Shares in Tesla have bucked today’s trend, by surging after the electric carmaker finally secured entry to the S&P 500.

Tesla shares have jumped by around 7.5% today, as investors anticipated that tracker funds would now have to buy the stock once it joins the S&P 500 next month.

Our wealth correspondent Rupert Neate point out that the rally means CEO Elon Musk, is poised to overtake Facebook’s Mark Zuckerberg as the world’s third richest person:

Tesla had been due to join the index at the last reshuffle in September but was passed over due to concerns about the stock’s volatility.

With a stock market value approaching $400bn, Tesla will be among the most valuable companies ever added to the S&P 500 index

Heads-up. The head of the European Central Bank has struck a cautious note on the pandemic, saying that its economic projections won’t fundamentally change even if an effective vaccine is rolled out.

Christine Lagarde told Bloomberg’s New Economy Forum that the ECB’s current forecasts were already based on a vaccine being deployed in 2021 -- and that the second wave of Covid-19 cases already causing fresh economic pain.

Reuters has the details:

An effective coronavirus vaccine will not fundamentally change European Central Bank economic projections, as a medical solution was already factored into forecasts, ECB President Christine Lagarde told a Bloomberg event on Tuesday.

Lagarde added that, while vaccine deployment may be somewhat quicker than earlier thought, the economy was also taking a bigger hit from the second wave of the pandemic than expected.

“I’m not sure that is going to be a major game changer for our forecasts, simply because what we had anticipated in our baseline was that at some stage in the first half of 2021 there would be a vaccine and that it would be rolled out in the course of 2021,” she said.

Andrew Hunter, senior US economist at Capital Economics, agrees that the slowdown in US retail sales last month suggests the new wave of virus infections is starting to weigh on the economy.

He told clients:

Perhaps most notable was the 0.1% m/m decline in spending at bars and restaurants, the first fall since April and the clearest sign yet that the new wave of virus cases is starting to weigh on the recovery. The high-frequency data point to further weakness to come, with restaurant dining now clearly trending lower and the recovery in travel apparently stalling

That may have only a limited impact on retail sales given the ongoing substitution towards goods spending, but it does suggest that overall consumption growth could slow sharply over the next couple of months unless the virus is brought under control.

Rupert Murdoch’s News Corp is exploring a bid for Simon & Schuster, the world’s third biggest book publisher, home to authors including Hillary Clinton and Stephen King and classic best-sellers including Gone With the Wind and Catch-22.

News Corp, parent company of the publisher of The Sun and Times in the UK, also owns HarperCollins, which has published works by JRR Tolkien and Mark Twain.

Other bidders for Simon & Schuster, which was put up for sale by ViacomCBS in March and is expected to fetch well over $1bn, include Penguin Random House, the world’s biggest book publisher, which is owned by German media conglomerate Bertelsmann.

Mohamed El-Erian, chief economic adviser at Allianz, points out that Bitcoin’s recent rally has come with a lot less hype than the one in 2017:

I suspect we’ll hear more excitement if Bitcoin starts hitting record highs again, though...

Christmas shoppers turning to the internet should stick with reputable websites of know retailers instead of third-party sellers on online marketplaces when buying electronic goods as gifts, a UK safety charity has warned today.

Electrical Safety First says Britons are swapping one risk for another, as millions more consumers than usual shop from online marketplaces due to fears about Covid-19, putting themselves at risk of potentially dangerous substandard and counterfeit goods.

Its new research (3,000 adults were polled) found that 58% of consumers will be shopping online marketplaces for Christmas this year, with over half (53%) saying they will be using these sites more than in previous years.

Lesley Rudd, chief executive of Electrical Safety First, commented:

“With Covid-19 at the forefront of everyone’s minds, it is understandable that many consumers are planning to shop online for Christmas gifts to avoid the High Street this year. But we would urge people purchasing electrical products to use the stores or websites of known manufacturers and retailers rather than resorting to third party sellers on online marketplaces.

“Substandard or counterfeit products are often very difficult to spot to the untrained eye. We have proposed legislation which, if passed, would force online marketplaces to take responsibility for the safety of the goods sold on them and allow consumers to shop in good faith.”

