Time for a quick recap.

A Federal Reserve governor has warned that stablecoins could be a risk to consumers, and financial stability. Lael Brainard said that the rise of ‘private money’ was a concern, as the Fed also steps up its work on a possible digital dollar.

Brainard compared the rise of stablecoins, which tie crypto-currencies to more stable assets, to the proliferation of rival private money in the US during the 19th century.

Unlike central bank fiat currencies, stablecoins do not have legal tender status. Depending on underlying arrangements, some may expose consumers and businesses to risk. If widely adopted, stablecoins could serve as the basis of an alternative payments system oriented around new private forms of money.

Given the network externalities associated with achieving scale in payments, there is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. payment system in ways that impose burdens and raise costs for households and businesses.

The governor of the Bank of England has criticised Lex Greensill, telling MPs that the Australian acted like he’d discovered the secrets of the universe through his now-collapsed supply chain finance business.

Andrew Bailey told MPs that there was nothing new about the broad practice of financing invoices, while the financing of ‘future receivables’ (business not yet conducted) is a concern -- it looks like unsecured lending, and could also be used to flatter a company’s financial picture.

Bailey revealed that the Bank of England had flagged its concerns about Wyelands Bank - owned by steel tycoon Sanjeev Gupta -- to the National Crime Agency and the Serious Fraud Office more than a year ago.

Bailey also repeated his concerns about crypto assets, saying they were dangerous.

HSBC is also keeping away, telling Reuters they have no plans to offer bitcoin to clients.

Gupta’s Liberty Steel announced plans to sell its aerospace steel business in Yorkshire as part of a restructuring deal as it tries to ensure its survival.

The under-pressure steel firm said on Monday it was in talks with Credit Suisse, a large creditor, over agreements that would give it time to repay its debts. Gupta met Credit Suisse representatives in Dubai, where he is currently based.

Beijing stepped up its pressures over rising commodity prices, warning that it would not tolerate ‘speculators and hoarders’. Iron ore promptly tumbled, and steel prices also fell in China.

Cinema owners have enjoyed a strong opening weekend in the UK, with the biggest box office takings since cinemas were first forced to close 14 months ago.

Cinema owners took an estimated £7m in ticket sales over the weekend, the best take since 6-8 March last year, led by Peter Rabbit 2: The Runaway. The previous weekend high was the £6m taken by Tenet when it was released last August.

Shares closed higher in London, with oil also rallying, on optimism about the economic recovery.

Britain’s energy regulator has approved a £300m investment spree to help triple the number of ultra-rapid electric car charge points across the country, as part of efforts to accelerate the UK’s shift to clean energy.

Workers at accountancy firm EY will be expected to work from home for at least two days a week even after coronavirus restrictions lift, in the latest sign of the pandemic changing office life.

The company, formerly known as Ernst & Young, on Monday told UK employees via video call that 17,000 staff will move to a “hybrid working model” that mixes work in the home and the office – as well as visits to clients – once social distancing advice is removed.

Eight men have been arrested in early morning raids across England as part of an investigation into scam texts claiming to be from Royal Mail.

The men were detained on suspicion of fraud involving “smishing” texts claiming to be from delivery firms.

Developers have been snapping up vacant retail and office sites in urban areas, to create more apartment blocks for over-65s

Britain’s biggest fund manager, Legal & General Investment Management (LGIM), has has piled pressure on Shell after joining a shareholder rebellion over the oil company’s carbon-cutting plans:

Goodnight. GW

The London stock market ended today on the front foot, as investors anticipated the reopening of the economy.

The blue-chip FTSE 100 index closed 33 points higher at 7051, up 0.5% today.

Catering company Compass (+2.8%) led the risers, with betting firms Entain (+2.2%), Flutter (+2%), and hotel operators Intercontinental (+1.9%) and Whitbread (+1.9%) also gaining.

The smaller FTSE 250 index gained 0.4%, with gambling firm Rank, eateries group Restaurant Group (+5.2%), transport firm National Express (+3.8%) and pub chain JD Wetherspoons (+3.6%) in demand.

