Stocks in Europe ticked higher in early trade on Tuesday after a mildly down day on Monday. The FTSE 100 added 40 points to 6,760, rising 0.6%, while the DAX added 65 points to 13,910, a gain of 0.5%. However early gains were pared after an hour of trade. Asian shares outside of China rose, with Tokyo +1.4% overnight and US futures also climbing. US markets reopen after a three-day weekend with attention shifting to some important corporate earnings (Goldman Sachs, Bank of America, Netflix) and the inauguration tomorrow of Joe Biden and the actions he takes during his first few days in office. Emboldened by the Georgia run-off wins, Biden is going to push hard early. Weaker forecast oil demand for 2021 may also weigh on sentiment through the rest of the session.

A triumvirate of tough Biden picks for key regulatory and policy roles indicate Wall Street is going to have a prickly relationship with the new regime. The appointments of Gary Gensler to chair the Securities and Exchange Commission (SEC) and Rohit Chopra to head the Consumer Financial Protection Bureau (CFPB) indicate a leftist agenda being pursued by the Democrats that will focus on things like executive pay, corporate racial and gender diversity and climate change. Trump-era deregulation is over and we see a return to the Obama-era meddling. They join Sherrod Brown, the new chair of the Senate Banking Committee who has previously called for a break-up of the big banks and return to the Glass-Steagall act, in three key positions affecting financial markets. Brown said Chopra would ensure the CFPB “plays a leading role in combating racial inequities in our financial system”. 

Meanwhile, Biden’s pick for Treasury secretary, Janet Yellen, is going to take a ‘go big or go home’ approach to policy. The former Fed chair appears before the Senate Finance Committee today. It’s expected she will call for “big” action on the crisis – what does this mean exactly? Does it mean going further down the path of modern monetary theory? It may be moot – the pandemic has effectively thrust MMT onto the US without much debate. Open embracement of the policy by Treasury and Fed is the next logical step. Her comments later today could be market-moving.

The US dollar retreated – speculators remain heavily short even after a bump up in the last month. The dollar index pared gains after flirting with the 50-day simple moving average, whilst EURUSD has bounced back above 1.21 after finding support on the 50-day line at 1.20750. GBPUSD eased back above 1.36. 

Oil slipped lower after the International Energy Agency lowered its demand forecasts for 2021, warning that pickup in oil demand has been curtailed by new lockdown measures. The IEA said it thinks oil demand will recover by 5.5m barrels per day this year to 96.6m, a downward revision of 0.3m bpd. It underscores the rocky recovery ahead as demand recovery will be patchy and hinges on vaccines. Nevertheless, looking out beyond the first half of the year, demand recovery should really start to bounce back. WTI crude moved under $52.50 in early European trade after the release.

Equities 

AO World was one of the biggest gainers on the FTSE 350 last year thanks to consumer spending habits affected by the pandemic. But today shares have fallen 8% after it warned of “significantly higher costs” as it tries to “negotiate some of the operational challenges of working in a Covid-compliant environment”. More drivers, more warehouses space all costs money. They’ve also seen higher cancellations of mobile and lucrative. warranty contracts. This indicates near-term profitability is likely to be lower than thought. 

Nevertheless, demand remains very strong, with the company enjoying its strongest ever peak trading period over Black Friday and in the run-up to Christmas.  In the three months to 31 December 2020, management record UK revenue growth of +67.2% to £457.3m and of +77.4% to €73.6m in Germany. 

Meanwhile, bereft of pubs, cafes and restaurants, consumers are turning to sweet and savoury packaged delights from Premier Foods, like Mr Kipling cakes, Bisto gravy and Ambrosia custard.  Q3 Group sales up +9% and up +12.5% year to date, driven by 90% growth in online in Q3. Increased investment in brands means management expect trading profit to be in the range of £145-£150m this year and net debt/EBITDA to fall below 2.0x by the year end. Shares fell a touch in early trade. 

Miners were higher after Rio Tinto reported iron ore shipments slightly ahead of forecast. Rio rose +0.7%, with Anglo American +1%. 

HSBC shares rose 4% after chairman Mark Tucker said the bank hopes to resume paying dividends as soon as possible. Chunky returns possible with a meagre $0.22 dividend in 2021 offering about 4% yields at current prices. Shares have been on a steady march higher since top shareholder Ping An Asset Management upped its stake in September. Standard Chartered fell over 1%.