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Shares rally, retail drives silver higher

Simon Jessop
·3-min read

Global shares have bounced and silver markets surged as retail investors expand their social-media fuelled battle against Wall Street to drive the precious metal to an eight-year high.

Stock markets had been roiled last week after a spike in retail demand to buy the stocks most bet-against by hedge funds driving huge gains in companies such as GameStop and prompting fresh concern that COVID-19 monetary and fiscal support measures were fuelling a market bubble.

With chatrooms abuzz with talk that silver was the new target, silver-exposed stocks, funds and coins jumped in Asian trade, pushing spot silver up more than 11 per cent, with London-listed miners up strongly, including Fresnillo, up 18 per cent.

After falling 3.6 per cent last week - its biggest weekly drop in three months - the MSCI All-Country World Index was up 0.5 per cent in early deals, tracking overnight gains in Asia.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.4 per cent while Japan's Nikkei added 1.2 per cent and Chinese blue chips rose 0.5 per cent after the country's central bank injected more cash into money markets.

Futures for the S&P 500 and NASDAQ, meanwhile, both pointed to a stronger open on Wall Street, up around 1 per cent.

While the retail battle versus Wall Street, co-ordinated over online forums such as Reddit, created some systemic risks, the bigger danger was in the tech sector, where some stocks had "eye-watering valuations", Deutsche Bank analyst Jim Reid said.

"Retail has in many parts driven such valuations in the last 10 months. If this pops the wider market will have bigger issues than last week."

Gold followed silver higher to $US1862 an ounce, while oil also tracked the gains in other commodities, with Brent crude and its US peer up around 1 per cent.

While the stock market tussle continued to grab the headlines, analysts cautioned the bigger concern was economic momentum in the United States and Europe as coronavirus lockdowns bite.

Indeed, two surveys from China showed factory activity slowed in January as restrictions took a toll in some regions. In the euro zone, manufacturing growth remained resilient at the start of the year but the pace waned from December.

Data out of Britain will be in focus later in the European session.

While the coronavirus vaccine rollout globally remains slow, with concern about whether they will work on new COVID strains, Europe was also bolstered by news that it would receive a further nine million doses from AstraZeneca in the first quarter.

"It is these considerations, not what is happening to a video game retailer day-to-day, that has weighed on risk assets," John Briggs, global head of strategy at NatWest Markets, said.

"So much of the market's valuations, risk in particular, is premised on the fact we can see a light at the end of the COVID tunnel."

Higher yields combined with the more cautious market mood have seen the safe-haven dollar steady above its recent lows. The dollar index stood at 90.722, having bounced from a trough of 89.206 hit early in January.

The euro, meanwhile, fell 0.3 per cent to $US1.2100, well off its recent peak at $US1.23499, while sterling was the biggest gainer in the G10 group of currencies, up 0.3 per cent on the day at $1.3732..

With riskier markets bouncing, Italian government bond yields fell 2-3 basis points across the curve.

German Bund yields, meanwhile, the benchmark for the euro zone, remained anchored around -0.51 per cent on Monday, tracking US Treasury yields that also remained unchanged.