Stocks edge up as tech rebound offsets Middle East jitters

By Marc Jones

LONDON, July 9 (Reuters) - Global stocks edged higher while bond markets and currencies were largely steady on Thursday as investors balanced renewed tensions in the Middle East against continued strength in technology shares and resilient economic data.

Oil prices had initially dipped in Europe, but were forced back up as Iranian armed forces responded to a second night of U.S. strikes with fresh attacks on U.S. military infrastructure in neighbouring Qatar, Kuwait and Bahrain.

Brent crude futures rose to nearly $79 from around $77 earlier in the day, bolstering what has been a 9% leap over recent days.

Pressure was just starting to show in global borrowing costs too. Benchmark 10-year U.S. Treasury yields ticked up towards 4.58% having started the month around 4.40%, although Germany's Bund yields held steady at just over 3% in Europe.

In Asia, Japan's 10-year yields had hit 2.9%, the highest since 1996, while Australia's 10-year government bond yields scaled a one-month peak of 4.933%.

HSBC's Chief Multi-Asset Strategist Max Kettner said the bond markets remained highly sensitive to the Middle East tensions given the potential implications for inflation and global interest rates.

"In reality, the rates market is really following oil prices," he said. "That has been clear over the last few days."

TECH VOLATILITY

European shares moved tentatively higher, helped by a rebound in tech and AI stocks after a stumbling couple of weeks for the high-flying sector.

Wall Street futures still pointed to modest gains when its main markets reopen although Meta META.O fell 1.2% after Reuters reported the company was planning to start making its own artificial intelligence microchip from September.

Back in Europe the pan-European STOXX 600 index remained up almost half a percent with tech stocks up 1.8% as chipmaker Siltronic surged more than 16% following an analyst upgrade.

Global sentiment was also buoyed by a report that China could allow domestic AI firms limited access to AI leader Nvidia's H200 chips and reports that SK Hynix's $28 billion U.S. share listing was more than seven times oversubscribed.

The offering from the South Korean chipmaker, which will finance new factories and equipment to meet surging AI chip demand, is set to be the world's second-biggest share sale after SpaceX's record-breaking $85.7 billion IPO last month.

HSBC's Kettner said the 30-day "realised volatility" on South Korea's KOSPI index was 75% currently. In comparison, a 7- to 10- year U.S. Treasury exchange-traded fund traditionally has realised volatility of around 3%.

"Imagine if you are an institutional investor. Who can really buy in size an asset class with 75% realised volatility?" Kettner said. HSBC closed its "overweight" on emerging market stocks this week following the surge in key markets like Korea's.

MUTED CURRENCY MARKETS

Wall Street futures were 0.2% to 0.6% higher ahead of the resumption of trading there. [.N]

The day's early data showed the number of Americans filing claims for unemployment benefits fell last week, suggesting the labor market remained stable despite a slowdown in job growth in June.

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 215,000 for the week ended July 4, the Labor Department said on Thursday. Economists polled by Reuters had forecast 218,000 claims for the latest week.

Currency markets were rather muted, with the dollar barely budged, the yen stuck near a 40-year low and the euro, sterling and most other European currencies also little changed on the day. [/FRX]

Wednesday's June FOMC minutes, the first under new Federal Reserve Chair Kevin Warsh, had shown some growing concerns about inflation. Markets have increased the implied probability of a Fed hike this year to about 87%, according to CME FedWatch.

Gold edged up 0.8% to $4,109 an ounce as oil prices eased. [GOL/]

Tim Waterer, chief market analyst at KCM Trade, said traders were watching how the Middle East tensions develop from here.

"The possibility that the next move could be de-escalatory is what's currently preventing oil from pushing meaningfully higher," he said.

(Additional reporting by Stella Qiu in Sydney; editing by Philippa Fletcher and Ros Russell)