Global equities jump as retail investors shift their focus to silver after huge contraction of short sellers

• Global stocks rose on Monday as the army of retail investors turned to a new favorite asset: silver.
• The world’s largest silver-backed ETF posted a record $ 1 billion in inflows through Friday, the FT reported.
• Silver surfers pushed the London benchmark and UK mining stocks higher due to the new short contraction.
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Global stocks surged on Monday as retail investors shifted their focus to the silver market, showing that the Reddit frenzy has spread from stocks and cryptocurrencies to precious metals.

The S&P 500, Dow Jones and Nasdaq rose between 0.8% and 1%, suggesting a higher open for US market indices later in the day.

On Sunday, a group of 10 Republican senators proposed an alternative economic plan worth $ 600 billion compared to President Joe Biden’s $ 1.9 trillion relief plan. Although the latest GOP proposal is much smaller than Biden’s, the markets reacted positively as it suggests the talks could move again.

Silver rose nearly 12% on Monday, from just under $ 25 to over $ 30, its highest level since last August, as the world’s largest silver-backed ETF, the i-Shares Silver Trust, recorded a record $ 1 billion in tickets through Friday, according to the Financial Times.

“While this market is much more difficult to move compared to smaller stocks like GameStop, the events of the past week showed that the impact of the retail frenzy should not be underestimated,” said Milan Cutkovic, market analyst at AxiCorp.

The impact of the r / wallstreetbets movement caused immense volatility in US markets last week, prompting short sellers to anticipate a further explosion in nostalgic stocks. The volatility was driven by market positioning rather than growth concerns, according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

Read more: Bank of America warns of 3 impending catalysts that could cause the bull market to crash in 2021, and shares how to position themselves for the ‘big change’ as the WallStreetBets crowd battles the system.

“There is no question that huge central bank liquidity and government stimulus controls in the hands of underemployed / laid off retail investors (through no fault of their own) will be a big part of this bubble story,” said Jim Reid, managing director of cross-asset analysis at Deutsche Bank.

Silver bulls began to affect prices elsewhere, causing the London benchmark index and mining stocks to rise as a result.

The UK’s FTSE 100 was up 0.8%, the Euro Stoxx 50 was up 1.3% and the German DAX was up 1.4%. Mining companies Glencore and Anglo American, the leading stocks, rose 3% and 2.7%, respectively.

However, Connor Campbell, a financial analyst at SpreadEx, noted that there is speculation that Reddit is not necessarily behind the latest move.

“Although there are posts in favor of silver on WallStreetBets, the ‘top post’ on the subject is against trading, stating that by ‘betting on silver, you would be putting money directly into the pockets of the EXACT HEDGING FUNDS IN THE ANOTHER SIDE OF $ GME, ‘”he said. “The same cartel also stated that the little squeeze was ‘a coordinated attack by hedge funds so they can continue fighting the $ GME.’

Elsewhere in Asia, China saw a drop in a key business activity index, as the resurgence of the coronavirus hurt overall sentiment. The lower purchasing managers’ index suggests that momentum has slowed for now, although the pan-Asian recovery remains on an upward trajectory, said Jeffrey Halley, senior market analyst at OANDA.

China’s Shanghai Composite rose 0.6%, Japan’s Nikkei was up 1.5% and Hong Kong’s Hang Seng was up 2%.

Read more: Buy these 26 stocks very short as retail traders unleash wild rallies on Wall Street’s less-loved names, says Wells Fargo