Social Media Attack by Retail Investors on
Hedge Funds in Equity Markets Worldwide Spawns a Consequence: Stocks Dropped,
Raising Demand for the US Currency
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| dollar to yen intervals of 60 minute |
European and US stocks fell on
Friday, while Asian stocks suffered their sharpest weekly drop in months as the
Wall Street retail frenzy and liquidity shortages in China unnerved investors
and put pressure on warmed buy markets.
S&P 500 futures fell 1.2%, while
Nasdaq 100 futures fell 1.4%. FTSE, DAX and EuroSTOXX 50 futures fell by
just over 1%. The US dollar rose to a seven-week high against the yen.
MSCI's broadest Asia-Pacific stock
index outside Japan fell 0.5% and is poised for a 3.8% weekly decline, the
biggest drop since September. The Japanese Nikkei fell 1.5% and is
approaching its first weekly loss this year.
“I can definitely see the
nervousness,” said Chris Weston, head of research at the Pepperstone brokerage
in Melbourne.
"There is a side effect of
targeting hedge funds, and it may have reasons ... people are not sure how this
social media movement will affect the big financial markets."
Wall Street has been engulfed in a
coordinated assault by small traders who set up online forums such as Reddit to
force hedge funds to close short positions. A short, or short, is a bet
that the stock will fall.
They lost some of their firepowers
when brokers stopped leveraging them and restricted trading to some of the most
popular brands like GameStop and BlackBerry.
The owner of the popular online broker
Robinhood said the restrictions were in place to protect the brokerage company
and its clients, but that some of the restrictions will be lifted on Friday.
“Robinhood lost. The crowd is
back, ”said Bank of Singapore currency analyst Moh Xiong Sim, drawing the attention of foreign exchange traders to stocks as stock moves stimulate
sentiment.
“The price movement last week was
strange,” he said, referring to a forced shakeup, not fundamentals. ”
Nervousness pushed the US dollar into
buying, although, in addition to hitting a new year high of 104.57 yen, it
remained within recent ranges against other major currencies.
It rose about 0.5% against the risk-sensitive Australian dollar and 0.6% against the Norwegian krone.
Liquidity
problem
Nervousness is exacerbating the upset
in stock markets as COVID-19 vaccine, the introduction has run into trouble and
global economic data has dimmed.
Investors were impressed by
less-than-expected growth in US jobless claims on Thursday. But they still
grew by more than 840,000, and the data showed that the US economy contracted
last year at the sharpest pace since World War II.
Delays in vaccine production have
also spilt over into disputes between the European Union and drug
manufacturers over how best to allocate the limited supply.
Meanwhile, the People's Bank of China
(PBOC) poured 100 billion yuan into the financial system on Friday after a week
of liquidity cuts that sparked concerns that the central bank is actually tightening
monetary policy.
That said, the extra money did little
to ease the stress of the short-term money markets, where rates rallied for the
fifth straight day and benchmark overnight repo rates rose to their highest
level in nearly six years.
“This size was not enough to fill the
liquidity gap during the Chinese New Year and it is too early to talk about
eliminating the liquidity gap,” said Mizuho chief Asian currency strategist Ken
Chung, referring to the Lunar New Years in the coming weeks. ...
The yuan fell 0.2% to 6.4627 per
dollar. The Hang Seng and Shanghai Composite were up slightly on Friday,
but both expect a weekly decline of more than 2.5%.
The yield on 10-year US Treasury
bonds rose yesterday and amounted to 1.0483% on Friday. Gold was worth $
1,842 an ounce, while oil prices remained stable and the suspension of vaccine
distribution held back growth.
Brent crude futures last traded flat
at $ 55.52 a barrel, while US crude oil futures fell 0.3% to $ 52.18 a barrel.
Tom Westbrook in Singapore and Alwyn
Scott in New York Thomson Reuters
