European stocks and US futures markets fell on Friday, as an intensifying battle between retail traders and brokers over a handful of closely followed stocks continued to grab global attention and drive up market measures of volatility.
Robinhood, one of the popular US brokers, which like its peers moved on Thursday to restrict trading in a number of companies such as retailer GameStop, said it would “open up trading for some of these securities in a responsible manner”. The company has raised $1bn from investors and tapped credit lines to meet its capital and clearing requirements.
Europe’s benchmark Stoxx 600 index fell 1 per cent in early trading. London’s FTSE 100 benchmark lost 0.8 per cent and Germany’s Xetra dropped 1 per cent.
Futures for the US blue-chip S&P 500 index were down 0.9 per cent, while the Vix — a measure of expected volatility known as Wall Street’s “fear gauge” — sat at 33, well above its long-term average of just below 20.
GameStop was back at $360 per share in pre-market trading, more than 80 per cent above its Thursday close.
“The retail horde are not going anywhere, and may have no day jobs,” said Michael Every, a global strategist at Rabobank, an investment bank. They “can pile into any stock or asset they choose, forcing brokers or regulators to shut down trading”.
The nervousness added to worries among European investors about the economic damage being caused by the Covid-19 pandemic and shortages in some vaccines — whose rollout is deemed crucial to a recovery from the crisis.
“I think the volatility in the US will have some affect on European markets,” said Arnab Das, global market strategist at Invesco. “But the bigger picture here is still monetary policy, fiscal policy and the pandemic.”
Asia’s major stock markets were down across the board as jitters grew. Japan’s Topix fell 1.6 per cent and South Korea’s Kospi dropped 2.8 per cent. Hong Kong’s Hang Seng swung from gains of about 1 per cent to be down 0.9 per cent.
China’s CSI 300 index of Shanghai- and Shenzhen-listed shares was down 0.5 per cent.
The Kuala Lumpur-traded shares of Top Glove, the world’s biggest maker of rubber gloves, jumped as much as 14 per cent on Friday after Reddit users called on retail investors to buy the stock. The “Bursabets” subreddit has signed up over 6,000 members since it was set up on Thursday. Top Glove has been targeted by short-sellers, which profit when a company’s share price falls.
This week’s rise in volatility has been spurred in part by a rapid rally in stocks targeted by Reddit users, which has forced some hedge funds to exit their positions.
Additional reporting by Stefania Palma in Singapore