Asian Markets Recover as Gold Prices Bounce Back in Calm Trading

Market Overview and Key Developments

By Tom Westbrook

Gold and Silver Price Movements

SINGAPORE, Feb 3 (Reuters) - Gold and Asian stocks were on the rebound on Tuesday as trade took a calmer tone after wild swings in metals markets, with the mood helped overnight by a sharp jump in U.S. factory activity.

Impact of U.S. Economic Data

Japan's Nikkei jumped 2.5% to recoup Monday losses and South Korea's KOSPI rose 4%. Futures pointed to a recovery in Hong Kong while S&P 500 futures were up 0.3% with traders eyeing a busy few sessions of earnings.

Currency Market Adjustments

Investors were looking ahead to a central bank meeting in Australia later on Tuesday, where a strong jobs market and an unexpectedly hot fourth-quarter inflation reading have the market betting on a 25 basis point rate hike.

Australian shares were up 1.3% in early trade and the Aussie dollar, which has been bumpy but logged its largest monthly rise in three years in January, was firm at $0.6958.

Gold, silver, stocks and the dollar have all whipsawed since U.S. President Donald Trump's nomination of Kevin Warsh to lead the Federal Reserve sent metal prices tumbling.

Gold was up 3% in the Asia morning to $4,800 an ounce, a bounce of nearly 9% from Monday lows. Silver traded 5% higher to $83.34 an ounce.

Warsh is seen shrinking the Fed's balance sheet, pushing up bond yields, which is negative for precious metals that pay no income.

However, the dive in prices on Friday and on Monday went beyond fundamentals and was a wipeout for leveraged positions and sent tremors through global commodity and stock markets as traders sold other assets to bail out losing bets.

"(It was) a flushing out of leverage in the system which has built up," said Christopher Forbes, head of Asia and the Middle East at CMC Markets.

"The bigger question is really on the true pain point from the gold and silver unwind...I'm not sure everyone will have made it."

WALL STREET STEADIES

Overnight, U.S. factory activity grew for the first time in a year in January, PMI data showed, pushing up Treasury yields a little, though without changing the outlook for rate cuts.

Benchmark 10-year yields were steady at 4.275% in Tokyo, while two-year yields, which jumped four basis points in New York, held at 3.57%.

On Wall Street chipmakers and other AI companies carried the S&P 500 0.5% higher and Alphabet shares hit a record top ahead of earnings due later in the week. Disney shares tumbled 7.4%, as it warned of a decline in international visitors to its U.S. theme parks and a slump in earnings at its TV and film division.

On Tuesday, chipmaker AMD and server equipment company Super Micro Computer are due to report after market.

Currency markets were finding a level after last week's sharp spike lower in the dollar. The euro bought $1.18 in the Asia session, off highs hit above $1.20 late in January.

The yen traded at 155.54 per dollar and has retraced about half the gains it made on the greenback that followed talk of possible joint U.S.-Japan intervention to boost the yen.

Polls show Prime Minister Sanae Takaichi's Liberal Democratic Party heading for a landslide victory at the weekend's election -- putting pressure on bonds and the yen as it would hand a mandate to her agenda for fiscal loosening.

A U.S.-India trade deal announced by Trump overnight cuts tariffs in return for a halt on Indian purchases of Russian oil and is likely to boost the rupee. Benchmark Brent crude settled 6% lower to $66.30 a barrel on easing U.S.-Iran tensions.

(Reporting by Tom Westbrook; Editing by Sam Holmes)