With all eyes on the US inauguration, it’s time to wrap up here. A quick recap:

Inflation across the UK has risen, lifted by higher transport and recreation costs, and a pickup in clothing prices.

Economists have predicted that prices will keep pushing higher this year, as the economy reopens as the pandemic eases.

UK house prices have surged at the fastest rate in over four years. In London, prices jumped by 9.7% in the 12 months to November, with the average property costing more than £500,000 for the first time ever.

Pent-up demand, stamp duty holiday, low borrowing costs and overseas investors all drove prices higher...

Stocks on Wall Street have hit a new record high, as Joe Biden prepares to be sworn in as the 46th US president.

Analysts say stocks could keep rallying, as the new administration pushes for a large new stimulus package and gets to grips with the Covid-19 pandemic.

European stock markets have also risen. But, with the pound rallying, the FTSE 100 is only up 17 points or 0.3% in late trading.

Bitcoin, though, has sunk after Treasury Secretary nominee Janet Yellen yesterday called for cryptocurrencies to be curtailed to prevent their illicit use by terrorists. It’s now down almost 7% at $34,100.

A tie-up with football star Marcus Rashford has helped luxury fashion chain Burberry ride out a slump in European sales, where stores have been shuttered due to the pandemic.

Electricals retailer Dixons Carphone has seen a surge in sales of big-screen TVs, food preparation gadgets and health and beauty appliances over Christmas.

The big story, of course, is happening in Washington DC - we’re tracking all the action here:

The S&P 500 index of leading US shares has climbed to a new peak today, up 1.1% or 43 points at 3,842.

The prospect of co-ordinated stimulus measures from the Biden administration is lifting stocks, and there could be further highs ahead, argues Nigel Green, chief executive and founder of deVere Group, which has $12bn under advisement.

“Today’s political pageantry in Washington represents the dawning of an era of renewed certainty, stability and the return to established norms, all of which the markets approve.

“However, despite the inauguration pomp and ceremony at the Capitol, investors’ focus is now already on Janet Yellen, who will take over from Steve Mnuchin as U.S. Treasury Secretary.”

“In her testimony in Congress on Tuesday, the former Federal Reserve Chair called on lawmakers to ‘act big’ on coronavirus stimulus especially with interest rates being at historic lows.

“At the Fed she continually made the case for full employment, meaning we know already, her track record proves it, that she is prepared to spend.

“With Ms Yellen in charge and with an economy that needs a shot in the arm, I think we can expect massive spending combined with continued ultra-low interest rates for years.

“This will act as a catalyst for stock markets.”

In New York, stocks have opened higher as traders watch Donald Trump depart the White House, ahead of Joe Biden’s inauguration as the next US president.

The Dow Jones industrial average is up 85 points, or 0.3%, at 31,016 points, with the broader S&P 500 up 26 points, or 0.7%, at 3,825.

The tech-focused Nasdaq has soared to a fresh all-time high, up 1.2% or 160 points at 13,357.

Netflix is leading the charge, up 15% after reporting new subscriber additions that exceeded Wall Street estimates last night.

Marketwatch points out that Wall Street has soared since the election back in November, and is on track for the best post-election rally in over 90 years.

• Biden aims for best stock-market rally in 92 years ahead of inauguration

Shares certainly did rise sharply as it became clear that Joe Biden had won the White House race, raising hopes of a larger stimulus programme and investment in green technology.

But that rally also reflects optimism that the pandemic can be overcome; Pfizer’s vaccine results were released just days after Biden won the presidency.

A British freight company director with more than over 20 years’ experience has told how EU hauliers and transport companies are turning their backs on UK business because they are being asked to provide tens of thousands of pounds in guarantees to cover VAT or potential tariffs on arrival in Britain.

The financial guarantee requirement did not exist before Brexit and EU transport companies who previously provided a shipping service for small and medium-sized firms have decided they do not want the extra financial burden, according to Colin Jeffries, who runs Key Cargo International in Manchester.