Cineworld, who reported strong cinema takings since reopening last week, closed 3.2% higher.

On Saturday, data found that both the Pfizer and AstraZeneca jabs are highly effective at protecting people from the strain of the Covid-19 virus first found in India, easing some fears about the risk of a new lockdown.

Danni Hewson, AJ Bell financial analyst, says the recent reopening of the UK economy - and hopes that it will continue - lifted stocks.

“It seems investors have had a good weekend and have realised how many other people have also been enjoying newly reinstated opportunities.

Andrew Bailey has also reiterated, again, his concerns over crypto assets.

He tells MPs that while “innovation is good”, there is a danger that people get carried away.

It’s why I’m skeptical about cryptos assets, frankly.

They’re dangerous, and there’s a huge enthusiasm out there.

Bailey has previously warned against crypto several times, saying earlier this month that investors risk losing all their money.

Andrew Bailey also rejected the idea that the insurance industry should be blamed for the collapse of Greensill Capital, because it tightened cover when the pandemic began.

The Bank of England governor told the Treasury Committee that this “procyclicality” isn’t the root cause of the collapse of Greensill Capital. There are two other reasons.

First, his Australian insurer exceeded its underwriting limits to Greensill, says Bailey. It realised this, and pulled back.

Second, Greensill’s business model (paying off bills owed by large companies to small ones, for a small margin) was “excessively dependent on insurance”.

The problem is, he couldn’t sell his paper, his notes, without insurance cover, Bailey says.

Once the insurance cover fell away, he went from everything to nothing.

That’s a vulnerability in his business model he should have thought about.

Q: So is this kind of business model a Ponzi scheme, as some claim?

Bailey says it is not, and adds that Paul Myners (the former City minister) uses the term rather liberally.

Greensill was not the same structure as Charles Ponzi’s famous scam (promising high returns to investors, and using new customers to pay off old ones), Bailey insists.

Instead, it had at least one big structural weaknesses, that excessive reliance on insurance cover.

[that insurance cover allowed Greensill to pay off a customer’s bills, and then sell off that loan to a bank, typically Credit Suisse]

Bank of England governor Andrew Bailey has also revealed that the BoE informed the UK’s National Crime Agency about its concerns over Sanjeev Gupta’s bank, Wyelands, back in 2019, followed by the Serious Fraud Office in early 2020.

Bailey told the Treasury Committee that concerns over Wyelands emerged in late 2018 and early 2019 about the lack of transparency around connected lending, and the ultimate beneficial owner, Mr Gupta.

This led to the ‘first phase’ of the Prudential Regulation Authority’s investigation, in 2019. In September that year, the PRA imposed restrictions on Wyelands Bank, prevented further lending transactions with certain parties, and limits on accepting deposits.

This restrictions were tightened on five occasions over next 15 months, Bailey says.

Then in October and November of 2019, “further concerns came to light” concerning Wyeland’s loan book. This led to a phase 2 investigation - and also saw the PRA notify the National Crime Agency about its concerns and what it was doing.

Then in February 2020, based on the evidence gathered, the PRA laid out its concerns to the Serious Fraud Office, Bailey explains.

[The SFO launched an inquiry into the Gupta Family Group Alliance (GFG) earlier this month].

Then, in March 2021 the BoE ordered Wyelands to repay its depositors in full - an unprecedented move, meaning some £210m was returned to around 4,000 savers.

Q: So was it a coincidence that Greensill collapsed just as depositors were repaid?

“Yes, but....” Bailey replies. The “growing news around Gupta and Greensill” meant that the BoE had determined that leaving depositors’s cash on Wyeland’s balance sheet was not sensible.

So it was “a coincidence of substance, but not a coincidence of timing”, Bailey says.

Bank of England governor Andrew Bailey has taken a jab at Lex Greensill - saying that the Australian banker’s now-failed business was far less innovative than he claims.

During today’s testimony to the Treasury committee, Labour MP Siobhain McDonagh asked Bailey whether prospective receivables were “the latest 21st Century development of supply chain finance, or clairvoyance”.

