Aug 13 (Reuters) - Stocks rose and oil prices dropped on Thursday, even as investors shifted their attention back to the Iran war after softer-than-expected U.S. data reinforced expectations that the Federal Reserve will keep rates unchanged next month.
Oil prices slipped 2% to $87.30, as signals of lower demand outweighed the ongoing stalemate in peace negotiations over Iran. Commercial crude oil inventories posted their largest weekly gain since January 2023, and the Organization of the Petroleum Exporting Countries lowered its world oil demand growth forecast for 2026.
Traders scaled back their bets on a September rate hike, pricing in a 65% probability of the Fed staying on hold next month versus 50% on Wednesday before the release of the latest economic data and inflation figures.
A raft of upbeat earnings from AI infrastructure firms boosted technology stocks on Wall Street and Asian equities overnight with the U.S. broader semiconductor index (.SOX), advancing about 2.5%, the biggest daily rise in almost a week, and the Nasdaq outperforming peers.
MSCI's main world stocks index (.MIWD00000PUS), rose 0.20%. Europe's STOXX 600 (.STOXX), was up 0.26%, with tech stocks (.SX8P), rising 0.36%.
Nasdaq futures edged 0.08% and S&P 500 futures increased 0.13%. The S&P index (.SPX), hit an all-time high last week.
"Earnings season (for AI infrastructure names) has been strong and shows no signs of slowdown in Capex," Mohit Kumar, an economist at Jefferies, said, before stating the bank remained with an overweight position in the AI sector.
"The background of high amounts of cash in the system and Fed not hiking (Jefferies view) should continue to support risky assets," he added.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), rose 1.08%, led by South Korean shares (.KS11), jumping 3.78%. Japan's Nikkei (.N225), gained 1.67% on chip-related stocks and a robust earnings outlook.
Attention now shifts to the producer prices data, due later in the day, for confirmation that inflation pressures are moderating.
Washington and Tehran traded accusations on Thursday over a deal to reopen the strategically vital Strait of Hormuz, with the United States saying Iran had failed to meet its obligations and Iran countering that Washington had not delivered on ending a blockade of Iranian ports.
CONCERNS ABOUT U.S. DEFICIT
The U.S. dollar edged higher to its strongest level in nearly two weeks on concerns about the stalemate in Iran. High energy prices are expected to weigh more heavily on the economies of the euro zone and Japan, both large energy importers, while the United States is seen as relatively insulated from oil shocks.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, was down 0.08% at 99.90 after hitting 100.08, its highest level since July 31.
The euro, which by contrast benefits from lower oil prices, was up 0.12% at $1.1537.
U.S. Treasury yields eased slightly, with analysts saying the U.S. federal budget deficit's rise to $432 billion is likely to add upward pressure on long-term borrowing costs.
“I would still be careful chasing rallies (in U.S. Treasuries), especially in the back end, where supply, fiscal concerns and oil-related term premium remain hard to dismiss,” Mizuho strategist Evelyne Gomez-Liechti said, recalling that PPI data is the next test, alongside jobless claims and the 30-year U.S. Treasury auction.
U.S. 30-year Treasury yields were not far from their highest level in almost 30 years, down 1 basis point at 5.24%. They hit 5.2811% on July 31, their highest since summer 2007.
Against the yen , the dollar softened 0.08% to 159.33. Expectations that the Bank of Japan would hike interest rates next month, earlier than previously expected, were reinforced by Japan's producer price index, which rose 7.2% in July from a year earlier.
Reporting by Stefano Rebaudo; Editing by Shri Navaratnam, Sharon Singleton and Andrew Heavens
