Trading Day: Solid Data Over Hard Assets

Wall Street Reacts to Precious Metals Selloff Amid Strong Economic Data

Market Overview and Key Developments

By Jamie McGeever

Impact of Precious Metals Prices

ORLANDO, Florida, Feb 2 (Reuters) - Wall Street shrugged off last week's historic selloff in precious metals, which continued on Monday, and the dollar rose again as investors took their cue from strong U.S. and global manufacturing data, earnings, and an apparent detente between the U.S. and Iran.

U.S. Manufacturing Performance

More on that below. In my column today I look at how the naming of Kevin Warsh as U.S. President Donald Trump's pick to be new Fed Chair sparked Friday's historic collapse in precious metals prices. But the 'debasement' trade is far from over.

Trade Agreements and Their Effects

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.

1. Fed chair nominee Warsh may want smaller Fed holdings,but that's not easy to do 2. How soon before Trump dubs Kevin Warsh 'clueless'? -Mike Dolan 3. Slump in commodities rattles global markets 4. US cuts tariffs on India to 18%, India agrees to endRussian oil purchases 5. BOJ debated risk of being 'behind the curve' oninflation, January summary shows

Today's Key Market Moves

* STOCKS: Wall Street in the green, new all-time highs forUK and European benchmark indices. Asia in the red - South Koreaand Indonesia -5%. * SECTORS/SHARES: U.S. industrials, financials, consumerstaples up 1% or more. Energy -2%, utilities -1.5%, consumerdiscretionaries -1%. * FX: Dollar +0.7%, rises most vs Norwegian crown (oilprice) and Swissie (safe-haven premium reduced). Bitcoin +3%. * BONDS: Treasury yields rise around 4 bps across thecurve. 2s/10s curve briefly hits steepest since April 9 lastyear. * COMMODITIES/METALS: Gold -4%, silver -6%. Copper -1.5%.Oil -4.5%

Today's Talking Points

* Managing the precious metals spillover

The slump in precious metals prices continued on Monday, extending Friday's historic slide that saw silver and platinum have their worst days ever, and gold have its biggest fall since 1983. Gold fell another 4%, silver another 7%.

But this leg of the selloff appears more contained - Asian stocks crumbled but Europe and the U.S. shrugged it off. Managing risk exposure and protecting wider portfolios is key for fund managers now - 10-day realized volatility in silver hit 186% on Friday, according to Pepperstone's Chris Weston.

* Everybody's talking about ISM

U.S. manufacturing has gotten off to a strong start this year, with the ISM manufacturing PMI jumping to 52.6 in January. Although parts of the report were downbeat, it marked the strongest growth in nearly four years, a surprise to all 56 analysts in a Reuters poll who predicted another month of contraction.

It fits the wider narrative of solid U.S. growth, with the Atlanta Fed's GDPNow model for Q1 running at an annualized 4.2%. Even if underlying growth is a bit slower, it begs the question - with inflation comfortably above target - why is the Fed still expected to cut rates this year?

* Anything EU can do...

The U.S. and India struck a trade deal on Monday, which will see tariffs on U.S.-bound goods cut to 18%, and duties on India-bound shipments eliminated, according to U.S. President Donald Trump. India will also buy $500 billion of U.S. energy, tech, agricultural, and other products, Trump said.

This follows the comprehensive EU-India trade agreement struck last week after two decades of talks. Treasury Secretary Scott Bessent expressed disappointment in that deal, but it may have focused minds in Washington to get this one wrapped up quicker.

What could move markets tomorrow?

* Australia interest rate decision * South Korea inflation (January) * France inflation (January) * U.S. 'JOLTS' job openings (December) * U.S. Treasury auctions 30-year TIPS * U.S. earnings including AMD, Merck, Pepsi, Amgen andPfizer * U.S. Richmond Fed President Thomas Barkin speaks

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Jamie McGeever;)