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.

But there are hopes that a new fast-charging battery could spur the adoption of electric vehicles.

With Covid-19 cases still rising, the IEA has slashed its forecast for oil demand this year too, warning that:

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

Wall Street isn’t being held back by Covid-19, though. Goldman Sachs, has reported that earnings more than doubled in the last quarter, thanks to strong deal making.

Janet Yellen, the incoming US Treasury secretary, has told senators that the US needs a big new stimulus package to repair the damage caused by the pandemic.

Yellen also pledged to fight for US workers, and to help America compete better against China.

The World Economic Forum has warned that the pandemic will make it harder to tackle the climate crisis.

WEF chairman Klaus Schwab says:

“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.”

The Las Vegas casino operator MGM Resorts is abandoning its attempt to take control of UK gambling company Entain.

Many investors believe the bitcoin and US tech stocks are in a bubble, according to the latest survey from Deutsche Bank.

A separate report from Bank of America identified going ‘long bitcoin’ as the most crowded trade, ahead of buying into technology companies.

EU regulators are expected to give Boeing’s 737 Max approval to fly again next week.

But the London Metal Exchange’s historic in-person trading floor, the last in Europe, could soon close for good, bringing an end to outcry dealing at the Ring.

Goodnight. GW

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.

Medical devices maker Smith & Nephew was the top riser, up 3.6%.

Other European markets also had a quiet day, with the Stoxx 600 dipping slightly too despite the incoming Treasury Secretary insisting that a large US stimulus package is needed.

Connor Campbell of SpreadEx explains that investors want to see if president-elect Biden can get the package through the Senate.

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.

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.

America also needs to invest in infrastructure, R&D and training, to create a more productive economy, she says.

Extending unemployment insurance and food aid will give the biggest “bang for the buck”, Yellen adds.

In her opening remarks, Yellen also says that more must be done to support the economy -- and that without further action, the US will face a longer recession and more economic scarring.

With interest rates at historic lows, the smartest thing we can do is go big, she insists.

The former Federal Reserve chair also points out that America was living in a K-shaped economy, even before the pandemic began - with the wealthiest doing well while ordinary people fell behind.

Here’s our news story on Yellen’s testimony:

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 says:

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.

Shares in Entain have plunged by 15% to £11.96, wiping out much of their gains since MGM made its proposal.

Entain and MGM run a 50/50 joint venture together in the US, where the sports betting and online gaming market is booming - as my colleagues Rob Davies and Jasper Jolly explained previously:

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.

Analysts said US casino investors were no longer happy to share the spoils and were looking to buy out their British partners instead.

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.

“Our people responded admirably to a series of professional and personal challenges, while working from home or in offices that were reshaped dramatically,” Chief Executive Officer David Solomon said in a statement Tuesday.

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.

Despite the loss of almost 2 million lives to Covid-19, the WEF’s global risks report found that environmental issues were considered to pose the biggest danger in the coming years, both in terms of impact and likelihood.

Klaus Schwab, the executive chairman of the WEF, said:

“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.”

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

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.

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.

Patrick Ky, executive director of the European Union Aviation Safety Agency (EASA), said it would publish an updated airworthiness directive next week, following in the footsteps of regulators in the US and Brazil.

The plane was grounded worldwide after crashes in Indonesia and Ethiopia caused by a faulty sensor, which repeatedly triggered a system that pushed the nose down. 346 people died in the two accidents.

The 737 Max will be able to return to service as soon as Boeing has updated software and rewired some components, and airlines have trained their pilots in the changes.

Ky said the version of the 737 Max bought by Irish airline Ryanair will be certified “in the coming weeks”, meaning it will likely be ready for service in the summer. Domestic airlines in Brazil and the US are already operating commercial flights using the plane.

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.

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