Bitcoin plunges, then rebounds, as inflation worries hit markets – as it happened

Graeme Wearden

from on 2021-05-19 20:58 (#5J06G)

Rolling coverage of the latest economic and financial news

Ark's Cathie Wood reiterates $500,000 price target
Bitcoin plunged 25% amid wild selloff.... then rebounded to around $40,000 tonight
Fears over crackdown in China sent crypto prices sliding
Ethereum cryptocurrency to slash carbon emissions

Earlier:

9.58pm BST

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.

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."

While Bitcoin was able to pare back its losses to just 11% from 31% Wednesday, its rival coins weren't as lucky https://t.co/3ZhSd3ooXl

It begins to look like the bitcoin tail is wagging the stock market dog. This is how bitcoin and S&P 500 prices moved during the day..... pic.twitter.com/iYI9Mx9NJd

9.19pm BST

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%.

U.S. stocks cut sharp losses and ended the wild session far off their lows on Wednesday as cryptocurrency prices largely recovered.
The Dow fell 0.48%.
The S&P 500 was down 0.29%.
The Nasdaq inched down 0.03%. https://t.co/iE4xSUiXTK pic.twitter.com/8ych2DBpuZ

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.

8.32pm BST

Tesla's share price has dropped today too, down around 3% in afternoon trading at $560.

That's rather worse than the wider market - the Nasdaq is staging a late recovery, only down 0.2%.

7.45pm BST

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.

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.

#BREAKING Some Federal Reserve officials believe it may soon be time to consider tapering asset purchases meant to aid the US economy's recovery from the pandemic, according to meeting minutes pic.twitter.com/zYRE90FU7t

#FOMC minutes#Fed "thinking about thinking about" #QE tapering

" *if* 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" pic.twitter.com/I7QrHkgF7v

Looking at FOMC minutes, Fed might not be 'thinking about thinking about' tapering asset purchases, but they are thinking about talking about it. "...it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases."

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.

7.11pm BST

Bloomberg's John Authers has some timely thoughts on today's drama:

So. Bitcoin fell 53% in five weeks, and then it rallied 35% in four hours. Two observations for now:
1) Nobody in their rate mind would enter into a transaction denominated in bitcoin
2) It's too early to say the bubble's burst (or to say this is a new bull market). pic.twitter.com/ArEaaKVUHC

7.09pm BST

Reuters' John Foley has a good column on bitcoin tonight - arguing that the bull case for the crypto asset has been undermined this week:

The bull case for bitcoin is pretty simple. It's a form of payment that can be used anywhere in the world; its supply is limited, so it should preserve its value when inflation picks up; and it can't be manipulated, especially by central bankers or governments.

After a recent plunge, the crypto-asset is currently scoring zero out of three.

While there is no central bank to meddle with its value, Musk, China or posters on Reddit can too easily step into the vacuum, without a central bank's accountability. As for inflation, investors are more worried about that than they have been in years, yet bitcoin is going in precisely the wrong direction.

In sum, the best way to think about bitcoin is as an option on something that might one day be a currency. And a pretty expensive one at that.

Bitcoin's value was dented by Chinese curbs and Elon Musk's whimsy. Part of the cryptocurrency's appeal was the lack of a meddling central bank, yet thin liquidity permits others to step in and make waves, @johnsfoley writes. https://t.co/353zbrK9EZ pic.twitter.com/S340e8ozq0

6.56pm BST

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.

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

Ark's Cathie Wood is sticking with her $500,000 target for Bitcoin #TheBusinessweek https://t.co/9eBp5M39Zi pic.twitter.com/VeSRF5fplm

6.35pm BST

Aviva Investors is shutting its 347m UK Property fund, which has 3,400 investors, more than a year after suspending dealing, saying there is not enough liquidity to reopen it.

It it also closing two feeder funds. The funds will be wound up on 19 July and the cash returned to investors in a fair and orderly manner" - after the properties owned by the funds have been sold.

As investors will be aware, dealing in the funds was suspended in March 2020 due to material uncertainty over the valuation of property within the portfolio, brought about by the Covid-19 pandemic.