Jeffries says:

“We’ve got people that are trying to bring textiles in from Italy but we are being told there is no haulage availability on that. Nobody’s willing to touch anything because of these guarantees. In Poland, we’re trying to get masks in for PPE in the workplace and we can’t get anyone to bring them over.”

Morgan Stanley has joined the ranks of Wall Street firms posting strong results during the pandemic.

Earnings jumped by over 60% in the final quarter of 2020, up to $4,430m from $2,733m a year earlier, lifting total earnings last year to $14,418m from $11,301m.

Investment banking, wealth management and equity and bond trading were all strong, lifting net revenue to a new annual record, and underlining that the financial sector did well despite the impact of Covid-19.

CEO James P. Gorman says:

“The Firm produced a very strong quarter and record full-year results, with excellent performance across all three businesses and geographies.

I am extremely proud of how our employees came together to support each other and our communities and deliver for our clients in an incredibly challenging year.

Here’s my colleague Phillip Inman on the rise in UK inflation last month.

The annual rate of inflation rose to 0.6% in December from 0.3% in the previous month as shoppers returned to the high street in most parts of the UK after the end of the second lockdown.

The Office for National Statistics said an increase in transport costs and a rise in computer games console prices as Christmas approached was only partially offset by cheaper takeaway food and lower furniture and household equipment prices.

With the economy battered by the coronavirus pandemic and most consumers restricted by the government’s regional tiers, the relatively weak rise in prices as the festive period approached was in line with City analyst expectations of a 0.5% increase.

The number of UK companies which collapsed into administration slumped to historic lows last year, as the government’s coronavirus support measures proved to be a lifeline for many businesses.

1,112 companies fell into administration during 2020, a 22% fall compared with 2019, according to the restructuring practice at accountant KPMG, which analysed notices in The Gazette.

The coronavirus job retention scheme, rent and tax deferrals, grants and loans all combined to support firms which saw income dry up as a result of Covid restrictions, leading to the lowest annual number of administrations since KPMG started tracking the data in 2005.

Leisure and hospitality companies, which have struggled the most to trade during restrictions, represented the lion’s share of insolvencies in the final quarter of the year following by building and construction firms, real estate businesses and retailers.

Blair Nimmo, head of restructuring for KPMG in the UK, warned that the figures “provide a distorted view of reality” and that companies will struggle once support measures are eased:

“Those businesses that remain in hibernation due to ongoing lockdown measures, such as those in the leisure and hospitality and travel and tourism sectors, continue to accrue liabilities while seeing precious little cash flow into the business.

At some point, rent and tax deferrals and loans will need to be repaid. The job retention scheme will unwind. Weaning off these support schemes is going to be a massive challenge for many.”

While inflation rose in the UK last month, it remains elusive in the eurozone.

Consumer prices fell by 0.3% year-on-year in December, for the fourth month running, according to statistics body Eurostat.

Cheaper energy kept inflation below zero, it says:

In December, the highest contribution to the annual euro area inflation rate came from services (+0.30 percentage points, pp), followed by food, alcohol & tobacco (+0.25 pp), non-energy industrial goods (-0.14 pp) and energy (-0.68 pp)

The 7.6% jump in UK house prices last year is a blow to those trying to get onto the housing ladder.

But Ross Counsell, chartered surveyor and director at Good Move, suggests 2021 will be better for buyers, as the stamp duty holiday expires:

“So why are the house prices so high? We can put this growth down to the influx of people looking to buy property in 2020, both before the end of the Stamp Duty Holiday in March, and due to many people simply looking for more spacious properties, particularly in rural locations, during lockdown. Mortgage approvals too are at an all-time 13 year high, and with such high demand for properties and mortgages, naturally comes higher average house prices.

“The property market is incredibly competitive, and becoming increasingly more selective for lenders choosing who to lend to. However, it’s not all bad news. Despite these record high house prices, we expect them to fall after the end of the Stamp Duty Holiday in March.

And as the world hopefully resumes some normalcy this year, we do not expect 2021 to follow 2020’s footsteps with the staggeringly high house prices, and we therefore expect 2021 to be a solid year for buyers.”

