Hedge fund short sellers capitalise on UK ‘Freedom Day’ fears as rising Covid rate sinks FTSE stocks

Coronavirus impact

Hedge funds betting against UK blue chip stocks saw their negative wagers pay off on Monday as investor fears over rising coronavirus cases sent the FTSE 100 tumbling some 2.3 per cent.

Hopes that the easing of most Covid-19 restrictions in England this week – with 19 July having been dubbed ‘Freedom Day’ – would help accelerate the UK’s nascent economic recovery were soured as travel, manufacturing and retail names were all dented.

Travel and tourism-related stocks were among the hardest hit amid continued uncertainty surrounding the UK’s traffic-light quarantine system for travellers, which threatens summer holidays for many. EasyJet dropped 6.8 per cent and IAG, which owns British Airways, fell 5.5 per cent at one point. Hedge funds betting against EasyJet’s share price include AHL Partners and Kintbury Capital, according to FCA regulatory disclosures. Carnival – the cruise line operator which is one of DE Shaw’s short positions – also fell in value on Monday.

Among Monday’s changes in England are the reopening of nightclubs and an end to mandatory mask-wearing in most public places.

But there are concerns that the soaring Covid rate – there have been more than 320,000 new cases in the past week, a 41 per cent increase – coupled with the growing number of people required to self-isolate as a result of being identified by the UK’s tracing app will ultimately stretch staff numbers and impact businesses, particularly in the retail sector.

On Monday, supermarket giant Tesco, which is being shorted by high-profile hedge fund Marshall Wace, fell 1.72 per cent. Marshall Wace is also one of a number of managers along with BlackRock, BNP Paribas and Polygon Global Partners which is positioned against grocery staple Sainsbury’s, which also ended Monday down.

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Hugh Leask
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Editor, Hedgeweek