European investors have put worries about Covid-19 variants behind them, with stocks ending the day higher.

The pan-European Stoxx 600 has closed 0.7% higher at 436.92 points, back towards last week’s record highs, with gains in Paris, Frankfurt, London, Madrid and Milan.

The UK’s FTSE 100 finished 35 points up at 6,895, up 0.5% -- or around a quarter of yesterday’s drop.

France’s CAC gained 0.75% while Germany’s DAX picked up 0.4%.

Commodity prices are also strengthening:

Michael Hewson of CMC Markets has summed up the day:

After the big declines seen yesterday, European markets have recovered some of their poise today, with the travel and leisure sector looking to find a bit of a base after recent declines, while health care stocks have outperformed, due to a positive read across from US medical devices company Intuitive Surgical, which has sent Smith and Nephew shares to two-month highs.

Airlines were big fallers yesterday with long haul carriers getting hit the hardest, over concerns that extended shutdowns in Asia markets could mean delays to the speedy resumption of long-haul travel. These concerns were borne out after IATA said that they were revising up their estimates for airline industry losses for 2021 to $48bn, from $38bn, presumably on the basis of delays to the resumption of international travel.

Global airlines body IATA have lowered their global traffic forecasts for this year, as the pandemic and government restrictions continue to hit the sector.

In its latest industry outlook, the International Air Transport Association warns that travel restrictions, including quarantines, have “killed demand”.

IATA now expects that air traffic (measured in revenue passenger kilometers) will only reach 43% of 2019 levels this over the year. While that is a 26% improvement on 2020, it is “far from a recovery”, it warns.

Back in February, IATA’s baseline forecast for 2021 was for a 50.4% improvement on demand in 2020 (the “Worst Year in History for Air Travel Demand”), that would bring the industry to 50.6% of 2019 levels.

Willie Walsh, IATA’s Director General, warns that international demand is particularly weak.

“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases.

There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.

Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash.”

IATA says governments need to have plans in place so that flights can restart quickly when the pandemic allows, and also provide more relief measures such as employment support.

The group also wants to see cost reduction,including the “extortionate costs for COVID-19 testing”.

Bloomberg are reporting that Greensill Bank AG’s German offices and the homes of board members have been raided by prosecutors in the city of Bremen, investigating accounting irregularities linked to the demise of the lender.

Here’s the story:

Searches in the bank’s offices started last week and are continuing, said Frank Passade, a spokesman for prosecutors. Investigators on Tuesday also raided the homes of some of the five suspects in the probe.

“The raid continues as long as we say it continues,” Passade said. “This gives us the opportunity to get into the bank’s offices whenever we need it.”

The number of homes sold in the UK hit a record high in March as buyers and sellers attempted to complete deals, and take advantage of the stamp duty holiday.

An estimated 180,690 transactions were recorded during the month, according to official figures from HMRC.

That’s twice as many as in March 2020 and the highest number since it started publishing the data in this way in 2005.

With prices rising at their fastest rate in six years, it shows the fevered nature of the market.

The stamp duty holiday had been due to finish at the end of March, creating a rush to complete sales, but was extended in the Budget until the end of June.

Nicky Stevenson, the managing director at the national estate agent group Fine & Country, said:

“The property market remains in a parallel universe at odds with the wider reality everyone has been living.

“It’s been a gloom-defying 12 months, given that last March, when the first lockdown arrived, the market seized up, mortgage products were withdrawn and everyone held their breath.”

Bank of England governor Andrew Bailey has weighed in on the issue of lobbying which is gripping UK politics and business, with a warning to be ‘rigorous’ about speaking to a diverse range of people when considering an issue.

Bailey was speaking this morning at an event to increase the diversity of the Bank’s contacts within the financial sector, to improve its market intelligence and analysis operations.

This, Bailey said, will help the BoE better understand global financial markets, and their impact on the UK economy, and make better decisions.

As a public institution, we need to represent the diversity of the country in what we look like, who we talk to and the impact of our decisions.

