Global stock index dips with tech slump while dollar rises, oil rallies

NEW YORK/LONDON, February 5 ------ MSCI's global equities gauge lost ground with technology stocks leading losses on Wall Street, while the dollar rose against Japan's yen and silver outperformed gold following their recent plunge.

Oil prices rose sharply for a second consecutive day as the U.S. and Iran appeared to disagree on some elements of their plan for nuclear talks expected to take place on Friday. Crude prices had already spiked on Tuesday after the U.S. shot down an Iranian drone and armed boats approached a U.S.-flagged vessel in a key waterway.

U.S. Treasury yields were a mixed bag as investors assessed economic data. Earlier on Wednesday, ADP's national employment report showed slower-than-expected growth in January. The Institute for Supply Management said the U.S. services sector held steady in January, but businesses paid more for inputs, suggesting that services inflation could pick up after a slowing trend in recent months.

After the data, traders were still betting that the Federal Reserve's next rate cut would not come before June, according to CME Group's FedWatch tool. "The data this morning are not too hot, not too cold, and it doesn't really change the outlook as it relates to the Fed or the direction of the economy," said Emily Roland, co-chief investment strategist at Manulife John Hancock Investments. She pointed to a healthy "broadening of participation" in the stock market, which often depends on technology stocks for support.

Value stocks were outperforming growth stocks on Wall Street, where market action has been dominated in recent days by a selloff in global providers of data analytics, professional services, and software following Anthropic's launch of plug-ins for its Claude Cowork agent on Friday. That raised worries about AI-fuelled disruption to those industries.

Losses in the U.S. software and services index <.SPLRCIS> slowed to a 0.4 per cent decline on Wednesday after a drop of more than 12 per cent over the last five days. "A week ago, the markets had a clear vision of what the year was going to look like. Since then, so much of that has been called into question," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas. He cited concerns about AI disruption as well as the nomination last Friday by U.S. President Donald Trump of Kevin Warsh as his less-dovish-than-expected pick to lead the Federal Reserve.

"In some regards, the stock market was a bug in search of a windshield. Something was going to knock it down from the euphoric perspective. Warsh was a fine nomination, but that was part of the windshield. Agentic AI was another big part of it," said Phipps, pointing to a "significant shift from growth stocks to values, from large cap to small and mid caps."

The S&P 500 value index finished up 0.9 per cent while the growth index ended down 1.8 per cent. The Dow Jones Industrial Average rose 260.31 points, or 0.53 per cent, to 49,501.30, the S&P 500 fell 35.09 points, or 0.51 per cent, to 6,882.72, and the Nasdaq Composite fell 350.61 points, or 1.51 per cent, to 22,904.58. MSCI's gauge of stocks across the globe fell 4.21 points, or 0.40 per cent, to 1,039.77.

EUROPEAN EQUITIES AT RECORD HIGHS

Earlier, the pan-European STOXX 600 index closed up 0.03 per cent, barely managing its third record closing high in a row as strength in telecom and consumer stocks was countered by weakness in software companies and a selloff in healthcare company Novo Nordisk after a disappointing outlook.

In commodities, gold prices were close to flat while silver gained ground, with both below their session highs, as the dollar firmed and attention remained focused on geopolitical developments. Both precious metals had rallied on Tuesday after a vicious two-day meltdown triggered by Warsh's nomination, as the former Fed governor is expected to look to shrink the Fed's balance sheet. That would put pressure on non-yielding precious metals. Spot gold rose 0.11 per cent to $4,943.79 an ounce while spot silver rose 2.58 per cent to $87.29 an ounce.

In currencies, the dollar rose against the yen, pushing the Japanese currency towards its fourth consecutive daily decline ahead of elections expected to boost Prime Minister Sanae Takaichi's fiscal and defense-spending ambitions. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.26 per cent to 97.66, with the euro down 0.13 per cent at $1.1803. Against the Japanese yen, the dollar strengthened 0.76 per cent to 156.91.

In cryptocurrencies, bitcoin fell 3.64 per cent to $73,374.92, on track for its sixth decline out of the last seven sessions. In the government bond market, traders were assessing the data from private providers while they waited for delayed economic releases from the government and continued to evaluate the impact that Warsh might have on monetary policy.

The yield on benchmark U.S. 10-year notes rose 0.3 basis points to 4.276 per cent, from 4.273 per cent late on Tuesday, while the 30-year bond yield rose 1 basis point to 4.9159 per cent. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.5 basis points to 3.557 per cent, from 3.572 per cent late on Tuesday.

In energy markets, U.S. crude oil futures settled up nearly $2 as traders watched the to-and-fro between the U.S. and Iran. U.S. Secretary of State Marco Rubio said that meaningful talks between the United States and Iran will have to include Tehran's missile arsenal and other issues, while Tehran said it would only discuss its nuclear program, not its missiles. U.S. crude settled up 3.05 per cent, or $1.93, at $65.14 a barrel, and Brent rose to $69.46 per barrel, up 3.16 per cent, or $2.13 on the day.

Source: channelnewsasia.com