European stocks fell alongside US equity futures on Friday, as an intensifying battle between retail traders and brokers over a handful of closely followed stocks drove up market measures of volatility.
Robinhood, which was among a number of US brokers on Thursday to restrict trading in companies such as retailer GameStop, said it would “open up trading for some of these securities in a responsible manner”.
The California-based group has raised $1 billion (€830 million) from investors and tapped credit lines to meet its capital and clearing requirements.
Europe’s benchmark Stoxx 600 index fell 1.1 per cent in morning trading, while London’s FTSE 100 benchmark?slid 1.2 per cent and Frankfurt’s Xetra Dax sank 1 per cent.
Average
Futures for the US blue-chip S&P 500 index were down 1.2 per cent, while the Cboe Vix - a measure of expected volatility known as Wall Street’s “fear gauge” - sat at 34, 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 uptick in volatility triggered by the market tussle 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 effect 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.”
The Vstoxx index, the European gauge of market volatility, also climbed to its highest level since early November.
Jitters
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 3 per cent. Hong Kong’s Hang Seng swung from gains of about 1 per cent to end its session 0.9 per cent lower.
China’s CSI 300 index of Shanghai and Shenzhen-listed shares closed 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 more than 6,000 members since it was set up on Thursday. Top Glove has been targeted by short-sellers who profit when a company’s share price falls. – Copyright The Financial Times Limited 2021
