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What to Watch: BA owner buys Air Europa, Santander Ebury stake, and Lagarde speech

Tom Belger
Finance and policy reporter
IAG is buying Air Europa. Photo: JOSEP LAGO/AFP via Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

BA owner buys Air Europa in €1bn deal

The owner of British Airways and Iberia has agreed to buy the Spanish airline giant Air Europa in a €1bn deal (£860m, $1.12bn).

The International Consolidated Airlines Group (IAG) hopes to capitalise on travel between Europe and Latin America by snapping up its rival.

It also hopes it can boost Madrid airport as a major European hub, and comes after the 2015 acquisition of Aer Lingus.

READ MORE: BA reports sliding profits after pilot strike

IAG (IAG.L) chief executive Willie Walsh said it would “add a new competitive, cost-effective airline to IAG.”

It comes just a few days after IAG reported a 6.9% slide in operating profits excluding exceptional costs after a BA pilot strike forced it to ground 1,700 flights.

New ECB chief speaks amid eurozone manufacturing gloom

The new European Central Bank (ECB) president Christine Lagarde will give her first speech in her new role in Berlin on Monday.

Investors expect her not to signal much change from her predecessor Mario Draghi, whose final act was a new round of bond buying that began last week.

It comes amid renewed gloom over the state of manufacturing, with new purchasing managers’ index (PMI) figures on Monday making bleak reading for Lagarde, investors and firms.

The widely watched IHS Markit figures show factory activity shrunk significantly last month as US trade tensions and uncertainty over Brexit bite.

READ MORE: Lagarde takes charge at the ECB

The PMI for the eurozone came in at 45.9 on an index where figures above 50 show growth and below 50 show decline.

Meanwhile Germany’s factories appeared stuck in a downturn amid fresh fears the country’s economy is on the brink of a recession.

German factories slashed jobs at the fastest pace in almost 10 years, with manufacturers in Europe’s largest economy showing an index reading of 42.1.

It marked an upward trend on last month’s 41.7 reading, but was still the second lowest in a decade and showed new orders dropping for a 13th month in a row.

£350m Santander stake in Ebury

The bank Santander (BNC.L) has bought a £350m ($453m) majority stake in UK trade and foreign exchange firm Ebury.

The bank said it would help it offer small and medium-sized business customers “faster and more efficient products and services” previously only available to larger companies.

READ MORE: Hot fintech firm Ebury burns £19m on expansion

The deal for 50.1% of Ebury will help boost Santander expansion into new markets in Latin America and Asia, according to Santander.

Ebury operates in 19 countries and 140 different currencies, and it was once touted as a potential “unicorn.”

Ryanair axes jobs over Boeing troubles

Ryanair downgraded growth hopes. Photo: PA

Ryanair is warning of job cuts as it blamed the Boeing 737 Max scandal for making some of its bases unprofitable.

The company (RYA.L) said in its half-year results on Monday there could be further delays reintroducing the planes, which were grounded worldwide after two fatal crashes earlier this year.

CEO Michael O'Leary said there remained a “real risk” of not having any of the planes back in service next summer, but reduced the expected number from 30 to 20.

It downgraded its expectations for passenger growth from 162 to 157 million customers in the next financial year to the end of March 2021.

It narrowed its full-year forecast to the end of March to $800-900m, in line with analyst forecasts of €836m, according to Reuters.

Mothercare UK collapses into administration

Mothercare (MTC.L) has become the latest UK high street retailer to collapse, as it appointed administrators for its UK operations on Monday.

The move put 2,500 jobs at risk. The struggling retailer will shut all 79 stores in the UK, though its overseas business remains unaffected.

In the UK the company lost over £36m last year. It had already closed a third of its British stores over the past year through a company voluntary arrangement (CVA).

Trade hopes boost European stocks

European markets were trading higher despite the gloom over manufacturing, as markets were buoyed by increased hopes the US and China could pull back from a prolonged trade war.

Global shares reached a 21-month high, according to Reuters. Britain’s FTSE (FTSE), the French CAC 40 (^FCHI) and the Euro Stoxx 50 (^STOXX50E) were all up 1.1%, while the German DAX (^GDAXI) rose 1.2%.

The US and Chinese governments had highlighted progress in talks on Friday over the dispute that has rattled markets, with US officials suggesting a deal could be reached this month.

Asian stocks were mixed overnight, with Japan’s Nikkei (^N225) sinking 0.3% but China’s Shanghai Composite index (000001.SS) up 0.6% and the Hong Kong Hang Seng Index (^HSI) soaring 1.7%

What to expect in the US

US stocks also looked set to rise on the open on the global trade hopes. Dow Jones futures (YM=F) and S&P 500 futures (ES=F) were both 0.5% higher, and Nasdaq futures (NQ=F) were up almost 0.7% at around 10.30am in London.