During this period of economic uncertainty, it has become increasingly challenging to generate positive returns whilst also providing the necessary liquidity to re-open the funds."

6.28pm BST

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.

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.

"Iceland's central bank became the first in western Europe to tighten monetary policy since the pandemic by raising interest rates, as officials acted to head off a spike in inflation." https://t.co/GeebYrN64L pic.twitter.com/eKVQROk5Qb

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.

6.18pm BST

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

After falling 31%, Bitcoin has pared its decline to 10% https://t.co/8V1ufkmo7X pic.twitter.com/40GyU2mBSh

6.11pm BST

The threat of a clampdown in China means bitcoin will remain volatile, predicts Sheila Warren, Deputy Head of the World Economic Forum's C4IR [Centre For the Fourth Industrial Revolution].

We fully expect bitcoin's price to remain volatile, as it tends to be hyper-responsive to even the hint of regulation.

That being said, China's move doesn't necessarily presage similar crackdowns in other jurisdictions, and this move is likely to affect Chinese business innovation, which has already been slow because of the concern about regulatory action, more than consumer activity.

5.54pm BST

Matt Weller of Forex.com points out that bitcoin has been through several slumps in the past:

Any time markets are volatile, it helps to take a step back and review the historical data. While Bitcoin's current plunge certainly feels terrifying for bulls in the moment, experienced hodlers" know that Bitcoin routinely sees steep selloffs during bull markets.

As the chart below shows, Bitcoin saw seven separate -30% pullbacks before finally peaking in its 2015-2017 bull market:

5.34pm BST

Here's a chart showing how bitcoin slumped dramatically a few hours ago, before a partial recovery.....

5.04pm BST

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 has

4.50pm BST

Back in London, the FTSE 100 index of blue-chip shares has closed 84 points lower, or 1.2%, at 6950 points - its lowest close in over a week.

Angst about inflation, and the possibility of central banks tightening policy, hit the mining sector.

4.36pm BST

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.

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".

4.22pm BST

Lumber prices have also fallen sharply today, the 8th daily drop in a row.

You might not think lumber and bitcoin have anything in common.

Lumber limit down pic.twitter.com/qBNrCV6ng4

3.58pm BST

Fear of missing out has lured many people into crypto recently, with the price of bitcoin, ether et al soaring in recent months.

But as Rick Eling, investment director at Quilter, points out, FOMO is not the basis of an investment strategy.

Bitcoin is a volatile asset, and as we have seen so often in financial markets boom is almost always followed by bust.

If we say that Bitcoin is a currency, then it must get to a point of broadly stable value in order to function as a currency. Successful currencies do not have wildly fluctuating values such as this. But if we also say that Bitcoin will make us money" then it can't also have a stable value. We reach a circularity.

In other words, the premise on which people claim Bitcoin has long term value (that it will become an accepted currency) argues against its future growth potential. Those who have made money from cryptocurrencies have much more luck than they do skill."

3.45pm BST

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.

3.02pm BST

Shares in Coinbase, the crypto exchange, tumbled over 10% at the start of trading.

They fell as low at $208 per share, a new record low, further from the $381 at which it listed just last month.

Coinbase will go down as one of the worst direct listings ever. Coinbase is getting crushed as the crypto markets collapse. The global crypto market is down over 25% today alone and this crash will not bode well for attracting new customers. Coinbase wants new crypto traders, but many will be afraid that this Bitcoin crash could end up just like the one in 2017.

Coinbase's trading debut coincides with the top for Bitcoin and many traders can't make a convincing argument that it will be able to recover all those losses since then.

#Coinbase falls more than 10% as cryptocurrencies plummet. $COIN pic.twitter.com/aIHH1NhM7Z

We're seeing some issues on Coinbase and Coinbase Pro and we're aware some features may not be functioning completely normal," the company said in a statement to CNBC.

We're currently investigating these issues and will provide updates as soon as possible."

CNBC: Coinbase down for some users as Bitcoin sees selloff

2.44pm BST

Stocks have opened lower on Wall Street, with inflation worries hitting shares, and the slump in crypto assets also causing jitters.

