FirstFT: Hedge funds lose $6bn betting against cruise lines and hotels

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Hedge funds have lost more than $6bn this year betting against cruise lines and hotels after underestimating the resilience of US consumers.

Cruise lines Royal Caribbean and Carnival are two of the 10 most heavily shorted companies in the S&P 500 but have confounded short sellers’ expectations by more than doubling in value so far this year.

Short sellers — typically hedge funds — aim to make money by selling borrowed stock and buying it back at a lower price when the shares decline. The sharp rally in cruise lines and other holiday accommodations, however, has left them sitting on $6.4bn of mark-to-market losses, according to data from S3 Partners.

Carnival, Royal Caribbean and smaller rival Norwegian accounted for $2.9bn of the losses. Large short positions in Airbnb, which has rallied 70 per cent year to date, and Booking.com, which is up 44 per cent, have also inflicted big losses.

Many US investors started the year expecting an impending recession, encouraging them to avoid sectors that would be exposed to a downturn in consumer spending.

However, economic growth has remained resilient in the face of higher interest rates, boosting confidence about the chances of a “soft landing” — bringing down inflation without causing a recession.

Here’s what else I’m keeping tabs on today:

Economic data: US jobs figures are expected to show growth has fallen to its lowest level since 2020, with the labour market slowly cooling after almost 18 months of interest rate rises.
Saudi-led Ukraine talks: Dozens of countries will take part in a conference hosted by the kingdom to sway developing countries to support Kyiv’s demands for Russia to withdraw troops.
Results: AP Møller-Maersk, Capita, Commerzbank, Crédit Agricole, Dufry, Royal London, Swiss Re and WPP report.

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5. Banks that blacklist customers over political beliefs should be hit with heavy fines, said Jeremy Hunt. The UK chancellor told Britain’s financial regulator to launch an urgent review to find out the scale of “de-banking” and said the practice, exposed by former Brexit party leader Nigel Farage’s spat with elite bank Coutts, was “a threat to your right to express your opinions”.

News in-depth

After the sharpest tightening in monetary policy for 35 years, UK interest rates may finally be close to a peak. That was the message from Bank of England governor Andrew Bailey yesterday, as he set out forecasts for inflation to inch back to the central bank’s target against a backdrop of near-stagnant economic growth.

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Take a break from the news

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