But, just as importantly, Bailey added, it helps achieve goals of monetary and financial stability (including avoiding another financial crisis).

Improved cognitive diversity helps make for better decision making. The lack of such diversity has been highlighted as one important factor in the bank and regulatory failures of 2008.

It can also help the BoE understand what’s driving markets, avoiding analytical, and hence policy, mistakes. He cites work with the Islamic finance community, and efforts to increase female representation on key committees.

And Bailey rounded off his speech with a pointed reference to the ‘problem of lobbying’, saying:

There is a very important further issue in all of this, which is sadly highly topical, namely to ask what is the antidote to the problem of lobbying? The answer is not to speak to no-one. That is not likely to lead to good decision making. The answer is to be rigorous about speaking to a diverse range of people to get their views.

A timely point, given the various inquiries into the Greensill scandal, and the contacts between David Cameron and chancellor Rishi Sunak:

... and text messages have shown that Boris Johnson personally assured Sir James Dyson that the billionaire inventor’s employees would not have to pay extra tax if they came to the UK to make ventilators during the pandemic.

Fitness fans took part in more than 1m workouts in the first week after reopening in England, according to the UK’s largest gym chain, PureGym, my colleague Joanna Partridge explains.

Reporting a 92% crash in annual profits after Covid lockdown restrictions forced the closure of its gyms for more than a third of 2020, the group said customers were keen to get back on their exercise bikes, with footfall rebounding to a level similar to the equivalent week in 2019.

PureGym reopened its 240 sites in England on 12 April, including 10 new locations, while tens of thousands of new members joined.

Gyms are scheduled to reopen in Scotland this month, followed by those in Wales, and Northern Ireland in early May. The group’s venues reopened in Switzerland on Monday and it expects to restart the treadmills in Denmark next month.

We also have new data on the cost of renting a home, which show a small annual slowdown last month - particularly in London.

The ONS says:

• Private rental prices paid by tenants in the UK rose by 1.3% in the 12 months to March 2021, down from 1.4% in the 12 months to February 2021.
  
  
• Private rental prices grew by 1.3% in England, 1.5% in Wales and 1.0% in Scotland in the 12 months to March 2021.
  
  
• The South West was the English region to see the highest annual growth in private rental prices (2.4%), while London saw the lowest (0.5%).

On a monthly basis, rents look flat:

Cara Pacitti of Resolution Foundation has tweeted more details:

Although house prices were sharply up year-on-year, they were flat on a month-on-month basis in February.

[although they were 0.5% higher month-on-month on a seasonally adjusted basis].

EY ITEM Club’s Howard Archer predicts that prices will pick-up in the near term, but could then fade - and be flat year-on-year by early 2022:

“Following the Chancellor’s introduction of more supportive measures in the Budget, including the mortgage guarantee scheme and extension of the Stamp Duty threshold increase, the EY ITEM Club now expects the housing market to show vigour in the near term and a modest firming of prices. The market will also likely be helped by the extension of the furlough scheme to the end of September and the fact that unemployment is not likely to rise as much as expected at the outset of the pandemic.

“However, the EY ITEM Club is doubtful that this will be sustained for long as the strengthening of the housing market has been outsized relative to economic fundamentals.

“The EY ITEM Club suspects house prices will be flat year-on-year by early 2022. Some quarters of falling prices likely at the end of 2021 and early on in 2022 as the Stamp Duty benefit ends, unemployment rises and there is a waning of pent-up demand. Housing market activity may also be affected from the latter months of 2021 by growing expectations that interest rates could start to rise before long.”

UK house prices have risen at their fastest pace in over six years, new figures show.

The Office for National Statistics reports that UK average house prices increased by 8.6% in February, compared to a year ago.

That’s up from 8.0% in January 2021, and the highest annual growth rate the UK has seen since October 2014.

The temporary stamp duty holiday, and the pressure to move to larger homes following the shift to home-working and home schooling, are both factors.

The average UK house price was £250,000 in February 2021, the ONS adds, £20,000 higher than in February 2020.

