Finally....after probably the most chaotic days trading since the crash of March 2020, bitcoin is holding up better than rival cryptocurrencies.

Bitcoin is currently trading around $38,300, a fall of over 11% today after worries about China’s crypto currency triggered today’s slump.

But still, that’s a rebound from bitcoin’s lowest point (when it briefly hit $30,000), after Elon Musk tweeted about Tesla’s diamond hands (implying that it wasn’t selling its bitcoin), and Ark’s Cathie Wood said she still backed it.

Ether, the coin used on the ethereum blockchain network, is nursing steeper losses - down almost 25% today at $2,587, despite today’s news of a plan to cut its carbon emissions.

Ripple’s XRP is also down over a quarter, while joke coin Doge’s hopes of going “to the moon” have taken a knock -- it’s down 25% today at $0.35.

Nicholas Cawley from DailyFX says it was a day of ‘relentless selling pressure’ across the cryptocurrency market.

The sell-off has been triggered by news that China is looking to ban the use of cryptocurrencies. The speed of the sell-off suggests that leveraged accounts are being hit badly and the indiscriminate slump across the space also points to a lack of buying intent.

It maybe that this sell-off is an opportunity to enter or re-enter the market but the current level of volatility in the market should warn people against trying to ‘buy the dip’. Investors should not buy in a falling market and should wait until price action stabilizes before considering hitting the buy button.”

Bloombeg argues that Bitcoin’s relative recovery tonight shows its resilience:

That’s all for tonight. Here’s our news story about today’s action:

After a wild day, the New York stock market has closed off its earlier lows, as traders shook off the turmoil in the crypto asset world.

The Dow Jones Industrial Average has ended 164 points lower at 33,896.04, down 0.5%.

Oil company Chevron was the top Dow faller, down 2.8%, tracking the 3% drop in crude prices today.

It was followed by sportwear group Nike (-1.9%), investment bank Goldman Sachs (-1.65%) and chemicals producer Dow Inc (-1.4)%.

But the DJIA’s tech stocks did better, with Salesforce.com rising 3.2% and Intel nearly 1% higher.

The S&P 500, which covers a broader range of stocks, fell 0.3% while the Nasdaq finished flat.

As well as bitcoin’s partial recovery from its 30% slump, investors have also been digesting the Federal Reserve’s latest minutes.

Capital Economics’ Paul Ashworth reckons the Fed sounds dovish, despite some members suggesting it might soon be time to talk about how to taper its stimulus.

The minutes of the late-April FOMC meeting reveal that, even though some officials were beginning to worry the upward pressure on inflation could last longer, they were still committed to maintaining the asset purchases.

“The economy remained far from the [FOMC’s] maximum-employment and price-stability goals” and, as a result, “it would likely be some time until the economy had made [the] substantial further progress” needed to begin tapering those purchases.

The minutes of the Federal Reserve’s last meeting, held at the end of April, are out.

They show that some policymakers might be open to talking about how to slow its bond-purchase stimulus programme, at future meetings, if the economy keeps recovering.

The minutes of the FOMC meeting say:

A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.

So just a hint that the Fed could reconsidering its easy policies if the economy keeps rapidly improving. It’s currently buying $120bn of assets per month, expanding its balance sheet to stimulate the recovery and bring unemployment down.

However, the minutes also show that the Fed believes the US economy is far from reaching its inflation and maximum employment targets:

Participants observed that economic activity had picked up sharply this year, with robust gains in consumer spending, housing-sector activity, business equipment investment, and manufacturing production.

They noted that the acceleration in economic activity reflected positive developments associated with the rapid pace of vaccinations as well as continued support from fiscal and monetary policies. Nevertheless, participants generally noted that the economy remained far from the Committee’s maximum-employment and price-stability goals.

The meeting took place before April’s Non-Farm payroll report showed much fewer jobs were created last month than expected, and before US inflation jumped to a 12-year high of 4.2%.

The minute are online here.

Technology investor Cathie Wood has not lost faith in bitcoin, despite watching it plunge 30% earlier today before a rebound.

The head of Ark Investment Management told Bloomberg TV that Ark still expects the cryptocurrency to reach a price of $500,000.

Wood said that environmental concerns have risen, leading to people such as Elon Musk pulling away, but she argues that bitcoin mining could increasingly use green power sources such as solar - which could help the adoption of solar to accelerate.

Wood also said that the indicators which Ark tracks have been suggesting bitcoin had entered a ‘capitulation’ phase today -- ie, a buy signal.

