Qatar Airways has spent about £460m on increasing its stake in British Airways-owner IAG to increase its holding to 25.1%, strengthening its position ahead of a change in IAG management, Reuters reports:

In an endorsement of the Anglo-Spanish group just weeks before its founder Willie Walsh steps down, Qatar said on Wednesday the move showed its support for IAG and its strategy.

Qatar previously held 21.4% of IAG, which also owns Spanish carriers Iberia and Vueling and Ireland’s Aer Lingus. IAG’s share price has risen by 52% in the last six months.

The move comes after some unnamed non-EU investors sold their shares. EU rules mean that airlines must be majority owned within the bloc – a situation that will be complicated after the Brexit transition period.

There’s a mighty row brewing around Britain’s biggest mining project in North Yorkshire.

Mining giant Anglo American has offered £405m to buy Sirius Minerals, the troubled owner of the multi-billion-pound project to develop the Woodsmith fertiliser mine.

However, Odey Asset Management, the hedge fund owned by outspoken financier and political donor Crispin Odey, said the offer was too low. In an open letter, Odey, which held a 1.29% economic interest in Sirius as of Feb. 18, said it would only vote in favour of a bid at 7 pence per share or more – not the 5.5p suggested by Anglo. In its letter it said:

The lack of ‘final’ offer, in Odey’s opinion, suggests that Anglo American would be willing to bid substantially more for Sirius, with the investment case remaining highly attractive for Anglo American, even at a materially higher bid level.

Anglo American declined to comment. Sirius said in a statement that its board was unanimous in recommending shareholders vote for Anglo’s bid as it stands – and that the company could fail if it doesn’t secure the deal.

Read the full story here:

It’s still looking like an easy day for European stock market investors: blue-chip shares have notched up another record high.

The 0.6% gain for the Stoxx 600 index gives it a 3.5% increase for 2020 so far, and we’re only halfway through February.

The FTSE 100 index has fallen back slightly to 7,434 points, a 0.7% rise – likely because the pound has strengthened slightly. (Stronger sterling means the large chunk of US dollar earnings is less valuable in nominal terms.)

Laura Ashley has agreed emergency funding with its bank, Wells Fargo, staving off the threat of bankruptcy.

The struggling fashion and homeware retailer said it “should be able to utilise requisite funds from its working capital facility with Wells Fargo to meet its immediate funding requirements”.

Laura Ashley, which is listed in the UK, had said it would have to “consider all appropriate options” if it could not get hold of more cash, raising fears for the jobs of more than 2,700 workers.

Majority owner MUI Asia, which is controlled by the multimillionaire shareholder Khoo Kay Peng, did not inject any cash as part of the deal, but longer-term options are still under consideration. The company’s statement said:

The company welcomes the support from MUI Asia Limited and continues to review its working capital needs on an ongoing basis. The company will update shareholders in due course in relation to the review of its working capital needs.

Financial leaders of the world’s 20 largest economies (G20) will say that the coronavirus epidemic is a downside risk to forecasts of global growth, according to a draft communique. Private sector estimats of the cost suggest it could be big – but temporary.

Reuters has seen the document, ahead of the meeting of finance ministers and central bank governors due this weekend.

With 73,332 confirmed cases of the Covid-19 virus worldwide, and widespread quarantine conditions in China, there is little doubt among economists that global growth will be impacted. The question is the scale of the hit.

Oxford Economics, a consultancy, has today put out research that suggests that a global pandemic could cost the global economy $1.1tn (£850bn). GDP would be 1.3% lower than their model otherwise suggests. If the epidemic is confined to Asia the cost would be a still considerable $400bn, or 0.5% of 2020 GDP – although in either scenario the economy recovers by the end of next year.

A global pandemic would represent “a short but very sharp shock on the world economy”, wrote Adam Slater, lead economist at Oxford Economics.

Our scenarios see world GDP hit as a result of declines in discretionary consumption and travel and tourism, with some knock-on financial market effects and weaker investment.

A quick currencies update (on a pretty quiet day in foreign exchange markets): sterling has lost 0.1% against the US dollar, with brief gains from the inflation beat failing to hold.

“Pound hugs $1.30” is the headline from Reuters – perhaps not the most exciting development. It’s worth noting that against the euro the pound is at levels, above €1.20, not seen since the EU referendum in 2016 – barring the post-election result spike.

The Japanese yen has fallen by 0.5% against the dollar.

It was announced last night, but if you haven’t caught up yet, there are some pretty momentous plans in train for the UK’s post-Brexit immigration system.

