Short Interest in European Banks Increases as Market Volatility Rises

According to data from Hazeltree, the number of funds shorting European banks has been increasing, with 21 investors currently shorting Amsterdam-listed ING, up from just seven at the beginning of the year. This trend also applies to British bank NatWest Group, whose short bets have nearly doubled from 16 to 31 since January 2. However, some analysts suggest that this may be due to higher measures of momentum, as reflected in the RSI, leading some participants to tactically increase short positions. Short sellers are investors who borrow shares, sell them, and then buy them back once the price has fallen, profiting from the difference. The rise in both short and long investor interest in European banks reflects increasingly divergent views about the region’s economy and its ability to cope with higher borrowing costs. Some believe that this trend highlights potential economic headwinds in the region, while others suggest that it may simply indicate a protective strategy by some investors. Despite this, European bank chiefs have reported a spike in investor interest this year, following a series of better-than-expected earnings. The STOXX European banks index has recently reached its highest point since August 2015, as confidence in the sector’s earning power grows while central banks hold off on anticipated interest rate cuts.