“I think we’re in a capitulation phase. That’s a really great time to buy no matter what the asset is.”

You can watch some of the interview here.

ARK holds several cryptocurrency-related investments, including funds in Grayscale’s Ethereum Trust and crypto exchange Coinbase, whose shares fell again today.

Investors had a reminder of the prospect of rising interest rates earlier today, when Iceland became the first in western Europe to tighten monetary policy since the pandemic.

Iceland’s central bank raised its key interest rate to 1%, from 0.75%, due to “widespread“ inflation pressures. It cited the depreciation of the krona, and steep rises in wages and house prices.

Bloomberg explains that Iceland is trying to head off a spike in inflation:

Iceland’s sudden shift in its policy path is standing out in a region where central banks from Frankfurt to London are still deploying degrees of ultra-loose easing to give recoveries time to take hold.

Danni Hewson, AJ Bell financial analyst, says Iceland’s move - and the jump in UK inflation this morning - may have prompted some investors to look at their portfolios.

“It’s all been a pretty toxic mix. Inflation fears and a touch of FOMO might have pushed some investors to consider dipping their toe into crypto assets, but today’s falls have been a sharp reminder of their volatility.

The decision by Iceland to hike interest rates has also served as a timely reminder that just because UK rates have remained at record lows for over a year they certainly won’t stay there long-term and today’s inflation figures will have prompted some investors to take a long look at their portfolios.

Speaking of volatile.... Bitcoin has now jumped back to $40,000, taking its daily losses to below 10% in a day of remarkable swings:

Prices have picked up since Elon Musk’s ‘diamond hands’ tweet.

After its earlier crash, Bitcoin has risen back to around $37,000.

That still leaves it down 12% today, and around 40% below April’s peak above $64,000.

Tesla CEO Elon Musk has reached for the emoji button, and tweeted that his carmaker has ‘diamond hands’ .

That’s a phrase popular among Reddit traders, meaning to hold onto a position even if prices plunge.

Musk said on Monday that Tesla had not sold any of its remaining bitcoin which it acquired earlier this year.

A research note from JP Morgan, suggesting that institutional investors have been cutting their exposure to bitcoin, may also have added fuel to today’s selloff.

Reuters explains:

Investors may also be exiting bitcoin for gold, analysts at JPMorgan said, citing positioning data compiled on basis of open interest in CME bitcoin futures contracts.

This shows “the steepest and more sustained liquidation” in bitcoin futures since last October, they told clients, adding that it pointed to “continued retrenchment by institutional investors”.

Advocates of bitcoin have argued that it provides a hedge against inflation and money printing, as there can only be 21 million in circulation (over 18 million have been mined so far).

Gold, that more traditional protection against inflation, rose over 1% today to $1,889 per ounce, its highest since early January.

Ethereum, the second largest cryptocurrency after bitcoin, is just “months” away from shifting its underlying infrastructure to a new model that would slash its carbon emissions a hundredfold, the project has announced.

Since Ethereum also provides the infrastructure for a host of other cryptocurrency-related projects, including many non-fungible token platforms, the change could radically improve the energy efficiency of the sector.

At its heart, the plan involves shifting the way Ethereum’s underlying blockchain works. Currently, Ethereum uses a “proof-of-work” system, like the model used by Bitcoin and most other cryptocurrencies. The security of the system as a whole is guaranteed by a requirement that members burn electricity doing complex but pointless mathematics, in order to ensure that no single user can dominate the system.

When the switch is complete, Ethereum will instead use a model called “proof-of-stake”. Under that approach, rather than handing out internal responsibilities based on how much electricity is burned, the system instead allocates power based on how much Ethereum existing users already hold – requiring them to “stake” a portion of their currency every time they make a decision.

Here’s the full story:

Bitcoin’s slump is accelerating, plunging through $32,000 in further wild swings - a fall of around 25% today.

That means its lost half its value since hitting record highs in April.

Today’s bitcoin losses come days after Tesla’s Elon Musk rattled the crypto sector by suspending payments in Bitcoin, citing its high energy use.

Laith Khalaf, financial analyst at AJ Bell, argues that “the tide has turned” on bitcoin, given rising regulatory risks and environmental concerns (research shows that bitcoin consumes more energy than whole countries).

“The price of Bitcoin has tumbled by a third over the last month, which highlights the extreme risk inherent in cryptocurrency. Risk cuts both ways however, and Bitcoin is still trading above where it started the year, so many investors will remain in profit, albeit trimmed back by the recent fall. Some rough and tumble is to be expected when holding something as volatile as cryptocurrency, but in recent weeks there have been significant developments which undermine Bitcoin’s long term prospects.

