continuing its store expansion plans, and aiming for 1,000 UK stores by 2023.
Shares in oil giants BP (+1.5%) and Royal Dutch Shell (+1%) have risen in early trading, following the rally in the oil price.
This has helped to lift the FTSE 100 by around 10 points or 0.15%, to 6764 (up 4.7% so far this year).
China car sales rise again in December
China’s car sector has continued to recover from the shock of the Covid-19 pandemic.
Auto sales jumped by 6.4% in December, compared to a year earlier, the China Association of Automobile Manufacturers (CAAM) reported, with 2.83 million sold during the month.
That’s the 9th month of gains in a row, as sales picked up from the lockdowns earlier last year.
CAAM also reported that sales for 2020 as a whole were 1.9% lower than in 2019, with 25.31m new vehicles sold.
China's #auto sales in Dec 2020 hit 2.83 million units, up 6.4% y-o-y, but the country's annual auto sales last year were down 1.9% y-o-y to 25.31 million units: China Association of Automobile Manufacturers pic.twitter.com/h09Wi6iSPC
— Global Times (@globaltimesnews) January 13, 2021
Sales of ‘new energy’ vehicles rose around 11% last year; Reuters has more details:
The data showed passenger vehicle sales fell 6% for the full year of 2020.
The sales of commercial vehicles, which constitute around a quarter of the overall market, surged 19% thanks to government investment in infrastructure and as buyers upgraded to comply with tougher emissions rules.
Sales of new energy vehicles (NEVs), including battery-powered electric vehicles, plug-in petrol-electric hybrids and hydrogen fuel-cell vehicles, increased 11% in 2020 to 1.37 million units.
#China SUV annual sales surpass sedan sales for the 1st time.
— Moneyball (@DKurac) January 13, 2021
PV started to grow in May, in Sep passed CVs to become major contributor to auto 2020 sales.
Trucks major contributor to CV sales.with heavy and light trucks as leading segments. The growth was policy driven.
(CAAM) pic.twitter.com/mfMHArkhaR
Introduction: Brent crude jumps over $57
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Oil is continuing its new year rally, with prices hitting their highest level since last February as the reflation trade gathers pace.
Brent crude, the benchmark, has jumped by another 1% overnight, back over the $57 per barrel mark, amid expectations for a pick-up in demand this year as (hopefully) the global economy emerges from the pandemic.
This latest surge comes after the American Petroleum Institute reported that US stockpiles dropped more sharply than expected last week, down 5.8 million barrels.
A notably upbeat assessment of economic prospects from China’s president Xi Jinping is also bolstering optimism, says Avtar Sandu, senior manager commodities at Phillip Futures.
“Crude oil prices also continued to rally ... on economic optimism in China after President’s Xi comments and an inventory report from API showed that crude oil inventories fell more than expected.”
Today’s rally also follows reports that Saudi Arabia has cut supplies to some refiners, as it delivers on its pledge to rein in production.
Bloomberg has the details:
Saudi Arabia slashed crude oil supplies to at least nine refiners in Asia and Europe after the kingdom volunteered to cut its production by 1 million barrels a day for February and March.
Aramco will supply less crude as part of long-term contracts next month, giving some Asian processors as much as 20%-30% less than they had sought, according to company officials who received the notices but asked not to be identified as the information is private. A European refiner that typically buys small volumes from Saudi Arabia will not get any cargoes for February.
Brent crude oil has surged above $57 a barrel today (up ~10% year-to-date), while WTI is nearing $54 a barrel | #OOTT
— Javier Blas (@JavierBlas) January 13, 2021
Oil isn’t the only commodity rising, though.
Corn prices surged yesterday, as traders continue to anticipate a massive new US stimulus programme once the Democrats have taken control of the White House.
Corn is limit up! TIME TO HOARD NACHOS pic.twitter.com/jZfsal1wS8
— Michael P. Regan (@Reganonymous) January 12, 2021
The agenda
- 10am GMT: Eurozone industrial production for November
- 1.30pm GMT: US inflation data for December
- 3.30pm GMT: US weekly oil inventory figures
Updated