Consumers can find out more about the bill – and the tougher action proposed – by checking out Electrical Safety First’s online petition.

Stocks have fallen further in London too.

The FTSE 100 is now down 110 points, or 1.7%, at 6311 points, which wipes out Monday’s rally.

Banking giant HSBC (4.5%), the London Stock Exchange (-4.4%), mining group Antofagasta (-4.2%) and airline group IAG (-4%) are currently the top fallers.

Correction: The earlier quote from Asda about business rates (see 12.57pm) was from the company’s statement (not directly from CEO and president Roger Burnley as I wrongly wrote). Apologies, it’s now updated.

Reuters points out that the squeeze on US families is about to get worse...

Restrictions and consumer avoidance of crowded places like bars and restaurants could undercut spending and trigger another wave of layoffs, further squeezing incomes following the loss of a government weekly unemployment subsidy.

The supplement, which was part of more than $3 trillion in government coronavirus relief, has lapsed for millions of unemployed and underemployed workers. Millions more will lose benefits next month when a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs expires.

Another government program providing benefits for people who have exhausted their six months of eligibility for state aid will also lapse at the end of December.

More here: U.S. retail sales miss expectations in October

But.... Guy LeBas, chief fixed income strategist at financial services group Janney, reckons retail sales could bounce sharply as the holiday season approaches:

Here’s some snap reaction to the slowdown in US retail sales in October.

Chad Moutray of the National Association of Manufacturers shows how retail spending had surged back after the lockdown in March and April, but has slowed since, and almost petered out in October.

Paul La Monica of CNN Business suggests the lack of stimulus support is hurting:

Greg Daco of Oxford Economics says the new wave of Covid-19 cases has hurt retailers, along with lower incomes, the end of the summer hols, and the post-stimulus squeeze.

Back in the markets, most European indices have turned lower as a the recent rally fades.

In London, the FTSE 100 is now down around 70 points, or 1.1%, with the stronger pound pulling down some multinationals. Travel and hospitality companies are also lower.

The Stoxx 600 index has dipped by around 0.45%, away from last night’s eight-month high.

But still, the London market is still up over 13% this month, lifted by the positive news from Pfizer and Moderna, and the end of the US election race.

Chris Beauchamp, chief market analyst at IG, says investors are pondering the huge challenge of making and distributing the huge number of vaccine doses that will be needed.

Overall the atmosphere is still positive but as the euphoria about possible routes out of the crisis begins to fade the focus will shift, to a degree at least, to the manufacture and distribution of the vaccines.

Neither of these things is likely any time soon, leaving investors to worry how much further the second wave will spread and how bad things could actually get over the course of the winter. Nonetheless, risk appetite appears well-supported from here, seasonality, inflows and sentiment all providing a foundation for further gains into the end of the year.

The main debate will focus on whether value stocks have truly seen a resurgence, or whether, once again, this unloved sector of the market is just enjoying a brief recovery before investor enthusiasm for tech stocks and other high-growth names returns.

Bang on cue.... Sainsbury’s has just released a statement to the City, confirming it has received “some very preliminary expressions of interest” in its banking arm (as Kalyeena just mentioned).

However, this does not mean anything will come of these discussions, the supermarket chain adds.

The hedge-fund owned Cooperative Bank is being targeted for a potential takeover, adding to a growing list of UK lenders rumoured to be changing hands during the pandemic.

The Coop Bank did not divulge any details about the size of the offer or who made the approach, only saying it was a “financial sponsor with knowledge and experience of investing in European financial services businesses.”

The disclosure, which was dropped alongside an announcement about raising regulatory debt, said:

“The Bank has recently attracted an approach from a financial sponsor with knowledge and experience of investing in European financial services businesses regarding the possibility of a sale of the Bank and/or the Holding Company.

The Bank has instructed its professional advisers to assist with the provision to this financial sponsor of relevant information to help assess the prospects of this approach.”

The bank stressed it was a non-binding offer and there was no guarantee that talks would progress.

