Chipmakers chip away at stocks, oil hovers at $85

European stocks and Wall Street futures edged lower on Thursday following more tech troubles in Asia, while benign U.S. inflation data helped keep the dollar and government bond yields under control and the Iran war propped up oil prices.

Stellar results from Taiwanese chip giant TSMC could not prevent another 6% tumble for South Korea's KOSPI, which had doubled in value this year until a near 20% slump this month.

The decline came as the country's central bank hiked rates to try and steady the won and its Financial Services Commission launched a crackdown on new listings of funds suspected of fuelling the recent market volatility.

Europe's STOXX 600 and S&P 500 and Nasdaq futures also moved lower. [.EU][.N]

The tech bulls were putting up something of a fight thanks to gains for ASML in Amsterdam, although that was more than offset in Europe by drops of 0.5% to 1.5% in other sectors from utilities to telecoms.

Oil prices were holding firm again, meanwhile, after more overnight U.S. strikes on Iran. Hostilities have been escalating in the Middle East in recent days, with Washington launching attacks on Iran, while Tehran hit U.S. bases in Kuwait and Jordan.

Brent crude futures were roughly 0.5% higher in London at just over $85 a barrel and up roughly 11% for the week so far. [O/R]

"It's hard, unfortunately, to take your eyes off the Iran war, Trump's tweets and the oil price," Marlborough fund manager James Athey said, given the potential implications for global interest rates.

"In equities, there is still incredible volatility," he added. "The market is still flailing a bit for want of a better word, on how to price the AI trade and the extent to which that is sustainable."

SpaceX shares also dropped below their initial public offering price for the first time on Wednesday, which Athey said had not helped global sentiment either.

STERLING SLIPS BACK

For Wall Street watchers, the dip in futures prices came after a run of recent gains on the back of strong bank earnings that have pushed the benchmark S&P 500 back towards its June record close.

GE Aerospace dipped 4.2% in premarket moves despite the jet-engine maker lifting its 2026 profit forecast. United Airlines fell 3.1% as the renewed surge in oil prices weighed on its profit outlooks, while traders were also set to get Netflix earnings after market close. [.N]

In currency markets, Britain's pound was off a two-month high it reached on Wednesday following reports that soon-to-be British Prime Minister Andy Burnham would likely name fiscal conservative Shabana Mahmood as his new chancellor of the exchequer.

Data released on Thursday underscored the challenge they will face. Britain's economy eked out only minimal growth of 0.1% in May, the figures showed, in line with the median forecast of a Reuters poll of economists.

BENIGN U.S. INFLATION

The other key boost this week has been surprisingly benign U.S. PPI and consumer inflation data that has seen traders cut pricing on a U.S. rate hike this month to just 10%, from as high as 43% earlier in the month.

The pullback in inflation may prove only temporary, however, with oil and gas prices climbing on the renewed Middle East hostilities.

For bond investors, 2-year Treasury yields edged up 2 basis points to 4.16%, after falling 14 bps over the past two days. 10-year yields inched up a bit more to 4.585%, having been down 7 bps over the past two days.

It has been a different story in Europe, however. Germany's 10-year bond yield, the benchmark for the euro zone, was up to 3.13% on Thursday, its highest point since May 20.

It has risen 10 bps so far this week and over 25 bps in July as traders fear the renewed climb in oil and gas prices will force the European Central Bank to raise interest rates more aggressively, while also weighing on longer-term economic growth.

Britain's 10-year gilt yield was up at 4.98% having briefly touched 5% again on Tuesday.

"The cooler (U.S.) PPI report fits with recent inflation data coming in below consensus, which should be welcomed by the Fed," BCA Research strategist Felix Vezina-Poirier said. "We are past peak hawkishness."

That view has pulled the dollar down, except against the beleaguered yen. The dollar index was steady at 100.52 in Europe, after falling 0.4% on Wednesday to the lowest point since June 18. The yen hovered at 162.16, not far from the 40-year low of 162.84, as speculators remain wary of Japanese intervention.

(Additional reporting by Stella Qiu in Sydney; Editing by Thomas Derpinghaus and Joe Bavier)