Market Overview

Equity futures slide on nerves over retail-trading frenzy

European and U.S. stock futures fell on Friday, while Asian equities headed for their steepest weekly loss in months, as a Wall Street retail-trading frenzy and a liquidity squeeze in China unnerved investors and weighed on frothy markets. S&P 500 futures fell 1.2% and Nasdaq 100 futures fell 1.4%. FTSE futures, DAX futures and EuroSTOXX 50 futures all fell by just over 1%. The U.S. dollar rose to a seven-week high against the yen.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5% and is on course for a weekly loss of 3.8% – which would be the largest since September. Japan’s Nikkei fell 1.5% and is heading for its first weekly loss of the year. Wall Street has been gripped by a coordinated 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.

They lost some of their firepower overnight when brokers cut off borrowing facilities and restricted trading in some of the hottest names, such as GameStop and BlackBerry. The boss of popular online broker Robinhood said the curbs were deployed to protect the brokerage and its customers but that some restrictions will be lifted on Friday. Adding to nerves, the shake up in equity markets comes as COVID-19 vaccine rollouts have run into trouble and as global economic data starts to look less rosy. Investors were impressed by a smaller-than-expected rise in U.S. weekly jobless claims on Thursday. But they still rose by more than 840,000 and data showed the U.S. economy contracted last year at its sharpest pace since World War Two.

Equity futures slide on nerves over retail-trading frenzy, Reuters, Jan 29

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