Record inflows for Bitcoin ETF

Market update: 1st November 2024

The daily close.

Bitcoin experienced a downturn, closing the day at AU$106,590.50, reflecting a decline of 2.74%. It opened the day at AU$109,686.31 and hit a peak of AU$110,199.96 before dipping to a low of AU$105,328 during the trading session.

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State of crypto

Bitcoin ETFs hit new milestones as BlackRock leads the charge.

Bitcoin ETFs are making headlines, pulling in nearly US$900 million in one day. On Wednesday, these funds collectively crossed the threshold of over 1 million BTC, with BlackRock's iShares Bitcoin Trust claiming a massive share of the pie, attracting US$872 million alone. This surge brings the total inflows since the funds were approved in January to a whopping US$24.2 billion.

Interestingly, Bitcoin’s mysterious creator, Satoshi Nakamoto, still holds 1.1 million BTC, but at the current pace of ETF acquisitions, analysts predict the funds could surpass Satoshi's holdings within weeks.

As Bitcoin prices soar close to all-time high, institutional investors are joining the fray, signalling a second wave of interest in these ETFs. With BlackRock leading the pack, it's clear that the demand for Bitcoin ETFs is hotter than ever.

Tether's third-quarter profit soars to US$2.5 billion.

Tether just dropped some impressive numbers for Q3. The stablecoin issuer reported a whopping US$2.5 billion in net profits, bringing their total profit for the year to US$7.7 billion. The surge is largely thanks to US$1.3 billion earned from U.S. Treasury yields and an additional US$1.1 billion from the rising value of gold, which saw a 15% increase during the quarter.

As of September 30, Tether's reserves hit US$125.5 billion, with US$84.5 billion in U.S. Treasury bills alone. They’re also holding US$5 billion in gold and about US$4.8 billion in Bitcoin. Tether continues to play a crucial role in the digital asset ecosystem, maintaining its position as the third-largest cryptocurrency by market cap. Despite facing some scrutiny regarding U.S. investigations, Tether's CEO reaffirmed their commitment to U.S. regulations and investments.

Macro

Australia

• Aussie manufacturing struggles persist as Judo Bank PMI shows slight improvement.
• CoreLogic dwelling prices see slight dip in October.
• Producer prices continue to rise as construction and property costs climb.
• Housing credit growth edges up, annual loan growth hits highest pace since May 2023
• Retail sales barely budge in September as August warmth wears off.
• Export prices continue to slide in Q3 as demand for key resources falls, while gold shines.
• Dwelling approvals rebound in September, with private sector dwellings leading the way.

Aussie manufacturing struggles persist as Judo Bank PMI shows slight improvement.

In October, the Judo Bank Australia Manufacturing PMI rose to 47.3, up from 46.7 in September, but it still indicates ongoing struggles in the manufacturing sector for the ninth month in a row.

New orders have been declining for nearly two years, with export orders dropping sharply due to weaker demand from key markets. Although production is still down, the rate of decline has slowed, as manufacturers have been working through their backlogs at the fastest pace since May 2016.

Employment levels also took a hit, marking the fifth consecutive month of declines and the steepest drop since July. Companies are cutting back on purchasing, reluctant to stockpile raw materials amid falling demand.

Delivery times have stretched due to delays in the Red Sea region and Asia, and both shipping costs and input prices are on the rise. Despite these challenges, there's a glimmer of optimism among businesses, with many hoping for improved economic conditions to bolster future production.

CoreLogic dwelling prices see slight dip in October.

In October, CoreLogic reported that dwelling prices in Australia decreased by 0.3%, a slight decline from a 0.4% drop in September. Historically, dwelling prices have averaged around 0.51% since 1980, peaking at a whopping 5.5% back in June 1988 and hitting a low of -2.9% in September 1984.

On a brighter note, the value of new home loans for owner-occupied properties saw a minor bump of 0.1%, reaching AU$18.64 billion in September, but this growth is a lot softer than the 2.4% increase we saw the month before.

Meanwhile, investment lending for homes rose by 1.4% to AU$11.71 billion in August, following a more significant 5.4% jump in the prior month. Overall, it looks like the housing market is navigating some ups and downs!

Producer prices continue to rise as construction and property costs climb.

In the third quarter of 2024, Australia's final demand producer price index jumped by 0.9% quarter-on-quarter, following a solid 1.0% increase in the previous quarter. This growth outpaced market expectations of 0.7% and marks the 17th consecutive quarter of producer inflation.

Key drivers behind this increase included a 1.9% rise in fees from property operators, thanks to soaring rents, and a 0.9% boost from residential building construction, where rising labour costs and a shortage of skilled tradespeople are taking their toll. It looks like the pressures on prices are sticking around.

Housing credit growth edges up in September, annual loan growth hits highest pace since May 2023.

In September, Australia’s housing credit grew by 0.5% from the previous month, a slight increase from August’s 0.4%. Private sector credit also rose 0.5%, while personal credit picked up to 0.3%. However, business credit eased to 0.6% growth from 0.7% in August. On an annual basis, overall loan growth reached 5.8%, marking the fastest pace since May 2023. These trends reflect steady but varied credit demand across sectors.

Retail sales barely budge in September as August warmth wears off.

Retail sales in Australia inched up just 0.1% in September 2024, falling short of the anticipated 0.3% growth and slowing sharply from August’s 0.7% lift. The cooling effect was felt across categories as the warmer-weather sales boost faded.

