* Global stocks pressured by inflation jitters * European stocks down 1.3%, Nikkei loses 1.5% * Cryptocurrencies hit by fresh China measures * German Bund hits 2-year high * Global asset performance tmsnrt.rs/2yaDPgn LONDON, May 19 (Reuters) - Global stocks slipped and cryptocurrencies sank deeper on Wednesday as a threat of unwanted inflation had investors shy away from assets seen as vulnerable to any removal of monetary stimulus. Digital coins were also under pressure from new Chinese restrictions on financial institutions providing services related to cryptocurrency transactions. But as the U.S. dollar edged away from its lowest levels of the year against its rivals, prices of gold, viewed as a hedge against inflation, reversed their recent course to fall from near a four-month peak. “The bitcoin flow picture continues to deteriorate and is pointing to continued retrenchment by institutional investors,” JPMorgan analysts including Nikolaos Panigirtzoglou wrote in a research note. Institutional investors appeared to be shifting away from the cryptocurrency and back into traditional gold, reversing a trend of the previous two quarters, they added. The cautious sentiment pervaded in equity markets as focus was locked on the U.S. Federal Reserve’s release later on Wednesday of the minutes of its April meeting, which will be watched for any indication about monetary policy in the United States. Europe’s STOXX 600 index remained 1.3% down, on course for its biggest drop in more than a week, while MSCI’s gauge of stocks across the globe sank 0.4% lower. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%, though Hong Kong and South Korea are closed for holidays. Japan’s Nikkei lost 1.3%. U.S. S&P futures fell 1% in Europe a day after Wall Street stocks slid in late Tuesday trade, unable to sustain gains made after bumper earnings from Walmart and Home Depot. While demand is recovering fast as many developed countries have made progress with COVID-19 vaccination, companies are facing obstacles from shortages of chips, containers, and in the United States, workers too, stoking worries of higher prices. Mirroring a move underway in the United States as the global recovery takes hold, British consumer price inflation more than doubled to 1.5% in April, data showed on Wednesday. INVESTORS REMAIN CAUTIOUS Euro zone inflation picked up the same month, with consumer prices rising 0.6% month-on-month for a 1.6% year-on-year increase. Canada inflation data is due later. In the United States, the Fed has stuck to the narrative that a recent rise in inflation would be transient and that it therefore should keep its easy monetary policy settings. The minutes from April’s meeting are expected to repeat that message. “Inflation remains the biggest theme, whether it is real and whether the Fed may need to change its policy because of that,” said Kazushige Kaida, head of forex sales at State Street Bank’s Tokyo branch. “At the moment, markets are putting faith, after a fashion, in the Fed’s narrative.” Investors remain cautious following an unexpected pickup in U.S. consumer inflation shown earlier this month. Any further flare-up could hit assets whose prices have been bolstered by monetary easing, including cryptocurrencies, which rose sharply over the past year and are seen by some as exemplifying an excess created by a “wall of money” from central banks. Bitcoin extended an earlier slump to fall 13%, to its lowest level since early February, bringing its loss from a peak of $64,895 hit just over a month ago to more than 40%. It was last at $37,104. Ether, the second largest cryptocurrency, shed 28%, and is off more than 42% from record highs last week. It last changed hands at $2,579. While cryptocurrencies were bruised by China’s fresh ban on their transactions, they were not alone in facing pressure. Some commodities that have benefited from reflation trade have also lost steam, with U.S. lumber futures losing around 20% in the last three sessions. China will strengthen management from both supply and demand sides to curb “unreasonable” increases in commodity prices, and prevent the pass-through to the consumer, the cabinet said. Oil prices pulled back for a second day on simmering demand concerns as coronavirus cases in Asia rise and on fears of rising U.S. interest rates, which could limit economic growth. U.S. crude futures dropped 2.0% to $64.21 per barrel while Brent futures lost 1.9% to $67.44 per barrel. U.S. Treasuries were relatively calm, with the 10-year yield trading within the month’s ranges. In Europe, the benchmark German Bund yield climbed to a two-year high as investors increasingly priced in the possibility of the European Central Bank slowing its bond-buying. Germany’s 10-year bond yield was up 2 bps at -0.089%. Italy’s 10-year yield was up 3 bps at 1.123%, having earlier hit its highest since September 2020. In currency markets, the dollar firmed, moving away from its lowest levels of the year against major currencies. The euro pulled back from a near three-month high of $1.2244 . The dollar stood at 109.23 yen after four straight sessions of decline. After gold hit its highest level since late January on Tuesday, it was last down 0.8% at $1,853.16 per ounce. Reporting by Tom Arnold in London and Hideyuki Sano in Tokyo; Editing by Sam Holmes, Toby Chopra, William Maclean Our Standards: The Thomson Reuters Trust Principles.