‘Gamestop fever’ triggered widespread stock sell offs for US and European equities.28 Jan 2021 07:05
The FTSE 100 is set to start more than 1% lower on Thursday after ‘Gamestop fever’ triggered widespread stock sell offs for US and European equities.
IG Markets sees London’s blue-chip index down about 70 points, making the price 6,501 to 6,504 with just over an hour to go until the open.
As the Reddit ‘army’ of retail investors continued to buy up GameStop Corp and AMC shares, squeezing short-selling hedge funds, to send shockwaves through the stock market ecosystem.
Hedge funds are believed to have lost billions of dollars and triggered a major liquidity event and a market wide stock sell-off as margin calls and trading positions were shut-out.
Evidently, such was the hysteria on Wall Street, that even a record quarter from Apple Inc – showing US$111.4bn of revenue for the three months - was overlooked.
“Large hedge fund short positions were getting liquidated, prompting margin calls, and the cashing out of more profitable positions to fund the losses being caused by the Reddit surge in the likes of heavily shorted stocks like GameStop as well as AMC Entertainment, owners of Odeon Cinemas amongst others, which have seen huge gains, amidst big eye watering price swings,” said Michael Hewson, analyst at CMC Markets.
“While few people are shedding many tears about large scale hedge fund losses, after all if you play with fire, be prepared to get burned, the market turmoil is highlighting a number of areas within the market, that might prompt regulatory scrutiny in the future, the monitoring of retail trade chat forums and message boards, and how they drive markets.”
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