NEW YORK/MILAN, Aug 13 (Reuters) - Stocks rose on Thursday as investors pared back U.S. rate hike bets, while oil prices dropped as higher inventories and lower global demand forecasts offset geopolitical concerns.
U.S. producer price data, which was unchanged in July, reduced expectations for a Federal Reserve rate hike next month, helping tech stocks power the S&P 500 to an intraday record high.
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.
Gold prices pared losses and U.S. Treasury yields extended their decline after the producer price data.
MSCI's gauge of stocks across the globe (.MIWD00000PUS), rose 7.32 points, or 0.63%, to 1,161.85.
TECH BOOSTS WALL STREET
The Dow Jones Industrial Average (.DJI), rose 113.90 points, or 0.21%, to 53,884.17, the S&P 500 (.SPX), rose 55.76 points, or 0.72%, to 7,804.26 and the Nasdaq Composite (.IXIC), rose 235.69 points, or 0.89%, to 26,824.18.
"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.
In Europe, the STOXX 600 (.STOXX), index rose 0.12%, while the broad FTSEurofirst 300 index (.FTEU3), gained 3.09 points, or 0.12%.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MISX00000PUS), closed up 0.96% and emerging market stocks (.MSCIEF), were 0.92% higher at 1,697.36.
US-IRAN DEADLOCK
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.
Still, Brent crude futures fell to $86.72 per barrel, down 2.54% on the day, and U.S. crude dropped 2.7% to $81.02, on signs of lower demand.
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.
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.
CURRENCIES, BONDS
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.1% to 99.85, with the euro up 0.14% at $1.154.
The yield on benchmark U.S. 10-year notes fell 7.29 basis points to 4.619%, and the 30-year bond yield dropped 6 basis points to 5.187%.
Analysts said 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.
The Japanese yen strengthened 0.17% against the greenback to 159.16 per dollar.
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 Chris Prentice in New York and Stefano Rebaudo; Editing by Sharon Singleton, Andrew Heavens and Susan Fenton
