Global Stock Index Edges Down, Silver and Oil Extend Losses

Global Stock Index Declines as Silver and Oil Prices Continue to Fall

By Sinéad Carew and Amanda Cooper

Market Overview and Commodity Trends

NEW YORK/ LONDON, Feb 2 (Reuters) - MSCI's global equities gauge edged lower on Monday, with Wall Street providing a boost while the dollar rose and investors dealt with a deepening selloff in precious metals ahead of a week packed with corporate earnings, central bank meetings and major economic data.

Precious Metals Performance

Also on Monday, crude oil futures settled down more than 4% on hopes for a de-escalation of tensions between the U.S. and the OPEC member, while a stronger dollar and milder weather forecasts also weighed.

U.S. Equities Response

Trading in silver, which had hit a record high on Thursday, was choppy with the precious metal last down 5.56% at $79.92 an ounce after earlier falling as low as $71.33.

Currency and Interest Rate Outlook

With Friday's 27% rout, silver was headed for its biggest two-day loss since at least the 1980s.

Dealers said that pressure on a number of silver futures funds in China added to the rout late last week and it was exacerbated on Monday by CME Group raising margins on a number of futures contracts, including silver and gold. 

PRECIOUS METALS SPIRAL DOWN

Spot gold, which had also touched a record high on Thursday, was down 3.85% at $4,676.28 an ounce. These losses followed a slump of almost 10% for the safe-haven metal on Friday. 

"Gold and silver are on a rollercoaster ride and when you get to the top of the 'lift hill', gravity takes over and you are heading down," said SP Angel analyst John Meyer.

U.S. equities shook off early losses to close the session higher, snapping a three-session selloff in the S&P 500, with help from positive news on artificial intelligence funding.

The latest economic data showed that U.S. factory activity grew in January for the first time in a year, with new orders rebounding sharply, although U.S. President Donald Trump's import tariffs raised raw material prices and strained supply chains.

"The key thing that seemed to turn sentiment today is a pushback to focusing on fundamentals," said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis. 

"The latest AI news headlines and the economic data this morning are supportive of strong growth."

Schleif said investors will have "a whole lot of fundamentals to dig our teeth into" this week with earnings due from megacap companies including Alphabet and Amazon as well as chipmaker AMD.

DOW JONES, S&P 500, NASDAQ ALL GAIN

On Wall Street, the Dow Jones Industrial Average rose 515.19 points, or 1.05%, to 49,407.66, the S&P 500 rose 37.41 points, or 0.54%, to 6,976.44 and the Nasdaq Composite rose 130.29 points, or 0.56%, to 23,592.11. 

MSCI's gauge of stocks across the globe fell 0.49 points, or 0.05%, to 1,043.77. The pan-European STOXX 600 index closed up 1.03%, propelled by strong gains in financial and healthcare stocks, with about 30% of its constituents due to report earnings this week.

The European Central Bank and Bank of England convene on Thursday although neither is expected to make any changes to monetary policy. The Reserve Bank of Australia, which might even raise rates, also sets policy this week.

In currencies, the dollar strengthened broadly as precious metals sold off and investors assessed the outlook for U.S. interest rates after Trump nominated Kevin Warsh for Federal Reserve Chair last week.

Warsh, who served as a Fed governor from 2006 to 2011, has recently advocated for lower rates but he has a more hawkish reputation from his last stint at the central bank.

"There is a slow-motion flight to safety underway across the currency markets, driven by last week’s implosion in the precious metals complex," said Karl Schamotta, chief market strategist at Corpay in Toronto.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.37% to 97.59, with the euro down 0.47% at $1.1792.

Against the Japanese yen, the dollar strengthened 0.52% to 155.57.

Trump had said over the weekend that Iran was "seriously talking" with Washington and his remarks raised hopes the U.S. military may not strike the country.

Keeping pressure on oil prices, Iranian and U.S. officials told Reuters on Monday that the two countries will resume nuclear talks on Friday in Turkey. A regional diplomat said representatives from countries such as Saudi Arabia and Egypt would participate. 

U.S. crude settled down 4.71%, or $3.07, at $62.14 a barrel. Brent settled at $66.30 per barrel, down 4.36%, or $3.02.

In Treasuries, traders also focused on Warsh's Fed nomination as they estimated whether the former Fed Governor would revisit his more hawkish views or favor easier monetary policy, which Trump has been demanding from the U.S. central bank.

The yield on benchmark U.S. 10-year notes rose 4 basis points to 4.281%, from 4.241% late on Friday while the 30-year bond yield  rose 4.2 basis points to 4.9138%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 4.9 basis points to 3.576%, from 3.527% late on Friday.

In cryptocurrencies, bitcoin bitcoin gained 2.42% to $78,222.81. Ethereum rose 1.9% to $2,330.11.

(Reporting by Sinéad Carew, Anmol Choubey, Twesha Dikshit, Laura Matthews, Amanda Cooper, Wayne Cole; Editing by Emelia Sithole-Matarrise, Chizu Nomiyama, Mark Heinrich, Nick Zieminski and David Gregorio)