Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Having blasted GameSpot’s shares dramatically higher in the last week, some of the new wave of retail traders shaking up Wall Street have another target — silver.
The spot price of silver is soaring today, up over 7% to $29 per ounce, its highest level since last August. Some retail investors mobilized over social media are piling in the precious metal, with one Reddit post on WallStreetBets arguing that ‘The biggest short squeeze in the world’ is on.
The move began late last week, with a surge of money into the iShares Silver Trust, an exchange traded fund which is backed by physical silver and tracks its price.
Retail sites are also reporting a surge in demand for silver bars and coins on Sunday, indicating a scramble to get hold of physical silver assets.
Kyle Rodda of brokerage IG explains:
Like the GameStop situation, there’s a back-story to the attempted pumping over silver prices: angered by the perception of a manipulated market for paper silver, the traders are looking squeeze the shorts on the silver market, and force correction in price that, so the argument goes, better reflects the supply and demand of the underlying commodity.
But squeezing the silver market will be much harder than moving a single company’s stock price.
And other WallStreetBets users are urging against piling into silver, with one post claiming it’s an attempt by hedge funds to distract from the GameStop squeeze.
Jeffrey Halley, Senior Market Analyst at Asia Pacific, OANDA, says retail investors should be careful when targeting silver.
With a large physical off-exchange market, and a lot more liquidity theoretically, then the sparely traded stocks dallied with so far, the retail wolf pack is in dangerous waters.
The wolves of Wall Street may well be luring them into a trap in their Bunker Hunt for Reddit October.
Last week, the US stock market had its worst week in three months, with the attack on short selling in recent days leaving some large stablished funds nursing huge losses.
Melvin Capital, one of the hedge funds which bet against GameStop, lost more than 50% in January according to the Wall Street Journal.
This is forcing hedge funds and other major investors to cut their short positions in stocks identified by the Reddit reader/trader community. But they’re also closing their long holdings in stocks, to keep their portfolios balanced. This ‘de-grossing’ was a factor behind last week’s volatility.
Investors are also more anxious about the fight against the pandemic, given the deepening row between the European Union and AstraZeneca over vaccine supplies.
Yesterday, France and Germany raised the threat of legal action over the supply problems which mean the EU will only get 25% of the 100m doses pledged to the bloc by the end of March.
But despite that, European markets are on track for a positive open.
Also coming up today, a flurry of purchasing manager surveys will show how factories across the world fared in January.
The UK data is expected to confirm there was a sharp slowdown last month, with supply delays, rising costs and weak exports due to the pandemic and the end of the Brexit withdrawal agreement.
The picture in Australia is more encouraging, with the manufacturing PMI strengthening last month:
- 9am GMT: Eurozone manufacturing PMI report for January
- 9.30am GMT: UK manufacturing PMI report for January
- 9.30am GMT: UK mortgage approvals and lending data for December
- 10am GMT: Eurozone unemployment rate for December
- 3pm GMT: US manufacturing PMI report for January