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Day traders take over

Tesla, man and machine

Hedge funds are reeling this morning after day traders drove shares in US video game retailer GameStop to incredible levels overnight. While the share price action is divorced from any known valuation methodology, the pain for two prominent short sellers is real. The developments have some celebrating the democratization of markets, others are expressing concerns about potential stock manipulation.

Less than two weeks ago, GameStop shares traded below $20. Last night, during US trading, they touched $160, and this morning traded above $240 in after market action. Reports suggest a group of day traders co-ordinated their efforts on a Reddit sub thread, raising regulatory concerns. There are also reports that Elon Musk posted “GameStonk!” to a thread. At least two prominent short sellers are caught, with one of them receiving a $2.75 billion capital injection this morning.

Markets elsewhere were steady as the corporate reporting season drama rolled on. Microsoft soared more than 6% after its quarterly earnings outstripped analysts’ estimates. Around 20% of companies have reported so far, and overall sales growth of 0.5% and earnings growth of 2% stands in stark contrast to the record highs in share market indices.

Australian CPI data today is unlikely to shift the needle. However, tonight brings an interest rate decision from the US Federal Reserve. While there is almost zero chance of a move in interest rates, any commentary around a potential withdrawal of monetary stimulus as government support kicks in could draw significant market responses.

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