Good morning,

There’s been a big bitcoin sell-off over the weekend, with the risk-off sentiment in the crypto asset driving a mild risk-off theme in traditional markets as we get underway for the week.  The fall is being partly blamed on a power outage in the Xinjiang region of China, where there are a lot of bitcoin miners, but perhaps more notably some speculation that the US treasury is planning to crackdown on money laundering facilitated by cryptocurrencies.  Turkey has gone a step further and banned the use of crypto to pay for goods and services, citing concerns that the anonymity may lead to non-recoverable losses – though given how badly they are managing their own domestic currency, it’s little surprise that millions of Turks have flocked into bitcoin in a bid to avoid the loss in purchasing power of the Lira.  The FT has some more.

UK property prices are having a good run of it at the moment, having risen £7,000 in a month to set the UK average price at a whisker under £328k.  The rise in demand also means that the speed of a sale is on the up, with around 25% of sellers finding a buyer within a week of putting their property on the market.  This move could continue to be fueled as from today banks will be able to offer a 95% mortgage with a government guarantee.  The scheme will apply to properties up to £600k in value and the government’s own press release can be found here.

Ipsos Mori have polled UK citizens to ask whether they think Scots should be able to have an independence referendum if the SNP win a majority at the Scottish elections next month and half of the people surveyed think they should be able to.  Another interesting statistic is that less than 25% of people in the survey thought that the UK would exist in its current form in ten years’ time.  Westminster hasn’t commented on the results but do expect this to be drawn upon repeatedly if(when) we see a big SNP majority in early May.  The FT has the story.

The UK has sent warships to the Black Sea in response to Russian troops continuing to amas on the Ukrainian border.  The two ships, a destroyer and a frigate, will also be supported by the new flagship aircraft carrier the HMS Queen Elizabeth, though she will have to stay in the Mediterranean as there is an international treaty prohibiting aircraft carriers in the Black Sea.  This comes after the US scrapped their plans to send two destroyers to the area as they didn’t want to escalate tensions further.  The Times has more detail on the UK deployment.

In Europe:  Italy risks missing the deadline for submitting its final EU recovery plan.  So far the drafts of the proposal that have been sent to Brussels haven’t had been long on headlines but short on substance on just how the plans that they have will be implemented and managed, once approved.  The deadline is the 30th April and Italy is set to get the largest single amount of the €750bn fund, with €200bn heading their way – so getting the details isn’t unimportant!  Separate to this, there was a great article in the New York Times last week on how Mario Draghi has become the de facto leader of Europe in very short time, stepping in to fill the void of a retiring Angela Merkel and a wavering Ursula von der Leyen.  It’s a longer read, but a very interesting one.

The EU’s Brexit chief says that the disruption in Nothern Ireland can be overcome if both the UK and EU take a good faith approach to regulations and their enforcement.  This sounds positive, but his proposal starts with fully implementing all of the existing commitments and then seeing where the pain points are an working to address each one of them.  This might fall short of the UK’s expectations though, as we see it as needing to re-write the rules to pre-empt the problems of full implementation.  One area that he thinks would yield a noticeable improvement in trade frictions would be for the UK to align with EU standards on animal health and food safety, which would allow significant red tape and checks to be cut. Yet another FT article for you here.

In the US:  Republicans have said they’re open to a smaller one-off infrastructure bill, which could lead to Biden’s plan being split into two.  The first would be an easy win which would see both parties vote for it, whilst the second half would be the balance of his original proposal, but just railroaded through the House and Senate without Republican support! It’s not only Republicans that are giving him avenues for compromise, with Democrats signaling that they’d be willing to raise taxes to 25% but that a jump to 28% is probably a step too far – this won’t be a surprise to Biden and had he started at 25, he’d have had to settle on 23, so by starting at 28, he’ll be happy to arrive at 25%.

Joe Biden met Japanese President Yoshihide Suga last week and both leaders made positive commitments around the bilateral security alliance that they have and for Japan to bolster its own national and regional defense capabilities.  This is good news for the US on a couple of fronts:  It will give them a more resolute ally in the South China Sea and it will also involve Japan buying a lot of military hardware from the US.  The news will be welcomed by Biden, but a tougher sell to the Japanese public where defense spending is historically around 1% of GDP but is going to need to double this to keep up with these commitments.  Nikkei has the story.

Looking to the week ahead and it all seems quite UK-centric.  Rishi Sunak delivers a keynote shortly at the UK Fintech Week start.  This will be closely watched as it may give him a chance to talk about the post-Brexit role the UK can play in finance (and he’ll need to talk it up, as last week we heard that £1trn of assets have already been moved to Europe with more to follow).  Tomorrow we get UK unemployment numbers and on Wednesday the latest inflation numbers.  Thursday’s main focus is the European Central Bank rate announcement and press conference, then back to the UK for Friday with retail sales and public sector borrowing.  The first few minutes of the European open have been pretty static and the risk off that we saw in Asia as a result of the Bitcoin fall looks to have moderated for the time being.

Be well.

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