Silver jumps, stocks slide as social trading roils market

By Herbert Lash and Carolyn Cohn

NEW YORK/LONDON (Reuters) - Silver prices jumped and global equity markets sank on Friday amid a growing battle on Wall Street between hedge funds and retail investors, while a dispute over COVID-19 vaccine supply in Europe cooled risk appetite.

Disappointing vaccine data from Johnson & Johnson also hurt sentiment but the assault of retail traders using online forums to force hedge funds to reverse short positions - bets that stocks will fall - kept the market on edge.

Shares of GameStop Corp and AMC Entertainment Holdings Inc surged again after Robinhood and Interactive Brokers said they planned to ease restrictions after imposing buying halts on Thursday.

GameStop soared 67.9% to $325 a share, five times its closing price a week ago Friday, and AMC gained 53.7%, both in heavy trade. AMC was one of the most active stocks on the New York Stock Exchange. Volume on U.S. exchanges was 16.83 billion shares, up from the 10.6 billion average in the fourth quarter.

Silver rallied and was up 2% at $26.90 an ounce, taking gains to almost 10% since messages began to circulate on Reddit early Thursday urging retail investors to pile into the market and drive up prices.

Anxiety has grown as investors ask whether hedge funds will need to liquidate other positions to address losses in stocks they have shorted, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"Once this short squeeze inevitably ends and there aren't any more greater fools to bid up these stocks, will retail investors get stuck holding the bag?" Arone asked.

"The unintended consequences of this potential volatility have markets on edge as we end the week," Arone said.

Arone added that investors need to take a giant step back as earnings are strong, the economy is improving, fiscal and monetary policy is supportive and vaccines are rolling out.

MSCI's benchmark for global equity markets fell 1.82% to 642.57, while Europe's broad FTSEurofirst 300 index closed down 1.95% at 1,524.1 to post its worst weekly loss, at 3.3%, since October.

On Wall Street, the Dow Jones Industrial Average fell 2.03%, the S&P 500 lost 1.93% and the Nasdaq Composite dropped 2%. The three indexes suffered their biggest weekly fall since the end of October.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1% to post a weekly loss of 4.4%. Japan's Nikkei fell 1.9%, recording its first weekly loss of the year.

VACCINE DISPUTE

Delays in COVID-19 vaccine production have snowballed into a spat between Britain, the European Union and drugmakers over how best to direct limited supplies.

AstraZeneca Plc offered eight million more doses of its COVID-19 vaccine to the European Union after it unexpectedly announced supply cuts last week. But the bloc said that was far short of what was originally promised, an EU official told Reuters on Friday.

New variants of the novel coronavirus have prolonged lockdowns and delayed expectations of an economic rebound.

Click here http://tmsnrt.rs/2EmTD6j for an interactive chart on the vaccine race.

The U.S. dollar retreated from its highest level since mid-November against the Japanese yen as investors rebalanced portfolios for month-end. The greenback slid 0.48% against the yen and traded little changed against an index of currencies, falling 0.002%.

Bitcoin jumped as much as 14% to a two-week high after Tesla Inc chief Elon Musk tagged the cryptocurrency in his Twitter biography.

French 10-year government bond yields, which move inversely to price, rose four basis points after France's gross domestic product contracted less than expected in the fourth quarter of 2020.

U.S. Treasury yields rose, in line with those in Europe, after data showed inflation perked up last month, while employment costs rose, suggesting the world's largest economy is on the mend from the devastating effects of the pandemic.

The U.S. yield curve steepened as long yields increased, with the spread between 2-year and 10-year notes hitting 98.20 basis points, the widest in about a week.

The 10-year U.S. Treasury note rose 2.1 basis points to yield 1.0757%.

Oil prices traded mixed as demand concerns caused by new coronavirus variants and slow vaccine rollouts offset a cut in Saudi Arabian oil supply and falling U.S. oil inventories.

Brent crude futures settled up 35 cents at $55.88 a barrel. U.S. crude futures fell 14 cents to settle at $52.20 a barrel.

Spot gold prices rose 0.16% to $1,843.31 an ounce. U.S. gold futures settled up 0.5% to $1,850.30 an ounce.

Graphic: Hedge funds scrambling to exit shorts, cut losses https://fingfx.thomsonreuters.com/gfx/buzz/azgpollxqvd/Pasted%20image%201611849789072.png

(Additional reporting by Tom Westbrook in Singapore and Alwyn Scott in New York; Editing by Will Dunham, Richard Pullin, Ana Nicolaci da Costa, William Maclean, Larry King, Dan Grebler and Richard Chang)