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GLOBAL MARKETS-Wall Street set for weak open on hedge fund-retail battle

Published 29/01/2021, 11:22 pm
© Reuters.
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* U.S. futures, European stocks drop 0.5-0.8%

* Dollar index eyes weekly gain

* GameStop (NYSE:GME) price nearly doubles in U.S. pre-market

* Bitcoin jumps 14% after Elon Musk mention

By Carolyn Cohn

LONDON, Jan 29 (Reuters) - U.S. stock futures and European stocks fell on Friday while the safe-haven dollar held its ground as a Wall Street battle between hedge funds and retail investors and a row in Europe over COVID-19 vaccine supply cooled risk appetite.

Wall Street has been gripped by an assault by small traders organising over online forums, such as Reddit, to force hedge funds to reverse short positions - or bets that stocks would fall - on companies such as GameStop GME.N and AMC Entertainment AMC.N . stand-off comes after central bank and government stimulus have propelled stock markets to record highs in recent weeks, encouraging involvement by retail investors.

"There's fear in terms of the volatility," said Derek Halpenny, head of research for global markets at MUFG. "Specific trades in pockets of the market can spread into the broader market."

Shares in GameStop GME.N , AMC Entertainment AMC.N and BlackBerry BB.N plunged more than 40% on Thursday after several online platforms imposed buying halts, but rebounded as Robinhood and Interactive Brokers eased the restrictions on Friday. shares nearly doubled and AMC Entertainment was up 55% in U.S. pre-market trade.

"Any hedge fund will be carefully looking at all their shorts after this week and regulators will look very carefully at collective retail trading," Deutsche Bank (DE:DBKGn) analysts said.

S&P 500 futures ESc1 recouped some ground in European trade but were down 0.5% by 1138 GMT. Nasdaq 100 futures NQc1 fell 0.7% .

Britain's FTSE 100 index .FTSE fell 0.8% and European stocks .STOXX dropped 0.7%.

VACCINE ROW

Delays in COVID-19 vaccine production have snowballed into a spat between Britain, the European Union and drugmakers over how best to direct limited supplies. AZN.L offered eight million more doses of its COVID-19 vaccine to the European Union, after it unexpectedly announced cuts in supplies last week. But the bloc said that was far short of what was originally promised, an EU official told Reuters on Friday. variants of the novel coronavirus have also prolonged lockdowns and delayed expectations of an economic rebound.

Barclays (LON:BARC) analysts, however, said that "institutional positioning is not aggressive overall, and as long as vaccines work and central banks stay put, buy-the-dip mentality should continue".

Click here http://tmsnrt.rs/2EmTD6j for an interactive chart on the vaccine race

The U.S. dollar rose to its highest since mid-November against the yen JPY=EBS , and was steady against an index of currencies =USD , bringing its weekly rise to 0.4%. The euro EUR= edged up 0.1% and the pound GBP= was steady.

Bitcoin BTC=BTSP jumped as much as 14% to a two-week high after Tesla Inc TSLA.O chief Elon Musk tagged the cryptocurrency in his Twitter biography. 10-year government bond yields FR10YT=RR , which move inversely to price, rose four basis points after France's gross domestic product contracted less than expected in the fourth quarter of 2020. stocks .MIWD00000PUS fell 0.4% towards three-week lows set in the previous session, and were heading for a weekly fall of more than 2%.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1%, on course for a weekly loss of 4.4%. Japan's Nikkei .N225 fell 1.9%, recording its first weekly loss of the year.

The People's Bank of China (PBOC) injected 100 billion yuan into the financial system on Friday, following a week of reducing liquidity, which had sparked concerns the central bank was in fact tightening monetary policy.

The extra money did little to loosen short-term money markets, where rates rose for a fifth straight day and benchmark overnight repo rates CN1DRP=CFXS surged to their highest in nearly six years. prices rose within recent ranges, with concerns caused by the new coronavirus variants and slow vaccine rollouts offsetting a cut in Saudi Arabian oil supply and falling U.S. oil inventories. O/R

Brent crude futures LCOc1 were up 0.88% at $56.02 a barrel and U.S. crude futures CLc1 rose 0.5% to $52.60 a barrel.

Gold XAU= benefited from demand for safer assets, rising 1.1%.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global assets

http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar

http://tmsnrt.rs/2egbfVh Emerging markets

http://tmsnrt.rs/2ihRugV MSCI All Country World Index Market Cap

http://tmsnrt.rs/2EmTD6j Hedge funds scrambling to exit shorts, cut losses

https://tmsnrt.rs/3prlMgN

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