European equities made up some ground on Monday, after the struggle between Reddit’s day traders and Wall Street institutions added to investor nerves and helped send stocks to their worst week since October.
The regional benchmark Stoxx 600 index rose 1.1 per cent in morning trading, following a fall of more than 3 per cent last week. London’s FTSE 100 was up 0.8 per cent, after losing more than 4 per cent last week.
Some analysts attributed the optimistic mood to progress in the conflict between the EU and AstraZeneca over the terms of a supply deal for the Covid-19 vaccine that the pharmaceutical company has developed with Oxford university. The drugmaker has agreed to supply the bloc with 9m more doses by March.
Wall Street was also set for a rebound. Futures markets implied the blue-chip S&P 500 index, which fell more than 3 per cent last week, would rise 0.9 per cent at the opening bell.
But investors remain braced for significant swings in stocks. The Vix — an index that tracks expected volatility in US equities — remained elevated at above 31, against its long-run average of about 20.
Last week saw a dramatic battle between individual investors organising on the Reddit message board and short sellers of stocks including retailer GameStop, which prompted controversial trading curbs by brokers.
The activity has also spread into the silver market, after a user in the website’s r/WallStreetBets forum urged investors to bet on a popular silver-backed exchange traded fund.
Prices for silver rose 8 per cent to more than $29 a troy ounce on Monday, following a 6 per cent rise last week. Silver miners also prospered, with New York-listed First Majestic — another company identified by Redditors — rising almost 30 per cent over the week.
The role that Reddit has played in the mobilisation of scores of investors is a significant development, analysts said. “It is a siren call,” said Arnab Das, global market strategist at Invesco.
But Joost van Leenders, senior investment strategist at Kempen Capital Management, said “it’s not a threat to the market at this point . . . I don’t think the scale of money is large enough to drive the market”.
He added: “If the bubble of one of these stocks burst, it might make investors more cautious and cause some individual pain.”
In Asia, China’s CSI 300 index rose 1.2 per cent, Hong Kong’s Hang Seng gained 2.2 per cent and South Korea’s Kospi rose 2.7 per cent.