Here's the early prices:

Dow falls 400 points as stocks open sharply lower on inflation jitters https://t.co/78tpz0FKEx

2.33pm BST

Beyond the meltdown in crypto, other assets are also falling today as inflation worries rise.

In London, the FTSE 100 index of blue-chip shares is now 1.4%, or 99 points at 6935.

Rising Covid cases in India, Japan, Taiwan, Thailand and Vietnam have prompted fresh lockdown restrictions, raising concerns over softer fuel demand.

The global picture for demand is probably the most divided it has been since the start of the pandemic, with an improving demand picture in the West versus a deteriorating outlook in Asia. The mixed picture is contributing to the volatility we have seen across recent sessions.

2.21pm BST

The crypto bubble that added billions to nonsense digital tokens overnight" is bursting, says Bloomberg:

Bitcoin plunged more than 20% to less than $35,000, wiping out more than half a trillion dollars in value from the coin's peak market value. It has erased all the gains it clocked up following Tesla Inc.'s February 8 announcement that it would use corporate cash to buy the asset and accept it as a form of payment for its vehicles.

Ethereum, the second-biggest coin, sank more than 40%, while joke token Dogecoin lost 45%.

Holy crap these headlines:

*BITCOIN PLUNGE REACHES 29%, PRICE ALMOST DOWN TO $30,000

*ETHER EXTENDS DECLINE TO 40%

Absolute massacre! Ethereum down 50% in a week https://t.co/Gcn4ci0Xfw pic.twitter.com/Re32gb5SfN

2.12pm BST

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.

Bitcoin touches -50% from the April 14th top pic.twitter.com/nlDu4NoG8q

Wild swings as Bitcoin dips below $32k pic.twitter.com/bnTzj8cdvo

1.59pm BST

Nouriel Roubini, the American economist who has repeatedly warned that bitcoin is a bubble, tweets:

Bitcoin falls more than 40% from its peak in less than one month. Which institutional investors are reckless enough to invest in such a risky and volatile pseudo-asset with no intrinsic value? They should be fired on the spot if undertaking such a reckless speculative gamble!

1.47pm BST

CNBC points out that China's hard line on digital currencies is not new:

In 2017, authorities shut down local cryptocurrency exchanges and banned so-called initial coin offerings (ICOs), a way for companies in the space to raise money through issuing new digital tokens.

Traders in China once accounted for a huge share of the bitcoin market but after the crackdown, their influence was reduced significantly. Chinese cryptocurrency operations have moved abroad.

#Bitcoin tanks 20% in past 24 hours to below $37,000, hitting lowest level since early February https://t.co/NP8XtL1ucJ

1.40pm BST

Constance Hunter, chief economist at KPMG, tweets that liquidity-fuelled assets, such as bitcoin, are being hit by fears of higher inflation.

Cannot say I am surprised. Was only a matter of time. Bitcoin is a function of excess liquidity, just like were. The fear of non-transitory inflation means tighter monetary policy is in train and spooks liquidity fueled assets.
The end. pic.twitter.com/Rsygwb7tfA

The market has been looking to the news around Tesla and regulatory headwinds out of China as reasons behind the turnaround, though we have been warning for some time that a correction was due given the pace of the bull run this year.

On Tuesday, China was out reiterating its 2017 stance that local financial and payment institutions should not engage in or provide services to crypto related businesses. But much like the Tesla story, we think assigning the pullback to the China news would be a gross exaggeration of the reality that this is indeed a market that has run too far and fast and a market that is still very much correlated to broader risk sentiment.

Crypto, % below 2021 high
Solana $SOL: -29%
Polkadot $DOT: -32%
Stellar $XLM: -38%
Cardano $ADA: -39%
XRP $XRP: -40%
Chainlink $LINK: -40%
Ethereum $ETH: -42%
Litecoin $LTC: -44%
Bitcoin $BTC: -44%
Binance $BNB: -46%
Uniswap $UNI: -46%
BitcoinCash $BCH: -50%
Dogecoin $DOGE: -53%

1.19pm BST

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.

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 in free fall. Plunges to $37,000 as Elon Musk-fueled rally collapses. pic.twitter.com/pYFtSshmEm

12.57pm BST

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.