Some campaigners have been pushing chancellor Rishi Sunak to extend the stamp duty holiday in his March budget, or even to replace council tax and stamp duty with ‘a proportional property tax (PPT).

The average London house price has risen over £500,000 for the first time, as the stamp duty holiday helped to fuel demand for property during the pandemic.

New figures from the Office for National Statistics show that the average price in the capital hit £514,000 in November 2020, a jump of 9.7% over the last year.

That’s a record high and the first time London’s average house prices have surpassed £500,000.

The ONS reports that the temporary suspension of stamp duty (on the first £500,000 of a house purchase in England) was one factor driving the market.

It also cites pent-up demand following the first lockdown, and changes in housing preferences (as some families seek homes with more space due to rising remote working).

London’s annual house price growth has followed a sharp upward trend seen in most regions in recent months, likely reflecting a range of factors including pent-up demand, changes in housing preferences and the temporary reduction in property transaction taxes, which are due to end on 31 March 2021.

Looking at the picture within London, house prices have grown more quickly in Inner London than Outer London for some time. In November 2020, two London boroughs had annual house price growth above 20%, one is in Inner London (Kensington and Chelsea, at 28.6%), while the Outer London borough of Brent had annual price growth of 23.9%.

The annual growth rate in Brent is partly caused by a base effect as the average house price decreased by 11.9% between October and November 2019 and increased by 2.8% between October and November 2020.

The ONS also points to demand for investors, and people looking to move to the UK from Hong Kong following China’s clampdown on the city state.

Demand for property in Inner London may be particularly responsive to temporary property tax changes as property prices are high and therefore so is the corresponding tax to be paid. In addition, compared with other regions of the UK, London has a relatively high proportion of properties bought for investment, including from cash buyers and overseas investors.

As such, demand for property in Inner London is likely influenced by a broader range of factors than the rest of the UK, including the forthcoming introduction of additional property tax for non-UK residents and geopolitical circumstances such as the new route to UK citizenship for British Nationals Overseas in Hong Kong, being introduced in January 2021, both of which may push up demand for properties in Inner London.

Across the country, prices rose by 7.6% in the last year - their fastest rate since June 2016 - to hit a new record.

• UK average house prices increased by 7.6% over the year to November 2020, up from 5.9% in October 2020, to stand at a record high of £250,000; this is the highest annual growth rate the UK has seen since June 2016.
  
  
• Average house prices increased over the year in England to £267,000 (7.6%), Wales to £180,000 (7.0%), Scotland to £166,000 (8.6%) and Northern Ireland to £143,000 (2.4%).

The lowest annual growth was in the East of England, where average prices increased by 4.8% over the last year.

A “highly successful festive campaign” featuring campaigning England football star Marcus Rashford has helped luxury fashion chain Burberry ride out the pandemic.

Burberry reported a 9% drop in “retail comparable store sales” in the three months to Boxing Day, partly due to reduced tourism during the pandemic.

Sales were particularly weak in Europe, the Middle East and Africa, as Covid-19 restrictions continued.

• Asia Pacific: +11% with strong growth in Mainland China and Korea
• EMEIA: -37% due to fewer tourists and COVID-19 related store closures
• Americas: -8% as mid-teen increase in full-price sales was more than offset by planned reductions in markdown activities

But Burberry also benefitted from “new, younger clientele”, and reports that teaming up with Rashford was a success:

In November, we launched our Festive campaign, partnering with Marcus Rashford MBE, the English international footballer who has taken a prominent role against child poverty during the pandemic, and global charities championing youth-related causes.

The consumer response to the campaign was exceptional, with engagement on our Instagram campaign posts more than double our Q2 average, and imagery featuring Marcus becoming our most liked Instagram post of all time. Marcus’ work to support the UK’s youth sits at the heart of our partnership and embodies our commitment to community and going beyond.

Shares in Burberry have jumped 5% this morning, with CEO Marco Gobbetti saying the company is ‘well placed’ for the pandemic to ease:

“Despite the challenging external environment, we made good progress on our strategic priorities in the quarter. We saw a strong increase in full-price sales as our collections and communication resonated well with new, younger clientele as well as existing customers.