“The tide has turned on Bitcoin because environmental concerns and regulatory risks have materialised, which have raised doubt over the long term adoption of cryptocurrency by businesses and consumers. Tesla’s decision to suspend accepting Bitcoin on environmental grounds will give other companies the jitters about facilitating crypto payments, lest they spark an ESG backlash from shareholders. Those companies which already accept Bitcoin will likely be having second thoughts.

“Consumers and investors may also start to shun cryptocurrency, when they discover it’s an environmental deadweight, particularly younger Bitcoin fans who are also likely to be sensitive to climate issues. Bitcoin mining uses up a phenomenal amount of energy, and unlike traditional metal mining, doesn’t actually produce anything which is useful in the economy. Even celebrity endorsements may dry up as public figures become wary of being associated with an environmentally unfriendly product.

China’s warning overnight has also highlighted the regulatory threat to cryptocurrencies, Khalaf adds:

“Meanwhile the Chinese central bank has issued a warning that cryptocurrencies shouldn’t be accepted as payment for products or services.

This is a manifestation of the regulatory risk surrounding cryptocurrencies. Central banks aren’t simply going to roll over and let systemic risks build up on the back of Bitcoin trading, particularly when cryptocurrencies are looking to usurp their position as arbiters of monetary value.

Bitcoin has slumped to its lowest level since early February, after Chinese regulators intensified their efforts to crack down on the use of cryptocurrencies by financial institutions, and warned investors against speculative crypto trading.

A sudden selloff sent the world’s largest cryptocurrency lurching to as low as $36,111, before it then recovered to around $38,500 -- still down around 11% so far this session, according to Reuters data.

Coindesk data shows that bitcoin is currently down 15% over the last 24 hours.

Other cryptocurrencies are also plunging, with ether down almost 25%.

The slump was triggered by Chinese regulators intensifying their efforts to crack down on the use of cryptocurrencies by financial institutions.

In a joint statement, banking and internet industry associations said that financial and payment institutions should not accept cryptocurrencies as payment or offer services and products related to them.

Reuters has more details:

China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.

It was China’s latest attempt to clamp down on what was a burgeoning digital trading market. Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrency, such as registration, trading, clearing and settlement, three industry bodies said in a joint statement on Tuesday.

“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” they said in the statement.

Bitcoin has now fallen around 40% since hitting record highs around $64,000 last month.

The British weather has not been terribly kind to the pub trade recently, since pub beer gardens were reopened in the middle of April.

But still, customers have been braving the wet weather to flock back to their local for a pint, according to the pub groups Mitchells & Butlers and Marston’s, who reported strong demand since reopening in mid-April.

The pub and restaurant group Mitchells & Butlers, which is now serving customers at almost all of its 1,600 venues, said it was confident its profits would rebound once coronavirus restrictions are fully eased.

Phil Urban, Mitchells & Butlers’ chief executive, said this morning:

“We had plenty of examples of hardy souls refusing to leave their pint just because of a bit of rain.”

The All Bar One owner, which also runs pub chains including O’Neill’s and restaurant brands such as Harvester, said it had seen strong levels of bookings and demand.

However, with pubs restricted to outdoor-only tables until indoor drinking resumed on Monday, sales in the five weeks from 12 April remained 37% lower than normal trading before the pandemic.

“It finally feels as though we are on the way back,” said Urban.

“Judging by our bookings, we are in for a busy time. We believe people will value eating and drinking out far more than before, having been starved of it for so long.”

Back in the City, UK infrastructure investor John Laing are leading the FTSE 250 risers after agreeing to be taken over by private equity giant KKR in a £2bn deal.

My colleague Joanna Partridge explains:

Private equity firm KKR has agreed to buy UK infrastructure investor John Laing, whose recent projects include Liverpool’s Alder Hey Children’s Hospital, in a deal valued at around £2bn.

John Laing has invested in over 150 projects and businesses since it was founded, across a range of sectors including transport and energy.

The firm, which was floated in February 2015, currently owns assets including schools, hospitals and infrastructure predominantly in the United States and Australia, as well as in Europe.

John Laing said its board intended to unanimously recommend KKR’s offer to its shareholders to take the firm private, adding that it represented a fair and reasonable value for the company.

The takeover values the London-listed firm at 403p per share, a 27% premium to its value on 5 May, just before it confirmed it was in talks with KKR. Shares in John Laing have jumped 11% to 401p today.