Britain is to close its borders to unskilled workers and those who can’t speak English as part of a fundamental overhaul of immigration laws that will end the era of cheap EU labour in factories, warehouses, hotels and restaurants, reported the Guardian’s front page this morning.

Unveiling its Australian-style points system on Wednesday, the government said it is grasping a unique opportunity to take “full control” of British borders “for the first time in decades” and eliminate the “distortion” caused by EU freedom of movement.

Business groups reacted with horror, saying it would damage the economy, but the home secretary, Priti Patel, this morning essentially told them to like it or lump it.

There are 8m “economically inactive” Britons who could do the jobs, she said – although with the UK thought to be at or near full employment it is unclear how many of those could be tempted back into the labour market.

The Guardian’s economics editor, Larry Elliott, described it as “the biggest structural change to the UK labour market in decades”.

The new policy represents a break with the past and is highly interventionist. As a member of the European Union, the government was only able to limit migration from non-EU countries. Under the new approach, the UK will be open to highly skilled workers from anywhere in the world, but the door to those with low skills will be closed.

Here’s the full detail on the inflation figures, from the Guardian’s Phillip Inman:

Inflation jumped to a six-month high of 1.8% in January after a surge in petrol prices and an increase in the cost of gas and electricity over last year.

The surprise increase in the consumer prices index (CPI), which exceeded forecasts of a rise to 1.6%, brought the main measure of inflation closer to the Bank of England’s target of 2%.

The rise in fuel and energy costs forced up household heating costs and fed into the transport industry, the Office for National Statistics said.

Read the whole story here:

US stock markets are looking up.

Futures for the S&P 500 suggest the US benchmark index will gain 0.2% when it opens later today, while the tech-heavy Nasdaq is expected to rise by 0.3%.

Economists are wondering whether the Bank of England’s efforts to raise interest rates from historical lows will be short-lived, given fears over the state of the global economy.

Melanie Baker, senior economist at Royal London Asset Management, said:

Inflation rose closer to the Bank of England’s target, but underneath the noise of the headline figures, domestically-driven inflation still looks weak.

Business sentiment and the follow-through to activity data will, however, be the more important determinant of whether the Bank of England cut rates or not in coming months.

Jing Teow, an economist at PwC, said there could be risks of increasing inflation on the horizon – suggesting that the Bank would hesitate before a cut to interest rates.

A prolonged shutdown in production activity as a result of Covid-19 could exert a drag on industrial production and disrupt global supply chains, which could lead to further inflationary pressures as the shortage of inputs and key components start to bite.

Looking towards the medium-term, a modest recovery this year that spurs further business activity, combined with continued upward pressure on wages due to a tight labour market could also give rise to inflationary pressures.

For a view on just how unusual the past decade has been in monetary policy terms, take a look at this graph from a speech by the Bank of England’s chief economist Andy Haldane (with its impressive range of sources included). Central bankers are desperate to push interest rates back up, but fears over the slowing global economy have for the most part stymied those efforts.

Some more reactions on the slight-surprise inflation reading – first of all from a man who a week ago would not have been expected to be in the spotlight, and his opposition, who is likely to leave the spotlight in April.

Conservative chancellor Rishi Sunak said:

Families across the country are better off as a result of the strong wage growth and low inflation over the last 18 months.

We want to go further to help with the cost of living – that’s why we’ve cut taxes for 31m people and given nearly 2.4m a pay rise through our record increase to the National Living Wage.

John McDonnell, Labour’s shadow chancellor, focused on the jump in prices. He said:

The Tories’ poor economic management has contributed to an unstable economy, with prices rising sharply for people already suffering from ten years of vicious cuts.

Successive Conservative governments have repeatedly blamed anyone but themselves for an under-performing economy.

It’s time for this chaotic government to take responsibility for these failings, and to reverse the decade of decline the Tories have brought to this economy.

The inflation reading may have taken economists by surprise (1.8% against a 1.6% consensus), but it may not have a major effect on interest rate prospects, economists suggest.

The figures were in line with the Bank’s January monetary policy report forecast, according to Ruth Gregory, senior UK economist at Capital Economics, a consultancy. She said:

While CPI inflation rose for the first time in six months, the inflation figures were in line with the Bank of England’s expectations, so they are unlikely to move the dial on the outlook for interest rates.

CPI inflation still looks likely to slip back to 1.5% within the next few months and remain below 2% for the rest of the year. But for the MPC, the fact that inflation is evolving in line with its projections provides another reason not to cut interest rates in the near term.

