While some investors were no doubt being “carried out” after getting caught on the wrong side of the sudden share sell-off at the start of the week, others would have been popping champagne corks.
Hedge funds have been increasing their bets for some time now that the FTSE 100 was due a fall.
The index peaked at 7,104 in late April but fell amid worries about a Grexit and more recently slowing growth in China, which analysts said triggered Monday’s sharp collapse.
Average short interest in the FTSE 100 increased to 1.8 per cent of issued shares last week from 1.1 per cent in early 2014, a multiyear high, according to Markit. Simon Colvin, an analyst at the research company, said short-sellers seemed well positioned to benefit from the fall given that they had been upping positions for 18 months.
Several of the most shorted shares are companies exposed to the rout in metal and oil prices.
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Royal Dutch Shell, the oil giant, has seen short interest jump 23 per cent in the past month, with 4.4 per cent of shares shorted. Weir Group, the engineering company that operates in the oil industry, has 7.5 per cent of shares shorted, and Fresnillo, the silver miner, 5.2 per cent.
Short sellers in the latter include Lansdowne Partners, the hedge fund co-founded by Sir Paul Ruddock, the chairman of the Victoria & Albert Museum and a Conservative party donor, which made a profit of £243.6 million in the year to March.
Investors were trying to make money on the way back up yesterday as shares in most markets across the world rallied. Despite another tumble in Shanghai overnight, the FTSE 100 snapped a ten-day losing streak to rebound 182.47 points, or 3.09 per cent, to 6,081.34, the biggest percentage rise in a day since the end of November 2011.
The rally, which analysts attributed to bargain hunting and a sense that selling may have been overdone, was given added impetus by Beijing’s move to cut interest rates further.
Reversing Monday’s moves, the miners led the rally, tracking more stable commodity prices.
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Antofagasta was the day’s biggest riser, jumping 46½p to 579½p as investors were buoyed by the Chilean miner’s cost-savings targets, outlined after a sharp fall in first-half profits.
BHP Billiton, the world’s biggest miner, regained 53½p to £10.21 boosted by the company’s vow to protect the dividend, despite posting its worst underlying profit in a decade.
In a broad rebound, the London Stock Exchange was among the biggest movers, 165p dearer to £25.36, with traders saying the surge in equity volumes in recent days would have helped the group.
RSA Insurance, which was the only share to rise on Monday, added 19½p to 514½p after Zurich announced a 550p-a-share offer, which RSA will recommend to its board.
Only a few stocks missed out on the rally. Randgold Resources, the precious metal miner, gave back 147p to £40.01 and Fresnillo fell 4½p to 639½p as the price of gold fell.
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The rise on the FTSE 250, up 507.27 points to 16,721.55, was widespread. Regus rose 22½p to 271½p, as investors bought on better-than-expected first-half results and an upgrade from Investec. Home Retail fell 3p to 146½p after a downgrade to “underweight” from Barclays, which argued that wage inflation would hit the owner of Argos more than other retailers.
Wall Street report: A 350-point rally evaporated and turned into losses as concerns about China’s economy outweighed buying by some investors of stocks that they had seen as bargains. The Dow Jones industrial average closed down 204.91 points at 15,666.44.
Attraqt loses finance director
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The finance boss of an e-commerce business co-founded by Dan Wagner, who is known in the City for the dot-com boom and crash of Dialog, or Dial-a-dog as it was renamed by some, has stepped down a year after the company floated on AIM.
Attraqt, which supplies search software for retailers such as SuperGroup, Boohoo and Tesco, told investors that David Stirling would leave the board but would stay around the business until late next month to help with the handover to Mark Johnson, another hand who knows his way around the AIM market.
The tiddler, which was floated at 50p a pop through N+1 Singer last August, has traded above its float price, peaking at 63p in March, but it closed flat yesterday at 58½p.
Mr Wagner, the non-executive chairman of Attraqt, who had a reputation for wearing a Donald Duck waistcoat, remains the biggest investor in the company with a 24 per cent stake, while Mr Stirling, one of the smaller backers, holds about 0.46 per cent.
The company, which recently won a contract with Bonmarché, the clothing retailer, is due to post results for the six months to the end of June next month.
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