John Laing was founded in 1848 as a building company in Carlisle, and has worked on major UK projects such as the M1 motorway, the Severn Bridge, and the Sizewell B nuclear power station, before focusing on infrastructure work.

It was previously taken over by Henderson in 2006, before returning to the stock market in 2015.

Jamie Durham, economist at PwC, predicts that house prices will keep rising in the coming months, having jumped 10.2% to record levels in March.

He cites demand for larger houses, low borrowing costs, and the stash of savings accrued by some households in the lockdown.

“A shift in preferences towards larger properties, an accumulation of more than £140 billion of savings over the last year, low interest rates, and the stamp duty holiday continue to drive house price growth.

We expect that these forces will continue to support price growth over the coming months, even as the stamp duty holiday winds down.

“The spread of the new variant in the UK, and possibility of measures to contain it, is unlikely to have a material impact on the housing market, given price growth remained strong during the most recent lockdown.

“However, there is some risk to the outlook if inflation takes hold in the UK as banks may increase interest rates. This would affect mortgage affordability criteria, lending, and could ultimately weigh on house price growth, though the impact of this will depend on how high inflation rises.”

Anna Clare Harper, CEO of asset manager SPI Capital, points to the generational inequality created by housing boom:

‘The effects are also clear: with wages rising significantly more slowly than houseprices, affordability constraints are increasingly. This is creating, and will continue to drive huge inequalities between older and younger generations, and growing demand from both younger and older renters who are ‘priced out’.

She also predicts prices will continue to increase - partly because construction materials are much more expensive (prices of timber, copper and steel have surged amid shortages)

‘It is also getting more expensive to build. With construction costs rising due to raw material costs, and regulations around building standards getting tighter, it is easy to see how house price rises will continue over the coming years, in particular for new homes. The UK housing market of the future will no longer be dominated by the high value of land but by the challenges and costs of building new homes that meet the needs of a net carbon zero economy, in a context of rapidly rising costs to deliver.

Jonathan Hopper, CEO of Garrington Property Finders, says a ‘perfect storm’ of factors drove prices since the first wave of Covid-19 hit the economy.

“It’s official – a year of on-off lockdowns has completely unshackled the property market from the wider economy.

“The UK economy shrank by 6.1% between the first quarter of 2020 and the same time this year. Yet those same 12 months saw the average home rocket in value by 10.2%.

“The boom isn’t just one for the history books. It’s also the product of a perfect storm of factors. Years of demand that had been repressed by Brexit uncertainty were unleashed just as the difficulties of lockdown living forced thousands of people to fundamentally reassess what they want from their home.

“The Stamp Duty holiday fanned the flames, spurring thousands of would-be buyers into action.

“Spring is traditionally a busy time for the property industry, but this year has been off the chart.

House price inflation in the UK has risen to its highest level since the summer of 2007, just before the collapse of Northern Rock.

The average UK house price increased by 10.2% over the year to March 2021, hitting a new record, up from 9.2% in February 2021, the Office for National Statistics reports.

This is the highest annual growth rate the UK has seen since August 2007, just before the credit crunch struck.

The report shows that prices rose strongly in England, Wales and Scotland, but lagged behind in London:

• Average house prices increased over the year in England to £275,000 (10.2%), in Wales to £185,000 (11.0%), in Scotland to £167,000 (10.6%) and in Northern Ireland to £149,000 (6.0%).
  
  
• London continues to be the region with the lowest annual growth (3.7%) for the fourth consecutive month.

Prices for detached houses rose by 11.7%, faster than the average, amid the surge in demand for larger houses - perhaps further from the office - following the move to home working.

The government’s stamp duty holiday (which was extended in March’s budget) also fuelled the rise in prices.

The ONS says:

The latter half of 2020 saw the UK’s average house price growth accelerating. This trend has continued into the beginning of 2021, reaching an annual growth rate of 10.2% in March 2021.

The pandemic may have caused house buyers to reassess their housing preferences. In our UK HPI data, we have seen the average price of detached properties increase by 11.7% in the year to March 2021, in comparison with flats and maisonettes increasing by 5.0% over the same period.

Changes in the tax paid on housing transactions may have allowed sellers to request higher prices as the buyers’ overall costs are reduced.

Stocks in London have fallen sharply into the red this morning, following losses on Wall Street last night.

The FTSE 100 index of blue-chip share is down exactly 100 points, or 1.4%, at 6934 this morning, with almost every stock lower.

Mining companies are being hit by concerns that inflationary pressures could force central banks to rein in some of their stimulus packages, as a rise in interest rates would hit demand for commodities.

