The money keeps flowing in…

Thoughts of the Day

The accumulated inflows into the US Bitcoin Exchange Traded Funds (ETFs) since they were launched in January reached a new high of $14.85 billion yesterday. The ETFs saw a net inflow of $887 million yesterday, and it was the 2nd highest daily inflow on record. (The highest was $1.05 billion on 12 March.) Yesterday was the 16th consecutive day of inflow. The streak started on 13 May and since then, more than $3 billion has flowed into the ETFs.

This is proof that the interest to get invested in Bitcoin continues to grow as more mainstream investors and traditional finance firms get involved. Expect this trend to continue and new highs in Bitcoin are inevitable.

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While this is meant as a joke by the French, it shows the sentiment of the Parisians about being the host city to the Olympics. It will be interesting to see if anyone takes it seriously. Well, we have to wait till 23 June to find out.

Day Ahead

  • Bank of Canada Monetary Policy Decision (Rates expected to lower to 4.75% vs 5.00% current)
  • US ADP Employment Change (+180k expected vs +192k prev)
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What Happened Yesterday

Market Movements as of New York Close 5 Jun 24

Australian GDP was released earlier today and was weaker than expected: +1.1% Year-on-Year actual vs +1.2% expected and +1.6% prev (revised from+1.5%), +0.1% Quarter-on-Quarter actual vs +0.2% expected and +0.3% prev (revised from +0.2%). This was the 10th straight period of quarterly growth but the softest pace in 6 quarters. The AUDUSD rose +0.22% from 0.6648 to 0.6663.

JOLTS Job Openings: 8.059M actual vs 8.35M expected and 8.355M previously (revised from 8.488M). This is the lowest level since February 2021 and a moderating jobs market increases the likelihood that the US Federal Reserve will cut interest rates to help boost the economy. This helped US bond yields ease lower on the day with the 2-year bond yield down -0.04% and the 10-year down -0.07%. 

Newswires reported that according to “people familiar with the matter”, the Bank of Japan is likely to discuss reducing its bond purchases (currently at 6 trillion yen per month) as early as its policy meeting next week (13-14 June). This caused the USDJPY to drop from 156 to below 155 on the day. 

The US stock market opened slightly higher from Monday. It then traded sideways through the early half of the session before risk sentiment improved slightly. The S&P 500 rose +0.15% (high: +0.29%, low: -0.49%), the Dow Jones increased +0.36% (high: +0.56%, low: -0.45%) while the Nasdaq climbed +0.29% (high: +0.52%, low: -0.43%).

The crypto market rose on the day due to improved risk sentiment in the broader market with BTC up +2.3%.
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Headlines & Market Impact

U.S. job openings drop in April, as labour market cools

Notable Snippet:  U.S. job openings fell more than expected in April to the lowest in more than three years, a sign that labour market conditions are softening in a manner that could help the Federal Reserve’s fight against inflation.

Job openings, a measure of labour demand, were down 296,000 to 8.059 million on the last day of April, the lowest level since February 2021, the Labor Department’s Bureau of Labor Statistics said on Tuesday in its Job Openings and Labor Turnover Survey, or JOLTS report.

There were 1.24 job openings in April for every job-seeker, the data showed. That was down from 1.3 in March and the lowest since June 2021, but matched the high-water mark of pre-pandemic times.

Fed Chair Jerome Powell has often cited this ratio, which peaked near two job openings for every unemployed person, as a measure of labour market slack.

The decline points to “an ongoing normalisation between supply and demand for labour,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “From a policy perspective, the Fed’s challenge will be to maintain rates at a level that not only helps keep inflation in check but also prevents a significant weakening in the labour market going forward.

Data for March was revised slightly lower to show 8.355 million unfilled positions instead of the previously reported 8.488 million. Economists polled by Reuters had forecast 8.355 million job openings in April. Vacancies peaked at a record 12.0 million in March 2022.

The number of people quitting their jobs rose 98,000 to 3.507 million in April. The quits rate was unchanged from a month earlier at 2.2%, the lowest since September 2020.

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Tesla likely to spend $3 bln-$4 bln on Nvidia hardware this year

Notable Snippet: Tesla (TSLA.O) will likely spend between $3 billion and $4 billion on its purchases of chip company Nvidia’s (NVDA.O) hardware this year, CEO Elon Musk said in a post on X on Tuesday.

Musk also said that out of the $10 billion in artificial intelligence-related capital expenditure this year, around half would be internal spend.

“For building the AI training superclusters, Nvidia (sic) hardware is about 2/3 of the cost,” he said on X.

Earlier on Tuesday, Tesla reportedly told Nvidia to prioritise shipments of AI processors to his companies X and xAI over the electric-vehicle maker.

The development also comes ahead of a crucial shareholder vote on his pay package at Tesla.

Tesla in April reiterated its capital expenditure forecast of more than $10 billion this year and said it had expected capex to be between $8 billion and $10 billion in each of the following years.

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Japan’s service activity extends gains, price pressures persist, PMI shows

Notable Snippet: Japan’s service activity extended robust gains in May, a private sector survey showed on Wednesday, amid persistent inflationary pressures that have boosted expectations for another interest rate hike this year.

The final au Jibun Bank Service purchasing managers’ index (PMI) dipped to 53.8 last month from 54.3 in April.

The index has remained above the 50-mark that separates contraction from expansion since September 2022 and was better than the flash reading of 53.6.

“The Japanese service sector’s strong upturn was sustained in May, with growth rates for activity and new work easing only slightly,” said Trevor Balchin, economics director at S&P Global Market Intelligence.

Although the rate of increase slowed in May, new business kept growing, fuelled partly by tourism and the weak yen, the survey showed.

The volume of new work received from overseas rose at the fastest pace since the new export sub index was launched in September 2014, thanks to the yen’s depreciation and demand from other Asian economies.

Meanwhile, the rate of input prices eased slightly in May from last month when it hit an eight-month high, but hovered well above the average. The survey respondents cited rising wages and higher fuel and import cost, facilitated by the weak yen, for inflationary pressure.

Service providers passed increased costs for wages and materials on to customers in May, with the pace of price increases just below April’s reading, which was the third-highest in history.

The composite PMI, which combines the manufacturing and service activity figures, increased to 52.6 in May, the joint-highest level since August 2023, from 52.3 in April.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord