The Australian market has been caught in the grip of an epic global short squeeze originating in a share-punting forum hosted by the online platform Reddit, setting off billions of dollars of short covering by professional investment managers, and a broader market sell-off.

Amateur traders in the US market have been inflicting pain on hedge fund targets this week by piling into some of the most heavily shorted stocks on Wall Street, such as the bricks-and-mortar video games retailer GameStop and Nokia, the darling of the dotcom era, sending prices soaring.