GLOBAL MARKETS-Equities sink in extended AI rout, bond yields dip, silver savaged

By Sinéad Carew and Marc Jones

NEW YORK/ LONDON, Feb 5 (Reuters) - MSCI's global equities gauge slumped more than 1% on Thursday as worries deepened about the enormous cost of the artificial intelligence boom, while U.S. Treasuries were in demand after weak labor market data and, in commodities, silver took another hammering.

Oil prices ended their session nearly 3% lower after the U.S. and Iran agreed to hold talks in Oman on Friday, easing concerns about Iranian crude supplies.

Treasury yields fell after data showed new applications for unemployment benefits rising more than expected last week. Yields extended losses after the Labor Department's Bureau of Labor Statistics' Job Openings and Labor Turnover Survey showed U.S. job openings dropping to the lowest level in more than five years in December, while the prior month's data was revised lower.

Recruitment firm Challenger, Gray & Christmas said layoffs announced by U.S. employers surged in January amid a loss of business contracts and an uncertain economic environment, marking the highest level for the month in 17 years.

Adding to the disappointing jobs data, Ameriprise Financial's chief market strategist Anthony Saglimbene said investors were worried about massive spending hikes by technology companies to support AI demand. And software companies have been hit hard by concerns about AI competition.

After the U.S. market close on Thursday Amazon.com's AMZN.O shares tumbled more than 10% after it announced a 2026 spending plan of $200 billion versus analyst expectations of $144.67 billion. The day before, Google parent Alphabet GOOGL.O unveiled a capex plan of up to $185 billion, or 55% above estimates.

While the stock market has drawn support from recent investor rotation into cyclical and value stocks, continued pressure on technology stocks is eating at investors' broader risk appetite, Saglimbene said.

"If big tech and AI lose more momentum, it's likely that broader averages like the S&P 500 will see more pressure. There's good rotation happening but not enough to hold up the broader averages the way it has so far this year," he said.

"Investors today are starting to turn more defensive in their positioning because the market is starting to lose momentum."

The Dow Jones Industrial Average .DJI fell 592.58 points, or 1.20%, to 48,908.72, the S&P 500 .SPX fell 84.32 points, or 1.23%, to 6,798.40 and the Nasdaq Composite .IXIC fell 363.99 points, or 1.59%, to 22,540.59.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 12.81 points, or 1.23%, to 1,027.24.

"You've had a trade in markets that's been one way with regards to tech and anything AI related and with precious metals. You're seeing a pretty significant unravelling of it within software and you're seeing precious metals come off and seeing bitcoin sell off," said Brian Levitt, chief global market strategist at Invesco. He said he was still bullish on risk assets in an economy that is likely to stay strong.

"We're just in a pocket right here, following a fairly significant advance," Levitt said.

Earlier the pan-European STOXX 600 .STOXX index finished down 1.05% as investors weighed mixed earnings reports.

BOE, ECB RATE DECISIONS

In currencies, the U.S. dollar hit a two-week high as investors looked for safety. The pound tumbled after a razor-thin Bank of England vote left UK rates unchanged and the central bank signalled a rate reduction ahead if an expected drop in inflation is sustained.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.26% to 97.94, with the euro EUR= down 0.21% at $1.1781.

Against the Japanese yen JPY=, the dollar strengthened 0.13% to 157.05.

The yen has fallen for four straight days ahead of a Japanese general election on Sunday, with polls pointing to a decisive victory for Prime Minister Sanae Takaichi. That would endorse her spending ambitions which have raised concerns about the nation's strained finances.

The European Central Bank left euro zone rates at 2% and offered no immediate clues about its next move, reinforcing bets of no changes for a while.

A prolonged selloff in bitcoin showed no sign of relenting. The cryptocurrency dropped below $70,000 for the first time since late 2024 and hit its lowest since October of that year. Bitcoin BTC= was last down 12.09% at $63,868.33, which would mark its biggest one-day percentage drop since November 2022.

In Treasuries, the yield on benchmark U.S. 10-year notes US10YT=RR fell 8.8 basis points to 4.19%, from 4.278% late on Wednesday, while the 30-year bond US30YT=RR yield fell 6.8 basis points to 4.8469%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, hit a four-week low. It was last down 9.8 basis points at 3.461%.

SILVER, OIL SLUMP AGAIN

In precious metals, silver and gold fell on Thursday as a stronger dollar and the stock market rout prompted investors to liquidate holdings. Both metals gained in the prior two sessions after plunging from record highs on Friday in their steepest losses in decades.

Spot silver XAG= fell 16.4% to $73.62 an ounce after earlier falling as low as $72.21, while spot gold XAU= fell 3.14% to $4,806.58 an ounce.

In energy markets, U.S. crude CLc1 settled down 2.84%, or $1.85, at $63.29 a barrel while Brent LCOc1 settled at $67.55 per barrel, down 2.75%, or $1.91, on the day.