Average house prices increased over the year in England to £268,000 (8.7%), in Wales to £180,000 (8.4%), in Scotland to £162,000 (8.0%) and in Northern Ireland to £148,000 (5.3%).

UK manufacturers put up their prices last month, in a sign that inflationary pressures are rising.

The ONS reports that prices at the factory gate rose by 1.9% in the year to March, the biggest rise in nearly two years.

Manufacturers also faced higher costs themselves: the price for materials and fuels has jumped by 5.9% in the last year (and 1.3% in March alone), particularly for metals and non-metallic minerals, and crude oil.

TUC General Secretary Frances O’Grady says:

“With inflation well below target, the Chancellor must do more to stimulate the economy and speed up recovery. He should start by boosting pay for the key workers who kept us going through the pandemic.

“If workers get more spending power, our high streets and businesses will get a boost too. This will drive a faster recovery, supporting business growth and job creation.”

In the City, the FTSE 100 index has opened higher, clawing back some of yesterday’s losses.

The blue-chip index is up 37 points or 0.5% at 6897 points (having fallen 140 points, or 2%, on Tuesday).

Travel companies are recovering some ground, with British Airways owner IAG up 3.6%. Oil companies are also rising, with BP and Royal Dutch Shell 2% higher.

On the smaller FTSE 250 index, budget rival easyJet has risen 3% while cruise operator Carnival has gained 3.6%.

This chart illustrates pretty clearly why inflation rose last month:

At 0.7%, the UK annual inflation rate is still lower than before the pandemic - but higher than last summer [CPI fell to just 0.2% in August 2020]

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

The UK’s inflation rate has risen, pushed up by rising fuel and clothing costs ahead of the easing of the Covid-19 lockdown.

Figures just released show the annual consumer prices index rose to 0.7% in March, up from 0.4% in February, with transport costs making the largest contribution.

The Office for National Statistics says that rising prices for motor fuels and clothing pushed the inflation rate higher, although this was partially offset by falls in the price of food.

The ONS says a rise in costs at the pumps helped to push up the cost of living:

Between March 2020 and February 2021, motor fuels made a downward contribution to the CPIH 12-month rate. However, the contribution has turned positive in March 2021 reflecting a 12-month rate for motor fuels of 3.5%, the first positive rate since February 2020.

Petrol prices stood at 123.7 pence per litre in March 2021, compared with 119.4 pence per litre in March 2020 and a recent low of 106.2 pence per litre in May 2020.

Clothing and footwear prices also increased notable in March, ahead of the opening of non-essential shops earlier this month.

They rose by 1.6% between February and March 2021, compared with a fall of 0.3% between the same two months a year ago.

The ONS explains:

The rise this year has been influenced by a fall in the amount of discounting between February and March, albeit the incidence of discounting is still above normal levels for the time of year.

The upward contribution came principally from a wide range of women’s clothing.

Also coming up

Worries about the Covid-19 pandemic are weighing on the markets again, amid a surge in coronavirus cases in countries like India and Japan.

Yesterday, European markets posted their biggest fall this year, with airlines and hospitality firms badly hit. The pan-European Stoxx 600 lost 1.9%, while in London the FTSE 100 lost 2%.

Asia-Pacific markets have dropped again today, with Japan Nikkei 225 down around 1.9%, South Korea’s Kospi off 1.4% and Hong Kong’s Hang Seng falling 1.7%.

Stephen Innes of AXI says renewed virus concerns have spooked markets:

A worsening health crisis in India pushes out the return of pre-covid travel even further in the Asia-Pacific region.

It highlights the uneven pace of economic recovery in pockets of emerging markets.

Sticky travel restrictions leave economies with greater dependence on tourism (e.g. Thailand) and domestic demand (e.g. India) at risk of further disappointing growth expectations in 2021.

The agenda

• 7am BST: UK inflation report
• 9.05am BST: Bank of England deputy governor Sir Dave Ramsden speaks at UK FinTech week conference
• 12pm BST: US weekly mortgage applications
• 3.30pm BST: EIA weekly oil inventory figures