U.S. Index Futures Slide Amid China Squeeze, Retail Volatility

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U.S. stock index futures fell, erasing gains from the previous session, as concerns over a cash squeeze in China and volatile retail-trader speculation sparked a broad equity selloff in Asia.

Contracts on the S&P 500 dropped 1.1% as of 8:22 a.m. in London, while futures on the Nasdaq 100 declined 1.4% and those on the Dow Jones Industrial Average lost 0.9%. A money-market rate in China surged to the highest in almost six years, reflecting tight liquidity in the financial system.

Risk-off sentiment returned to Europe on Friday, with the Stoxx 600 Index falling 1.2%. Heavily shorted European stocks, which climbed this week in a spillover from GameStop Corp.’s day trader-fueled rally in the U.S., were trading mixed on Friday, with IAG SA erasing an earlier drop and Evotec SE slumping 7.6%.

“We’re seeing red all across global futures right now so the U.S. going the same way isn’t a surprise,” said Max Gokhman, director of asset allocation at Pacific Life Fund Advisors from Costa Mesa, California. “With even more volatility likely during the U.S. cash session some investors want to take some risk off the table.”

U.S. Index Futures Slide Amid China Squeeze, Retail Volatility

Global stocks are set for their worst weekly slide in about three months, partly on the turmoil caused by hoards of day-traders hatching stock bets that roiled hedge funds and strained trading platforms.

GameStop and AMC Entertainment Holdings Inc. surged in post-market trading after brokerage Robinhood Markets Inc. said it will ease some curbs on activity in stocks whipsawed by online chatrooms. On Thursday, The S&P 500 Index rose 1% as moves to limit retail traders’ speculation in some companies opened the door for hedge funds to load up on stocks they had been ditching.

“The loosening of these restrictions tonight, as well as traders migrating to other platforms to continue their trading, could see a renewed ramping in the market’s most heavily shorted stocks,” Kyle Rodda, an analyst at IG Markets in Melbourne, wrote in a note. “The bounce in equities that began overnight looks to be under threat once more.”

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