Our localised plans and digital capabilities helped drive growth in rebounding markets and we implemented our planned reduction in markdown. While the short-term outlook remains uncertain due to COVID-19, we are well placed to accelerate when the pandemic eases.”

Several economists are predicting that inflation will keep rising as the UK economy reopens later this year, following December’s increase.

Thomas Pugh of Capital Economics suggests CPI inflation could rise over the Bank of England’s 2% target by the end of this year, before dipping in 2022.

Inflation will probably start to rise more sharply from April when the temporary VAT cut for the hospitality sector is reversed and the recent rises in agricultural and energy commodities start to make themselves felt. T

Together these forces could lift inflation to more than 2% by the end of the year. But ample spare capacity means it will probably settle at close to 1.5% by the end of next year. Further ahead, inflation may creep higher if the authorities keep monetary and fiscal policy loose after all the spare capacity in the economy has been absorbed.

Suren Thiru, head of economics at the British Chambers of Commerce, says prices could also rise if ‘the current post-Brexit disruption persists’:

Tom Stevenson, investment director for personal investing at Fidelity International, says investors should prepare for a more inflationary environment:

“The doubling in the CPI measure of inflation in December to 0.6% is a reminder of the need to remain vigilant about the price threat. Inflation never seems to be a problem until suddenly it requires firm action to tame it again. The combination of unprecedented government spending, pent up consumer demand and low productivity is a recipe for rising prices. Transport, recreation and clothing were the biggest contributors.

“The challenge facing UK policy makers is that historically high debt levels will make it hard for us to rein in inflation with higher interest rates as and when they become necessary. Servicing our high borrowings is expensive enough with rates on the floor.

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

The reflation trade is one of the key drivers of the markets right now, as investors bet that stimulus packages and a post-lockdown boom will drive prices higher.

And the latest figures show that inflation across the UK rose in December.

The UK consumer prices index rose by 0.6% in the year to December, up from 0.3% in November, the Office for National Statistics reports.

Transport costs picked up during the month -- as restrictions on travel were briefly lifted over the Christmas period (before the latest lockdown was brought in).

Clothing prices were also higher, along with recreation activities (such are possible during a pandemic, anyway).

The ONS says:

Rising transport costs contributed 0.11 percentage points to the monthly change, while increasing prices for clothing, and recreation and culture items both contributed 0.10 percentage points to help increase inflation; these were partially offset by a downward contribution from falling food and non-alcoholic beverage prices.

Air fares rose by more than usual during November and December, the ONS reports, with fuel prices also picking up --prices at petrol pumps rose by 1.5 pence per litre last month.

Women’s and men’s clothing prices also rose, as the Black Friday discounts ended.

Technology prices were also higher than usual, the ONS adds:

The largest upward contribution [in the recreation and culture grouping] came from data processing equipment, where prices for computer software, PC peripherals and laptops were overall largely unchanged between November and December 2020, but fell between the same two months in 2019.

Food prices fell by 0.4% during December, though, bringing some help to households suffering from the impact of the Covid-19 lockdown.

Inflation is still below the Bank of England’s 2% target, but this move could be a signal that prices are going to keep pushing higher in 2021, as the Covid-19 lockdown eases.

We also get eurozone inflation figures later this morning, plus the latest UK house prices and US mortgage figures.

Investors will also be watching Joe Biden be sworn in as America’s 46th president, and assessing his chances of ‘going big’ with a new stimulus package and green energy policies.

Kyle Rodda of IG says:

The conversation in the market has generally remained on US politics and the incoming Biden-administrations fiscal stimulus plans.

Subdued price action in bond markets suggest little new information has come about on either front in recent days. Nevertheless, ahead of President-elect Biden’s inauguration this evening, where there remains some concern regarding civil unrest and violent protests, the drama enveloping US politics and the US economy remains the most attention grabbing news.

The agenda

• 7am GMT: UK inflation report for December
• 9.30am GMT: UK house price index for November
• 10am GMT: Eurozone inflation report for December
• Noon GMT: US weekly mortgage applications
• 3pm GMT: Bank of Canada interest rate decision