[prospective receivables is the practice of issuing loans against invoices against future business, rather than against invoices for goods that have actually been delivered].

Bailey replies that inventory financing is a very old financial instrument that has a very important role - it allows trade to happen, goods to be provided, and has proved its worth.

In its basic form it’s a very straightforward form of financial activity.

It’s not rocket science, it’s not fintech. It doesn’t involve large amounts of innovation.

Mr Greensill sometimes presents it as if he’s discovered the secret to the universe.

Bailey adds that was some innovation in Greensill’s business, perhaps some useful innovation.

But he then raises two concerns, and reasons to be sceptical:

First, the financing of future receivables “looks rather like unsecured lending to me”.

Second, the accounting question, and the suggestion that it can make the debt of a company look smaller than it is, and the cashflow look better than it is.

There are reasons to be skeptical. There’s no reason that this traditional form of invoice financing shouldn’t have useful innovation. That’s perfectly sensible, but there are some reasons to be sceptical in some areas.

McDonagh asks whether Bailey shares her concerns that “50% of the transactions” seem to have had no invoice, and companies involved regularly didn’t know they were involved?

We didn’t regulate Greensill in any shape or form, Bailey replies.

It’s clear that no-one regulated them. McDonagh hits back.

Bailey agrees.

Q : Are you concerned by these reports?

Bailey says yes, he would be concerned if that was the case.

Q: Is this practice used by other companies?

Bailey says the BoE aren’t experts in this field, so can’t comment.

Q: Are there any regulatory failures regarding Greensill?

Bailey says he’s not yet seen a case that Greensill should have been regulated based on a financial stability risk (as commercial lending isn’t regulated).

But when the evidence is all laid out, there may well be be “very, very difficult and regrettable practices”.

Cryptocurrency news: Federal Reserve governor Lael Brainard is warning that stablecoins, whose value is linked to another asset, could threaten consumer protections and undermine financial stability.

Speaking at a virtual conference organised by Coindesk, Brainard warns that the rise of stablecoins could bring risks to consumers and financial stability, if it creates ‘private forms of money’.

Such private monies don’t carry the same level of protection as bank deposits or fiat currency, she points out, and could fragment parts of the US payment system.

Brainard gave this warning as she explained that that the Fed is stepping up its research and public engagement into central bank digital currencies (CBDCs), and a possible digital version of the US dollar.

Last week, chair Jerome Powell said the Fed would publish a research paper this summer on this issue.

Brainard says today that a digital dollar would be “a new type of central bank money” issued in digital form for use by the general public.

By introducing safe central bank money that is accessible to households and businesses in digital payments systems, a CBDC would reduce counterparty risk and the associated consumer protection and financial stability risks.

Brainard explains that several developments have sharpened the focus on central bank digital currencies -- including the rise of digital private money.

Brainard says:

A stablecoin is a type of digital asset whose value is tied in some way to traditional stores of value, such as government-issued, or fiat, currencies or gold. Stablecoins vary widely in the assets they are linked to, the ability of users to redeem the stablecoin claims for the reference assets, whether they allow unhosted wallets, and the extent to which a central issuer is liable for making good on redemption rights.

Unlike central bank fiat currencies, stablecoins do not have legal tender status. Depending on underlying arrangements, some may expose consumers and businesses to risk. If widely adopted, stablecoins could serve as the basis of an alternative payments system oriented around new private forms of money.

Given the network externalities associated with achieving scale in payments, there is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. payment system in ways that impose burdens and raise costs for households and businesses.

A predominance of private monies may introduce consumer protection and financial stability risks because of their potential volatility and the risk of run-like behavior.

Indeed, the period in the nineteenth century when there was active competition among issuers of private paper banknotes in the United States is now notorious for inefficiency, fraud, and instability in the payments system. It led to the need for a uniform form of money backed by the national government.

Brainard also gives a clear warning that private money does not carry the same protection as fiat currencies.

It is not obvious that new forms of private money that reference fiat currency, like stablecoins, can carry the same level of protection as bank deposits or fiat currency.