The bank is currently owned by a group of US hedge funds – including Silver Point Capital, GoldenTree, Anchorage Capital, Blue Mountain and Cyrus Capital – who took full control in 2017 after launching a second rescue deal worth £700m.

Coop Bank’s hedge fund owners are expected make an exit at some point, but it’s questionable whether they will see this as the right time to sell. It adds to a list of potential takeovers in the UK banking sector, including Sainsbury’s Bank which has been approached by NatWest. There is also speculation about the future of TSB, after news broke that its owner Sabadell was in merger talks with Spanish rival BBVA.

The pound has gained ground this morning, as traders look for a signs of progress in the Brexit negotiations.

Sterling has gained 0.5% against the US dollar to $1.3262, its highest since last Wednesday, after Bloomberg reported that a deal could come next week - although the negotiations could still collapse.

The U.K. and European Union could strike a deal on their future trading and security relationship early next week as the two sides edge closer to agreement on the biggest sticking points.

As talks continue in Brussels, officials are planning for the possibility of a breakthrough to be announced as soon as Monday, although no precise day has been settled on, people familiar with the discussions said.

They also warned that there was still the potential for the negotiations to collapse, with the two sides still some way apart on the familiar stumbling blocks that have plagued the talks since they started in March. Getting a deal will still need the U.K. to make big political decisions over whether it is prepared to compromise, particularly on the thorny topic of access to British fishing waters, an EU official said.

The bloc’s chief Brexit negotiator, Michel Barnier, has penciled in a meeting with the EU’s 27 national ambassadors on Friday to brief them on progress, the official said. Prime Minister Boris Johnson may then hold another phone call with European Commission President Ursula von der Leyen, but that is yet to be confirmed, the official said.

More here: Brexit Negotiators Zero In on a Deal as Soon as Next Week

Our Brussels bureau chief Daniel Boffey wrote last night that the talks remained troubled, with the EU considering an emergency plan where the European parliament would vote on a trade deal on 28 December, three days before the transition period ended.

Bank of America’s latest investor survey shows that the markets are in “full bull” mode, hoping that Covid-19 vaccines will help economies to reopen again soon.

The monthly report found that investors have been busy deploying cash into smaller companies, emerging markets and banks, whose values were hit hard by the pandemic.

Reuters has the details:

The euphoria sent investors’ cash levels down to 4.1% in November, from 4.4% last month, to pre-COVID-19 levels last seen in January, according to the survey of 190 fund managers with $526 billion in assets under management.

With global economic growth and profit expectations running at a 20-year high among the investors surveyed, the “reopening rotation” into oversold business sectors is likely to continue in the fourth quarter, BofA said.

But the bank advised clients: “We say ‘sell the vaccine’ in coming weeks/months as we think we’re close to ‘full bull’.”

Russ Mould of stockbrokers AJ Bell says easyJet’s results make “ugly reading”, and predicts there could be “intense price competition” for flights, as airlines compete for business once Covid-19 restrictions ease.

Mould writes:

EasyJet’s full-year results make for ugly reading and reflect a period where the business and its industry have been turned upside down through no fault of their own.

“Shareholders have suffered a sharp decline in the share price this year and the temporarily cessation of the dividend. Customers have had to contend with cancelled flights and the long road to trying to claim refunds.

“It’s been a miserable experience for everyone involved, including those working for EasyJet, which is making more job cuts, freezing pay and switching some staff to seasonal contracts.

“The recent double dose of good news on the vaccine front from Pfizer and Moderna’s trials certainly gives some hope to society that the world can start to return to normal. Airlines like EasyJet need consumers to feel more confident about being about to move around safely, otherwise few people are going to book plane tickets.

“The late summer pick-up in business was encouraging for the sector but optimism quickly waned when new lockdown restrictions began to be rolled out in various parts of the world.

“Being stuck inside during the autumn and winter periods could fuel pent-up demand for wanting to go on holiday. Once lockdown restrictions start to ease again, a more optimistic consumer may well feel the time is right to book a break away.