Anglo American, which produces iron ore, coal, nickel, copper and platinum, are down 4%, followed by copper producer Antofagasta (-3.8%).

Scottish Mortgage Investment Trust, which owns stake in major tech companies, are down 3.4%, with the futures market suggesting America’s Nasdaq index will open lower.

Engineering companies are also in the fallers, with Renishaw down 3% and Melrose off 2.5%.

Hospitality companies are under pressure too, with Intercontinental Hotels down 3%, amid concerns that plans to ease lockdown restrictions could be upset by the latest Covid-19 variant.

Neil Wilson of Markets.com says:

Investors continue show signs of indecision as inflationary pressures, reopening uncertainty and toppy valuations just give them cause for a breather.

UK manufacturers put up their prices in April, as rising commodity prices drove up their costs..... which could signal that inflation pressures are building.

Factory gate prices (the cost of goods when leaving the factory) rose 3.9% in the 12 months to April 2021, up from 2.3% in March.

Prices rose 0.4% during the month, which may filter through to consumers in the shops.

Manufacturers were also hit by a surge in input prices, which jumped by 9.9% compared to April 2020. It was mainly due to rising prices for metals and minerals, and crude oil (which plunged to 18 year lows early in the pandemic but have since recovered).

This indicates that inflationary pressures are building in supply chains; a global scramble to get hold of raw materials drove iron ore and copper prices to record levels earlier this month.

Ellie Henderson of Investec says supply chain disruption is push up factory gate costs:

Of course this is a sharp increase, but it is important to note that these numbers have been distorted by the pandemic-related low base of April last year.

Even so this represents a persistent theme witnessed since the start of the year of supply chain disruptions placing upward pressure on producer prices.

At the House of Lords economic affairs committee meeting yesterday, Bank of England Governor Bailey acknowledged this development, but was keen to reiterate that ‘we are not yet seeing strong evidence of the pass through into consumer prices’.

Economist Julian Jessop also sees more inflation pressures building:

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

Inflation across the UK has risen to its highest level in over a year, more than doubling last month as higher petrol prices and gas and electricity bills pushed up the cost of living.

The Consumer Prices index rose by 1.5% in the 12 months to April 2021, new figures from the Office for National Statistics show.

That’s the highest reading since March 2020, and more than double the 0.7% recorded in March 2021.

During April alone, prices rose by 0.6%.

The jump in inflation was driven by rising household utility bills, with the cap on energy bills being lifted.

Motor fuel prices also had an upward impact on the inflation rate, as the jump in crude prices fed through to the pumps.

The ONS added that clothing had pushed up the inflation rate in April, saying:

Price movements for household utilities, clothing, and motor fuels are the main reasons for the higher monthly rate this year than a year ago.

Inflation worries have been weighing on the financial markets for weeks, as it could force central bankers to slow their bond-buying stimulus programmes or consider raising interest rates.

The Bank of England’s target is for inflation to be around 2% in the medium term.

Economists and investors expect inflation will keep rising in the next few months, as the economy emerges from lockdown.

Jon Hudson, fund manager of Premier Miton UK Growth Fund, says:

“Inflation is likely to continue rising throughout the year as lockdowns ease, the economy recovers and various commodity shortages feed through to rising prices. The recent strength of Sterling will act as a buffer for inflation as it reduces the cost of imports.

European stock markets are set to fall at the open, after a late selloff on Wall Street last night.

Kyle Rodda of IG says:

The S&P500 ended the session’s trade down by 0.85 per cent, in what was a fairly broad-based session of losses for the US stock market. Value sectors led the losses, with energy, financials and industrials at the bottom of the intraday market map. However, there was no clear rotation into value, and only a slight preference for defensiveness, with growth and the tech-sector also down, and only a small bid coming through for health-care and real estate stocks.

Energy’s weakness came-in sympathy with a fresh drop in oil prices overnight. Crude fell after news hit the headlines that progress was being made between the US and Iran on a new nuclear deal. The sell-off was retraced after the Russians later came-out to throw cold water on the story. But the move illustrated a slight wariness in the market about any factor that could boost global oil supplies at this time – although there is debate about what impact, if any, Iran’s return to global energy markets would have on prices.

Cryptocurrencies are sliding too, with bitcoin dropping below $40,000 to its lowest since February.

The agenda

• 7am BST: UK consumer inflation, and producer prices report, for April
• 9.30am BST: UK house price index for March
• 10am BST: Eurozone consumer inflation for April
• 12pm BST: US weekly mortgage applications
• 7pm BST: US Federal Reserve releases minutes of its last meeting