Shares rally, retail surge drives silver to 8-year high

* Retail crowd focus on silver drives it to 8-year high

* Oil up 1%; dollar index, Bund, T-bill yields steady

* Excess Money? Link

By Herbert Lash

NEW YORK, Feb 1 (Reuters) - Global shares rebounded from last week's steep sell-off and silver prices surged on Monday as retail investors expanded their social media-fueled battle with Wall Street to drive the precious metal to an eight-year high.

A shift in the retail trading frenzy to silver drove up mining stocks on both sides of the Atlantic and left precious metals dealers scrambling for bars and coins to meet demand.

The iShares Silver Trust ETF SLV.N - the largest silver-backed ETF - jumped 7.1%. Data showed its holdings rose by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.

Mining behemoths BHP Group BHPB.L , Glencore Plc GLEN.L and Anglo American Plc AAL.L were the top six gainers on the FTSE 100 .FTSE in London, with the blue-chip index closing up 0.92%.

Miner Fresnillo FRES.L rose 8.95% to 1,076 to help lead the pan-European STOXX 600 index .STOXX end 1.24% higher.

U.S. small-cap miners Hecla Mining Co HL.N and Coeur Mining Inc CDE.N surged 28.3% and 23.1%, respectively.

Silver prices XAG= climbed to an eight-year peak of just over $30 an ounce before paring gains to trade up 6.3% at $28.70.

The trading frenzy drove huge gains in companies such as GameStop Corp GME.N last week, forcing hedge funds to cover bets it would decline. GameStop GME.N slid 30.77% to $225.00.

"Silver has knock-on effects compared to GameStop because it has links to miners," said Connor Campbell, a financial analyst at SpreadEx. "If you start pushing silver higher, that is going to have effects on other industries and other markets and that is clearly what happened."

Silver has gained 19% in price since Thursday after posts on Reddit led small investors to buy silver mining stocks and exchange-traded funds (ETF) backed by physical silver bars, in a GameStop-style squeeze.

Spot silver XAG= was up 6.97% to $28.88.

MSCI's benchmark for global equity markets .MIWD00000PUS rose 1.47% to 652.35.

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.76%, the S&P 500 .SPX gained 1.61% and the Nasdaq Composite .IXIC added 2.55%.

The U.S. dollar bounced to a two-week high on weakness in the euro, Swiss franc and Japanese yen on the view that the United States has an advantage in growing its economy and vaccinating its population against COVID-19.

The euro weakened after Germany reported that retail sales plunged by an unexpected 9.6% in December after tighter lockdowns last year to curb the spread of COVID-19 choked consumer spending in Europe's largest economy.

The dollar index =USD rose 0.461%, with the euro EUR= down 0.66% to $1.2056.

The Japanese yen JPY= weakened 0.25% versus the greenback at 104.94 per dollar.

Oil prices rose, buoyed by shrinking inventories and hopes of a swifter global economic recovery, though halting vaccine rollouts and renewed travel restrictions capped gains.

Brent crude futures LCOc1 settled up $1.31 at $56.35 a barrel. U.S. crude futures CLc1 rose $1.35 to settle at $53.55 a barrel.

Gold XAU followed silver higher, up 0.77% to $1,860.22 an ounce. U.S. gold futures GCv1 settled up 0.7% at $1,863.90.

Data overnight showed Chinese factory activity slowed in January as restrictions took a toll in some regions. In the euro zone, manufacturing growth remained resilient at the start of the year but the pace waned from December.

British data showed an even greater struggle, with manufacturers facing the twin headwinds of COVID-19 and Britain's exit from the European Union.

While the coronavirus vaccine rollout globally remains slow, with concern about whether they will work on new COVID strains, Europe was also bolstered by news that it would receive a further 9 million doses from AstraZeneca in the first quarter.

With riskier markets bouncing, Italian government bond yields fell 2-3 basis points across the curve IT10YT=RR .

German Bund yields, meanwhile, the benchmark for the euro zone, remained anchored around -0.51% on Monday, tracking U.S. Treasury yields. DE10YT=RR . The 10-year U.S. Treasury US10YT=RR note fell 2.8 basis points to yield 1.0672%.

Asia stock markets Link
Asia-Pacific valuations Link
Silver has outperformed gold in price terms and in ETF holdgings
in recent months Link
Excess money? Link

Reporting by Herbert Lash; Editing by Richard Chang

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