Small investors continue to hunt for hedge fund money

Social Media Attack by Retail Investors on Hedge Funds in Equity Markets Worldwide Spawns a Consequence: Stocks Dropped, Raising Demand for the US Currency

dollar to yen intervals of 60 minute
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 

 

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