Crypto gets hammered. Bitcoin falls more than 15%, other cryptocurrencies fall about 25%.#Crypto #Bitcoin #Ethereum #Dogecoin #XRP #Litecoin #BCH pic.twitter.com/DgFh9XM7uE

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.

China bans financial, payment institutions from cryptocurrency business https://t.co/nNm6b22POY pic.twitter.com/KJoToq3vGv

12.16pm BST

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

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

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."

11.46am BST

Future, the owner of magazines from Marie Claire to Metal Hammer and sites such as Techradar and GoCompare, has reported record revenues and profits in its first half as the company continues to cash in on the pandemic-fuelled reading and online shopping boom.

Future reported a 21% increase in group revenues to 272m and more than doubled pre-tax profits to 57m in the six months to the end of March, well ahead of analyst forecasts, prompting the company to say that its full year results will now be materially ahead" of expectations.

There's no getting away from the fact that these are a stonking set of results from Future, and suggest at least for now, the business is futureproof"

11.36am BST

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.

11.20am BST

Here's our news story on the jump in UK's house prices:

House prices across the UK grew at the fastest pace in March since just before the financial crisis hit in 2007, according to official figures.

With buyers rushing to take advantage of the government's stamp duty holiday, extended to the end of June, the average UK house price climbed 10.2% in the year to March, up from 9.2% in February. This is the highest annual growth rate the UK has seen since August 2007, said the Office for National Statistics.

11.15am BST

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 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'.

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.

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%.

11.01am BST

Yorkshire and The Humber saw the highest growth in house prices over the last year within England, with average prices increasing by 14.0%.

But London lagged far behind, with average prices up 3.7% over the year to March 2021.

10.54am BST

The average UK house price hit a new peak of 256,000 in March 2021, which is 24,000 higher than in March 2020.

10.39am BST

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.

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.

10.32am BST

Inflation across the eurozone also accelerated last month, due to rising energy bills.... but core inflation has dipped.

Consumer prices across the single currency region jumped by 1.6% over the 12 months to April, up from 1.3% in March, and nearer to the European Central Bank's target of close to, but below, 2%.

Euro area annual #inflation up to 1.6% in April https://t.co/1zlpCh7bkp pic.twitter.com/XqYBRuxc2n

Let's try that again.#Eurozone #HICP final April 2021 1.6% vs 1.6% exp/flash:
-March 1.3%
-Core 0.7% vs 0.8% exp/flash.
-March 0.9%.
Softer core.$EUR
1/2

10.01am BST

10.00am BST

Europe's stock markets are all in the red this morning, with inflation worries on the rise.

Global markets have woken up on the wrong side of the bed, with share prices flashing red across most of Asia and Europe,"

Despite the initial shock when Covid struck in early 2020, stocks had a tremendous run last year as investors priced in the potential for strong earnings recovery. While we're now seeing a lot of companies beat expectations, it isn't enough to sustain momentum in the market.

9.57am BST

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.

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

9.19am BST

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.

Inflationary pressures in the supply chain are intensifying - rate of output inflation for goods leaving the factory gate up 3.9% on the year to April 2021 (up from 2.3% in Mar-21).

Input prices growth of 9.9% on the year to April, up from 6.4% in Mar-21 & highest since Feb-2017 pic.twitter.com/cYCJl6hLSJ

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.

No surprises in today's #CPI data: jump in headline #inflation (from 0.7% to 1.5%) driven by higher energy costs (rebound in global oil prices and 9% increase in OFGEM cap), core measure rose only slightly (from 1.1% to 1.3%), and both still below #BoE's 2% target.

BUT... (1/2)

... producer price measures (#PPI) show more pressures in the pipeline: output prices rose 3.9% y/y and input prices 9.9% (led by crude oil, but also other commodities, such as metals. whose prices are still rising)

(2/2)

8.55am BST

Ruth Gregory, senior UK economist at Capital Economics, predicts that April's burst of inflation will be temporary.

She points outs out that most of April's increase was due to energy price effects - the 13.6% jump in motor fuels, and the 9.2% increase in the gas and electricity price cap.