The consumer price index (CPI) of inflation (still the measure used by the Bank of England, despite the ONS’s best efforts) has faded over the past few years as the effects of the post-Brexit-vote devaluation of sterling have passed through.

Some other notable data from the ONS: the input producer price index (PPI) rose at its fastest pace since April 2019, suggesting that some further price pressures could feed through to consumers. The 12-month growth rate of Input PPI was 2.1% in January 2020, up from 0.9% in December 2019.

The ONS’s head of inflation, Mike Hardie, said:

The rise in inflation is largely the result of higher prices at the pump and airfares falling by less than a year ago. In addition, gas and electricity prices were unchanged this month, but fell this time last year due to the introduction of the energy price cap.

An interesting update on the trade relationship between the UK and the EU: German exports to the UK fell to their lowest level since 2013 last year.

The UK is Germany’s fifth-largest customer, but exports fell 4.2% to €78.7bn. At the same time Germany’s total exports rose 0.8% year-on-year to reach a record high. Reuters reports:

German exports to Britain fell for the fourth year running in 2019, according to Statistical Office data seen by Reuters, as the weak pound dampened demand and uncertainty over post-Brexit trade regulations disrupted existing supply chains.

Exports of cars, aircraft and aircraft parts, electronic equipment and pharmaceutical products had fallen, the data showed

Martin Braml, a trade expert at the Ifo research institute, said:

The main cause is the continuing uncertainty over the trade relationship after 2020, when the transition phase is over.

With the return of Boeing’s 737 Max to the skies not expected until late spring at the earliest, those effects on the US economy will be significant, according to economists.

Moody’s Investor Service, the influential credit rating agency, said that US economic growth will decelerate during 2020, in part because of the crisis at Boeing. In a note published on Monday its analysts said:

Boeing’s decision to temporarily halt the production of the 737 Max will weigh on Q1 GDP, subtracting as much as 0.5 percentage points, because of the effect on manufacturers down the supply chain.

(Note that US quarterly GDP numbers are reported on an annualised basis for obscure technical reasons that don’t seem to apply to much of the rest of the world. US real GDP grew by 2.3% in 2019.)

Here’s Boeing’s full statement on the debris discovery, from a spokesman:

Safely returning the 737 Max to service is our top priority. While conducting maintenance we discovered foreign object debris [FOD] in undelivered 737 Max airplanes currently in storage.

That finding led to a robust internal investigation and immediate corrective actions in our production system. We are also inspecting all stored 737 Max airplanes at Boeing to ensure there is no FOD.

We have already recommended to our customers with airplanes in active storage for more than one year to inspect the fuel tank for FOD as part of their procedures. We continue to have conversations with our customers about the best approach for inspections of their stored airplanes prior to return to service.

Some more on Boeing, a company so big that its travails have caused an appreciable dent in US manufacturing figures.

Boeing lost its crown as the world’s largest producer of planes in 2019 to fierce European rival Airbus – for the first time since 2011. Boeing produced only 380 planes last year, compared to Airbus’s 863.

The decision to ground the 737 Max planes was taken by regulators, but the follow-on effect of Boeing halting production of its most popular plane is hitting smaller suppliers around the US, according to this informative report in the FT (£).

The drop has affected everyone from toilet parts suppliers to major listed companies such as Spirit Aerosystems, which laid off 2,800 people as demand for its fuselage dropped.

The threat for Boeing is that the longer it idles its own machines and workers, the greater the risk of long-term damage to the supply chain.

Metro Bank has appointed a new chief executive – or rather, it has removed the word “interim” from his title.

The struggling lender on Wednesday said that Dan Frumkin would be the man to lead the bank permanently, after an accounting scandal that has so far cost it the jobs of its colourful founding chairman and its chief executive.

Frumkin joined the bank in September as chief transformation officer, taking charge of changing systems, and stepped into the breach as interim chief executive after Craig Donaldson quit.

It’s quite a change in a few months for Frumkin: the 55-year-old most recently spent eight years as global chief operating officer at the Bank of N.T. Butterfield & Son, a community bank based in Bermuda. He has previously held roles at Royal Bank of Scotland and Northern Rock.

Beyond the investigations into the accounting error, which saw loans misclassified, Frumkin will also have the task of turning around the bank’s share price. It’s worth less than a 20th of its price in March 2018.

European markets have gained at the opening bell, with the FTSE 100 up by 0.5% to about 7,421 points.

Germany’s Dax and France’s Cac 40 indices also gained 0.5% apiece.

London’s mid-cap FTSE 250 gained 0.4%.