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Hedge funds’ bullish European equities stance may be short-lived

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A client note issued by JP Morgan on Thursday has warned that the current hedge fund appetite for European equities may wane on the back of continued rising interest rates and further bond market troubles, according to a report by Reuters. 

JP Morgan’s view is that European share prices may have been supported since November by hedge funds covering their short positions, essentially bets that an asset price will weaken, while highlighting that there has been less buying of UK equities.

The note identified equity, multi-strategy, and computer-led and trend-trading hedge funds as those involved in covering short positions and establishing long positions, it said.

With the STOXX 600 index up around 20% from the lows seen in October, Trend funds, or CTAs, which frequently switch their buy and sell positions, have stayed bullish for longer than they usually would in European equities, said JP Morgan.

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