Hedge Funds Capitulate on European Shorts |
| Bloomberg - Aug 13, 2012 |
Hedge funds that base investment decisions on economic trends are unwinding bets against European stocks (SXXP) at the fastest pace in three years, speculating policy makers will step up the fight against the debt crisis.
The degree by which macro funds are trailing the Euro Stoxx 50 Index (SX5E) is narrowing at the fastest rate since 2009, a sign managers are covering short sales by buying shares, according to data compiled by Bloomberg and JPMorgan Chase & Co. The proportion of shares on loan in the Stoxx Europe 600 Index, an indication of short interest, has fallen to 2.9 percent from 3.4 percent in May, data from London-based Markit show.
Bulls say professional investors buying back shares that were borrowed and sold short are fueling a rally led by European Central Bank President Mario Draghi’s pledge to defend the euro. The Euro Stoxx 50 is up more than 12 percent in three weeks, twice the gain of the MSCI All-Country World Index (MXWD), even as the euro-area economy is forecast to slide into recession. Bears point to a drop in earnings estimates after profit fell about 10 percent last quarter as a sign stocks in Europe may fall.
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- Posted: 2012-08-13 15:00:42
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