“EasyJet needs that event to happen sooner rather than later so cash inflows can start to radically improve. Even when demand picks up, EasyJet faces the prospect of intense price competition in the industry as airlines rush to attract business to aid their recovery.

Adam Vettese, analyst at investment platform eToro, reckons easyJet is well-placed for the recovery, after the “toughest year in aviation history”.

“The situation has been so dire that there will almost certainly be airlines out there at the moment that wonder if they will survive without a swift return to normality.

“However, easyJet is not one of those. Despite posting its first ever loss, it is incredibly bullish about its prospects.

“While its debt has piled up during coronavirus, easyJet has slashed costs, has plenty of access to liquidity and is cherry-picking the flights it knows will make it money while capacity is reduced. For those reasons it is among the strongest of European carriers and therefore will weather this storm better than most.

“And if Pfizer or Moderna get approval for their vaccines, demand for air travel will recover rapidly and I expect to see the share prices of easyJet and other airlines rally.

EasyJet’s staff have also been hit by the pandemic, with the budget airline carrying out a cost efficiency programme that aims to cut headcount costs by up to 30%.

It says:

The restructuring in the UK has already been completed, with agreements having been reached with unions and the affected staff already having left the business. Union or Works Council agreements have now also been finalised in Germany, the Netherlands and Portugal, while discussions have started in other territories.

Agreement has also been reached on a two-year pay freeze across six countries and 10% of our UK crew have already moved to seasonal contracts to operate in the peak months only.

In September, the Evening Standard reported that those seasonal contracts had helped avoid “a mass cull” of pilots, with 60 out of 700 taking voluntary redundancy after the airline closed three bases at Stansted, Southend and Newcastle.

Despite posting a record loss last year, easyJet insists it is “strongly positioned to be a leader in the recovery of the European airline industry”.

It points out that it has raised £3.1bn in liquidity since the pandemic began:

Liquidity raised during the 2020 financial year comprised £400 million from drawing down an existing Revolving Credit Facility, £400 million from two term loans, £600 million from the UK Government’s Covid Corporate Financing Facility, £608 million in sale and leaseback transactions and £409 million in new equity issuance.

Since the end of the financial year sale and leasebacks of a further 30 aircraft have been transacted, raising an additional £717 million.

EasyJet has also reached an agreement to extend its £600m UK government rescue loan, to help it through the winter season. Rather than paying the whole sum in March, it will return half then and half next November.

On the FTSE 250 index, travel company shares are handing back some of yesterday’s gains.

Shares in easyJet have dropped 4% in early trading, while cruise operator Carnival are down 3%. WH Smiths, which runs shops at airports and railway stations, are down 5% while coffee and sandwich bar company SSP have dropped 6%.

Richard Hunter, head of markets at interactive investor, has analysed easyJet’s results:

“While the numbers make for predictably ugly reading, easyJet has been agile in reshaping its business where possible.

With the entire fleet grounded for 11 weeks during the initial wave of the pandemic, and with any number of country-specific travelling restrictions limiting recovery since, the effects on the numbers have been severe.

Overall revenues declined by 53%, passenger numbers by 50% and capacity by 47.5%. The effects of the pandemic have also exposed the thin margins on which the airline was operating, and these have unsurprisingly plunged into negative territory, with revenues per seat decreasing by almost 11% to £54.35, and exacerbated by a 21.7% increase in cost per seat to £69.03.

The headline loss of £835 million is within the previously guided range of between £815 and £845 million, while the reported pre-tax loss of £1.27 billion compares with a profit of £430 million in the previous year. Cash burn reduced from the previous quarter’s £774 million, but at £651 million nonetheless remains a constant and significant drain on the company’s resources.

Inevitably easyJet feels unable to give guidance for the forthcoming year in light of the ongoing uncertainty. In the shorter term, it expects to be flying at just 20% of planned capacity for the first quarter of the new financial year, down from the 38% of the fourth quarter as the traditionally quieter winter months kick in, let alone any other restrictions.

Here’s some early reaction to easyJet’s first ever full year loss, from ITV’s Jonathan Swain:

And here’s aviation analyst Alex Macheras: