Wednesday Jun 5 2024 10:52
8 min
The GameStop saga came back to life after a post by Keith Gill (Roaring Kitty), who shared a screenshot appearing to show a $115mn position in GME — and the meme stock crowd went wild.
GameStop shares rose abruptly in the pre-market on Monday and finished up 21% for the day, well off the indicated highs. Many shorts saw an opportunity (Andrew Left among them) – it always seems to end one way. Meanwhile, the US Securities and Exchange Commission (SEC) has been reviewing trading activity for GameStop call options around the timing of Gill's social media posts to determine if they could be considered market manipulation, as per a WSJ report.
E*Trade, which is owned by Morgan Stanley, is said to be considering kicking Gill off its platform. But should they also take that up with all the analysts and hedge funds who go on CNBC to talk their book? I don’t know. Unlike 2021, this is very much a rather tawdry sideshow.
GameStop stock has rallied close to 60% this year amid the meme stock resurgence. AMC, despite popping by up to 23% in pre-market and closing up 11.1% on Monday, has tumbled more than 21% in 2024 despite the Roaring Kitty-inspired rally.
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He’s back: Love or loathe, Nigel Farage is good box office. He’s going to lead Reform and attempt to win a seat in Clacton in the upcoming UK general election — like some old knight errant of yore buckling up his rusty suit of armour and tilting at glory (or is it windmills?). It’s probably not good for the Tories and it seems way too late for a deal to stand down his troops as he did in 2019 for Boris. Will he now take over the rump of the Tory party? If that’s his strategy, it’s been one heck of a long game.
Hard landing back? Rate cuts appear to be in the mail in the US.10-year Treasury yields tumbled about 11bps on soft readings from the US, which will bolster the case for the Fed to cut in the autumn and use this month’s meeting to signal confidence in their outlook. The 10-year Treasury has slipped around 20bps from ~4.6% to ~4.4% in the last couple of sessions.
ISM manufacturing was bad — lowest headline since February, lowest prices paid since March, lowest new orders since May 2023 and now in contraction for 2 years. Meanwhile the Atlanta Fed’s GDPNow estimate for Q2 growth was revised down to 1.8% from 2.7%. Add to this the fact that Q1 real GDP was revised down to 1.3% q/q and real consumer spending remains negative and you get a sense that the case for interest rate cuts is building again.
Oil prices plunged on worries about fresh supply coming onto the market in the wake of the OPEC+ decision to extend production cuts last weekend — the jittery reaction to US economic data was part of the story.
Spot WTI here crashed through one big Fib support level around $75.40 and is already testing the next level around the $72.50-60 area. Rising supply may meet with softening demand and the market is close to contango — which is usually not bullish.
The fact that eight countries want to phase out voluntary cuts is bearish, says Goldman Sachs, which now sees downside risks for its $75-90 range for Brent.
Also, reports are saying that Israel is prepared to go with phase 1 of a truce plan, which could suck out some of the geopolitical premium – something that could be seen with the gold price ticking down on the news yesterday, though we also saw Treasury yields track lower at the same time.
India’s Nifty 50 plunged 5% from record highs as early counting of election ballots indicated a slimmer majority for Mode’s BLP than previously thought. The reversal wiped out the gains from Monday as the early indicators suggested the party’s majority would be narrower than in 2019.
Meanwhile, Mexico's stock market ETF, the EWW, crashed nearly 11% as the Mexican stock market had its worst day since 2008. The Mexican peso also lost 4.5% against the US dollar in its biggest one-day drop for a long time.
US stocks were mixed on Monday, but trading looked very volatile. There were all kinds of glitches on the NYSE yesterday that at one point saw Berkshire Hathaway shares decline 100%. The Nasdaq rallied 0.56% on lower Treasury yields and the S&P 500 rose 0.11%, whilst the Dow was down 0.3%. We’ve seen two months of sideways action as markets pause following gains of the last 7 months — market breadth is super narrow (weakest since 2009).
Tech – particularly California-based chipmaker Nvidia – still doing the lifting with banks and financials struggling a bit. The market is maybe starting to worry that the Fed has stayed too tight for too long. Futures look weaker this morning. The JOLTS number today will be important.
European stock markets were in risk off mode early Tuesday. Steep declines for oil led the majors lower on the FTSE 100 with BP and Shell wiping about 25 pts off the blue chips, miners chipping in the difference as the index slid about 0.5%. Utilities – bond proxies – rallied 1-2% with the UK 10-year gilt yield down to 4.2% from 4.4% on Friday. Similar losses were noted in Frankfurt and Paris.
USD was a bit firmer this morning after suffering a drop on Monday that saw the euro and sterling hit their highest levels since March. GBPUSD pulling back from the long-term trend line I had put in place.
The copper price is looking a bit wobbly – commodities seem to be in the firing line.
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