Although various federal and state laws establish protections for users, nonbank issuers of private money are not regulated to the same extent as banks, the value stored in these systems is not insured directly by the Federal Deposit Insurance Corporation, and consumers may be at risk that the issuer will not be able to honor its liabilities. New forms of private money may introduce counterparty risk into the payments system in new ways that could lead to consumer protection threats or, at large scale, broader financial stability risks.

The largest stablecoin is Tether, which is pegged to the dollar and has now issued $60bn of tokens.

Those tokens, it says, are 100% backed by Tether’s reserves. Earlier this month. Tether reported that 75% of its reserves are backed by “Cash & Cash Equivalents & Other Short-Term Deposits & Commercial Paper”, with just 2.9% backed by cash reserves [as the FT explains here.]

Here’s some reaction to Brainard’s speech:

Brainard added that three other factors also spurring the Fed to look at digital currencies -- the migration to digital payments; plans for the use of foreign CBDCs in cross-border payments; and concerns about financial exclusion.

Liberty Steel has said it plans to sell its aerospace steel business based in Yorkshire as part of a restructuring deal as it tries to ensure its survival.

The steelmaker, which is owned by the metals magnate Sanjeev Gupta, on Monday said it was in talks with Credit Suisse, a large creditor, over agreements that would give it time to repay its debts.

Talks with Credit Suisse include a plan to sell its aerospace and special alloys steel business in Stocksbridge, South Yorkshire, plus an associated facility nearby and another in the West Midlands. It would also give Gupta time to refinance a separate plant in nearby Rotherham. About 750 people work at Stocksbridge, and 650 at Rotherham.

A deal with Credit Suisse would help Gupta to allay fears for the future of the company and its 3,000 UK workers.

Liberty has been in crisis since March following the collapse of its key lender, Greensill Capital. Since then it has faced a host of threats, including legal claims by Credit Suisse to reclaim money, low demand from the stricken aerospace industry, and the revelation of a months-long fraud and money-laundering investigation by the Serious Fraud Office.

Credit Suisse was one of the largest backers of Greensill, and it has been pursuing legal action to try to recoup its money from Liberty businesses in the UK and Australia.

Liberty said it was in “advanced discussions” over a standstill agreement with Credit Suisse in relation to an Australian business that would see the bank repaid in full. Talks over the UK business have not progressed as far.

More here:

Liberty Steel says it has also started a formal process to sell its Aluminium Technologies and Pressing Solutions.

Liberty Pressing Solution is based in Coventry, while Liberty Aluminium Technologies has sites in Essex and Kidderminster.

Liberty says it is “working collaboratively with the main customers of these plants to find a sustainable home for these quality businesses”.

Liberty Steel is putting its aerospace and special alloys steel business in Stocksbridge, Sheffield, up for sale as part of a major restructuring plan following the collapse of Greensill Capital.

Two of Stocksbridge’s “downstream plants”, a narrow strip mill at Brinsworth and Performance Steels at West Bromwich, will also be put up for sale.

Liberty, part of Sanjeev Gupta’s GFG Alliance, says the sale will help restructure and refinance its UK operations, which employ around 3,000 people in the UK.

The move follows crunch talks with Credit Suisse Asset Management over the weekend to reach a standstill agreement over debts which GFG owes the bank in relation to its Australian steelworks.

Liberty says selling Stocksbridge will help to resolve GFG Alliance’s “remaining exposure” with Credit Suisse.

The steel group adds that it will focus on developing its Rotherham factory, to recycle more scrap steel (a key part of Gupta’s business plan).

This sale will allow LIBERTY to focus on developing its Rotherham plant including its electric arc furnaces into a competitive 2 million tonnes recycled GREENSTEEL plant, one of the largest in Europe.

The plant will make use of some of the millions of tons of steel scrap currently exported by the UK to make more of the quality steel needed in the UK, which is currently being imported.

Greensill Capital was Gupta’s key lender, before collapsing into administration in March.

After tumbling yesterday, cryptocurrency prices are higher this morning -- but still sharply off their recent peaks.