There were pockets of inflation in those sectors that are reopening, with clothing inflation bouncing back from -3.5% to +0.5%, as retailers continued to reverse the aggressive discounting during lockdowns, and furniture inflation rising from 4.5% to 5.8%. And depending on the strength of pent-up demand for hospitality, there will probably be further surges in these categories over the coming months.

But in April, these movements were partially offset by some of the pandemic-induced surges in inflation continuing to fade. Data processing equipment fell further from 5.9% in March to 0.2%. Meanwhile, second-hand car inflation dropped from 1.2% to 0.2%.

8.43am BST

Food prices also rose last month - partly driven by increased prices for chocolate, and choc ices as people emerged from lockdown.

Food prices rose by 0.9% between March and April 2021 but were little changed between the same two months in 2020.

Prices for a variety of bread and cereal items rose this year but fell a year ago, resulting in an upward contribution of 0.04 percentage points. There was a similar upward contribution from across a range of sugar, jam, syrups, chocolate and confectionery items, with standout movements coming from large bars of chocolate and chocolate covered ice-cream bars.

Inflation has doubled, with price rises occurring in key areas where it's hard for consumers to control spending, namely transport, clothing, and household energy.

Those with a sweet tooth will also be perturbed to learn the price of chocolate bars and ice creams is on the up, particularly in a year when travel restrictions mean getting moderately beach fit is no longer a top priority.

8.32am BST

Grant Fitzner, chief economist at the ONS, says April's jump in inflation is mainly due to prices rising this year, while they were falling a year ago in the first lockdown.

Commenting on today's figures, ONS Chief Economist Grant Fitzner said: (1/2) pic.twitter.com/89ES044wWP

Grant Fitzner continued: (2/2) pic.twitter.com/squPlxi6Mb

8.15am BST

Core inflation, which strips out volatile components such as energy, food, alcohol and tobacco, rose by 1.3% in April, up from 1.1%.

Geoff Tily, senior economist at the TUC, says this shows inflation isn't a danger - the real risk is that policymakers fail to provide enough economic support to drive the recovery.

CPI to 1.5% in April from 0.7% in March.
As expected.
Driven by clothing, utility bills and petrol.
Still well below target.
Underlying or core inflation (purple) up to only 1.3%: wholly in line with outturns over past year.
Danger is inadequate gov. stimulus, not inflation. pic.twitter.com/DFdgMjSnrG

8.03am BST

Clothing and footwear prices rose by 2.4% in April, the month when retailers reopened their doors as restrictions on non-essential shops were eased.

After 12 months of subdued inflation, the Consumer Price Index rose by 1.5% in the year to April, doubling from 0.7% in March. The annual rise in inflation largely reflects an increase in prices from their low levels a year ago at the start of the pandemic.

April's increase in consumer prices was driven by higher household energy bills, due to Ofgem's increase in the price cap, and the price of motor fuels.

7.51am BST

Motor fuel prices jumped by 13.6% in April compared to a year ago -- which is the largest annual increase since March 2017.

The ONS explains:

Between March and April 2021, petrol prices rose by 1.8 pence per litre, to stand at 125.5 pence per litre, and diesel prices rose by 1.4 pence per litre, to stand at 129.5 pence per litre.

In comparison, between March and April 2020, petrol and diesel prices stood at 109.0 and 116.0 pence per litre, respectively, having fallen by 10.4 and 7.8 pence per litre. Last April's fall in petrol prices was the largest monthly fall since the current ultra-low sulphur or unleaded petrol series began in 1990.

7.46am BST

Gas bills rose by 9.4% in April, the ONS says, while electricity bills jumped by 9.1%.

That's due to energy regulator Ofgem lifting the price cap on standard tariffs back to pre-pandemic levels, following a rise in wholesale energy costs.

7.41am BST

This chart shows how the jump in regulated electricity and gas bills, clothing and footwear prices, and rising petrol prices, all pushed UK inflation up:

7.18am BST

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.

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

#Breaking The rate of Consumer Price Index inflation rose to 1.5% in April from 0.7% in March, the Office for National Statistics said

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.

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.

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