Household goods saw a modest 0.5% bump, and dining out nudged up by 0.4%, but other sectors, like clothing, food, and department stores, took a step back. On the geographical front, New South Wales, South Australia, and Western Australia showed minor growth, while trade slowed in Victoria, Tasmania, the Northern Territory, and ACT. Annually, retail trade rose by 2.3%, its softest pace in four months.

Export prices continue to slide in Q3 as demand for key resources falls, while gold shines.

Australia’s export prices dropped 4.3% in Q3 of 2024, marking the third consecutive quarterly decline. Weaker demand from China affected iron ore, while a global drop in demand hit coal, which fell by nearly 9%. A bright spot, however, was non-monetary gold, which saw a 4.4% rise as central bank demand and global uncertainties boosted prices.

On the import side, prices also dropped by 1.4%, driven by lower petroleum prices and a stronger AUD. Meanwhile, gold imports and cocoa products offset the dip, supported by strong central bank demand and crop issues in West Africa, respectively.

Dwelling approvals rebound in September, with private sector dwellings leading the way.

In September 2024, Australia’s dwelling approvals rose 4.4%, reversing a decline from the previous month, thanks to a boost in private sector approvals for multi-unit dwellings and houses. Approvals saw strong growth across Queensland (up 14.3%), Western Australia (11.4%), and South Australia (8.2%), though New South Wales saw a significant drop of 14.8%. Private house approvals were also up for the seventh time this year, led by gains in South Australia, Queensland, and Western Australia, while Victoria and New South Wales experienced declines.

Global

• China’s manufacturing shows signs of growth as PMI edges back into expansion territory
• Bank of Japan keeps rates steady while eyeing global economic shifts.
• Euro Area inflation makes a comeback as energy prices shift.
• US inflation nudges up as consumer spending shows resilience.
• Manufacturing recovery in China as PMI rises above expectations in October.

China’s manufacturing shows signs of growth as PMI edges back into expansion territory.

China's official manufacturing PMI edged up to 50.1 in October, slightly surpassing expectations and marking a return to expansion in factory activity after months of contraction. This rise, the first since April, was driven by stronger output, buoyed by stimulus efforts, while new orders held steady after five months of decline.

Foreign sales saw a deeper drop, but purchasing and employment contractions slowed, hinting at some stabilisation. Notably, input prices rose for the first time since May, while business sentiment hit a four-month high, suggesting a cautiously optimistic outlook for the sector.

Bank of Japan keeps rates steady while eyeing global economic shifts.

The Bank of Japan (BoJ) has decided to keep its key short-term interest rate at around 0.25%, marking the highest level since 2008 and aligning with market expectations. This decision, made during the October meeting, comes as Japan navigates a changing political landscape following recent elections, alongside the anticipation of the US presidential election.

Governor Kazuo Ueda expressed concerns over the uncertain global economic outlook, stating that the bank has time to assess risks after the recent rate hikes in March and July. The BoJ remains committed to adjusting rates further if economic indicators align with its forecasts.

In its quarterly outlook, the BoJ maintained its core inflation projection at 2.5% for FY 2024, with expectations of around 1.9% for FY 2025 and FY 2026. Additionally, the bank retained its GDP growth forecasts at 0.6% for 2024, 1.1% for 2025, and 1.0% for 2026.

Euro Area inflation makes a comeback as energy prices shift.

Annual inflation in the Euro Area jumped to 2% in October, up from 1.7% in September, surpassing forecasts of 1.9%. This increase was anticipated, as last year's steep declines in energy prices are no longer impacting the annual figures. Energy costs fell at a slower rate, while prices for food, alcohol, and tobacco saw a rise. Core inflation, excluding volatile items, held steady at 2.7%, the lowest since February 2022.

In France, the annual inflation rate edged up to 1.2%, driven by rising food prices, especially fresh products, and a smaller decline in energy costs. Meanwhile, Italy’s inflation ticked up to 0.9%, remaining below the Eurozone average, as food prices surged significantly. Overall, the shifting landscape of inflation reflects ongoing changes in the economic environment across Europe.

US inflation nudges up as consumer spending shows resilience.

In September, the US core PCE price index, the Federal Reserve’s favourite measure of inflation, rose by 0.3% from the previous month—the highest increase in five months. This increase followed a revised 0.2% rise in August and came in line with market expectations. While service prices climbed by 0.3%, goods prices dipped by 0.1%. Year-on-year, core PCE prices increased by 2.7%, exceeding forecasts of 2.6%.

On the personal income front, Americans saw a rise of 0.3% in September, bringing total personal income to nearly US$24.95 trillion. This growth is a good sign for the US economy, especially with employee compensation continuing to rise. Personal spending also gained momentum, increasing by 0.5% and reaching an annualised rate of US$20.024 trillion. This uptick in consumer spending reflects a robust economic environment, providing the Federal Reserve with room to maintain higher interest rates as it tackles inflation.

Manufacturing recovery in China as PMI rises above expectations in October.

The Caixin China General Manufacturing PMI saw a positive shift in October, climbing to 50.3 from 49.3 in September. This increase not only beats market expectations of 49.7 but also reflects a rebound in the manufacturing sector.

Historically, the Manufacturing PMI in China has averaged around 50.11 points since 2011, with its peak at 54.90 in November 2020 and a low of 40.30 in February 2020.

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