Bitcoin, which tumbled to just $31,111 during Sunday’s turmoil, has now risen back to around $36,500.

That’s still around 40% off April’s record ($64k), and around the levels seen back in February, as this chart shows:

This wild volatility follows China’s crackdown on cryptocurrency trading and mining, and Elon Musk’s criticism of bitcoin’s energy use -- and has dented claims that bitcoin can work as a currency, or as a stable store of value.

And HSBC’s CEO has now said that his bank has no plans to launch a cryptocurrency trading desk or offer the digital coins as an investment to customers.

Noel Quinn told Reuters that they are too volatile and lack transparency.

Here’s the story:

Europe’s biggest bank’s stance on cryptocurrencies comes as the world’s biggest and best-known, Bitcoin, has tumbled nearly 50% from the year’s high, after China cracked down on mining the currency and prominent advocate Elon Musk tempered his support.

HSBC’s stance also contrasts with rival banks such as Goldman Sachs, which Reuters in March reported had restarted its cryptocurrency trading desk.

“Given the volatility we are not into Bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business,” Quinn said.

“For similar reasons we’re not rushing into stablecoins,” he said, referring to the digital currencies that seek to avoid the volatility associated with typical cryptocurrencies by pegging their value to assets such as the U.S. dollar.

More here: EXCLUSIVE HSBC CEO says Bitcoin not for us

The oil price has jumped this morning, after efforts to revive the 2015 Iran nuclear deal and end sanctions on Tehran hit a stumbling block.

Brent crude is up 1.9% this morning at $67.68 per barrel, after the UN nuclear watchdog was unable to reach an expected agreement on how to continue to inspect Iran’s nuclear sites.

Last week, oil fell on the possibility that negotiators could agree terms for Washington to re-enter to the nuclear deal, with Iran’s President Hassan Rouhani declaring that the United States was ready to lift sanctions. That would uncork Iran’s crude supplies into the market.

But as our diplomatic editor Patrick Wintour explains, the two sides are still someway apart:

The UN’s International Atomic Energy Agency was forced to postpone a planned press conference on Sunday that was due to set out details of a one-month extension of the current light-touch inspection regime amid conflicting signals from Iran over whether it would sign up to it.

The IAEA said its director general, Rafael Grossi, will continue consultations with Tehran on a technical agreement. The wider talks in Vienna on reviving the nuclear deal with the west, which Donald Trump took the US out of in 2018, are likely to collapse or be suspended if there is no agreement first between the IAEA and Iran on inspections.

The talks are to enter what is expected to be their fifth and decisive round this week, with both sides warning that big gaps still remained.

The IAEA had been hoping that a three-month deal that expired at the weekend would be extended for another month giving Iran, the other signatories to the nuclear deal and the US time to complete extensive negotiations under way in Vienna on how the US and Iran could come back into compliance with the 2015 deal.

The US president, Joe Biden, has promised to rejoin so long as Iran also ended its own breaches of the agreement.

Cineworld has hopped to the top of the FTSE 250 leaderboard this morning after seeing stronger demand than expected after reopening its doors after the lockdown.

The cinema chain told the City it had enjoyed a “strong opening weekend in the UK”, driven by the success of kids film Peter Rabbit 2: The Runaway.

Cinemas had been closed in the UK for months, before the latest easing of lockdown restrictions last week. So, after months of being stuck at home, film fans were keen to return to the screens.

Cineworld says last weekend went “beyond our expectations”, including strong concession income as customers splashed out on treats such as popcorn.

Cinemas has suffered from many blockbusters being postponed in the pandemic, but CEO Mooky Greidinger is hopeful for a ‘good recovery’ in attendance as more firms are released.

We are especially pleased with the warm welcome our employees have received, and the positive feedback from returning guests. With the releases next week of Cruella, and A Quiet Place 2, we expect next weekend’s results to be strong.

When combined with improving consumer confidence and the success of the vaccination rollout, we expect a good recovery in attendance over the coming months, noting the record breaking success of F9 in the Asian market.

Shares in Cineworld are up over 3.5% this morning, making them the best performer on the FTSE 250 index of medium-sized firms.

“Range anxiety” -- the fear of running out of power mid-trip-- is one factor holding back the UK’s electric car sector.

And today, energy regulator Ofgem has announced a £300m push to tackle the poor availability of EV charging points, to encourage motorists to shift from fossil fuels to electric.

My colleague Kalyeena Makortoff explains:

Britain’s energy regulator is investing £300m to help triple the number of ultra-rapid charging points for electric vehicles across the country, as part of efforts to accelerate the UK’s shift to clean energy.

Ofgem will use the cash to build new infrastructure supporting 3,550 new ultra-rapid charging points – 1,800 at motorway service stations and 1,750 in towns and cities.

The UK plans to ban the sale of new petrol and diesel cars from 2030, and phase out hybrid vehicles from 2035. However, a report released by the influential Commons public accounts committee (PAC) last week showed there are huge challenges in reaching the government’s target to switch all cars to net zero emissions models within the decade, partly due to poor infrastructure.

“The payment will support the rapid take-up of electric vehicles which will be vital if Britain is to hit its climate change targets,” the Ofgem chief executive, Jonathan Brearley, said.

“Drivers need to be confident that they can charge their car quickly when they need to.”

Stocks have opened higher in London, with the FTSE 100 gaining 22 points in early trading to 7040 points, up 0.3%.

Industrial software firm Aveva (+1.5%), telecoms operators Vodafone (+1%) and BT (+1), and pharmaceuticals firm Hikma (+1%) are among the risers, in a fairly quiet start to the week.

Precious metals miner Fresnillo are leading the fallers, down 2%, while copper producer Antofagasta has dipped by 1% (analysts at RBC cut their target price this morning).

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

Commodity prices are on the slide today after China announced a new crackdown on ‘speculators and hoarders’ to deflate the boom in raw materials.

Following a meeting with China’s big metals producers, China’s National Development and Reform Commission issued a stern warning against commodity price manipulation.

The NDRC warned that against “excessive speculation” and hoarding of raw materials, and pledged to show “zero tolerance” for monopolies in the markets.

Pointing to the recent jump in raw material costs, the NDRC said:

“This round of price increases is the result of multiple factors, including international transmission but also have many aspects reflecting over-speculation.

It also warned that companies “should not collude with each other to manipulate market prices [or] hoard goods and drive up prices,”, pointing out that the surge in commodity prices are disrupting normal market order.

The NDRC is China’s top economic planner, and the move signals that Beijing is intensifying its efforts to cool soaring prices which are driving up costs across the world.

The move is having an immediate impact on the commodity markets, with with iron ore on China’s Dalian exchange plunging by almost its daily limit of 10%.

That extends its recent declines, having soared to record highs earlier this month.

Steel and copper prices have also dropped, as traders digested the move.

Last Wednesday, China’s cabinet said the government would manage “unreasonable” price increases for copper, coal, steel, and iron ore.

ANZ commodity strategists said in a note to clients that:

“China’s authorities continue to raise concerns about the rise of commodity prices, raising concerns that they may tighten regulations,”

Elsewhere, the crypto market had a torrid weekend. A fresh wave of selling send bitcoin down over 16% at one stage on Sunday towards the $31,000 mark, although it’s now risen back to over $36,000 this morning.

This latest selloff came after Beijing pledged to crack down on bitcoin mining and trading activities as part of efforts to fend off financial risks.

With bitcoin having slumped over 40% since last month’s record high of $64,000 last month, and other digital assets also sliding, some enthusiasts have abandoned the market, says Kyle Rodda of IG:

After a brief bounce off last week’s multi-month lows, some of the paper-handed types have seemingly sold-out just passed their breakeven, or decided to pack it in and cut their losses, as Bitcoin’s momentum, and the speculative mania that drove it, almost entirely disappears.

The agenda

• 1.30pm BST: Chicago Fed National Activity Index for April
• 2pm BST: Federal Reserve governor Lael Brainard speech
• 3.30pm BST: Treasury Committee hearing with the Bank of England