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Euro near 4-month high ahead of ECB meeting

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September rate cut signals awaited

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Gold holds near record highs

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh Graphic:

World

FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, July 18 (Reuters) - Stock markets pulled out of

tech-led tumble on Thursday, as attention turned to whether the

European Central Bank would signal September as its next likely

point to cut interest rates after sitting on its hands at its

latest meeting.

It was a busy day all round.

Wall Street was hoping for a Nasdaq reboot after its

worst day since December 2022. Japan's yen wilted after

scaling a six-week high, while both the bond markets and euro

were hearing from Christine Lagarde after the ECB left

its only-recently pruned rates

untouched

.

Given that its policymakers have not been pushing back

against market expectations, BNP Paribas economist Luca

Pennarola said that "barring any shocks" September was now their

preferred date for the next rate cut.

His colleague Mariana Monteiro said it would be important to

hear whether Thursday's decision - which was fully expected -

was unanimous given an emerging divergence over a potentially

spluttering economic recovery but also stubborn pockets of

inflation.

"We are not pre-committing to a particular rate path,"

Lagarde said in her opening remarks.

Back in the FX market, the U.S. dollar was still

loitering close to its weakest level in four months against a

basket of currencies.

Comments from Federal Reserve officials have bolstered the

case for September cut in the U.S. too. That in turn meant gold

was perched near its recent record highs.

Wall Street futures were going up. Europe's STOXX 600 was to

snap a three-session losing streak with carmaker stocks

driving the benchmark index with a 1.8% rise.

Tech was only fractionally higher though after a

4.4% slump on Wednesday - also its worst day since December 2022

- following a report that the U.S. was considering tighter curbs

on exports of advanced semiconductor technology to China.

MSCI's broadest index of Asia-Pacific shares outside Japan

has seen a sub-index of IT stocks

drop 2.5% overnight. Tech-heavy South Korean

shares slipped 1.5%, while Taiwan stocks fell

2%.

The yen's overnight strength and the sharp drop in chip

stocks took Japan's Nikkei down more than 2%, although

the yen came off in Europe after daily data showed little fresh

evidence of intervention from authorities.

"This volatility spike is now leading to some broader risk

reduction as investors worry about stretched positioning," said

Ben Bennett, Asia-Pacific investment strategist at Legal and

General Investment Management.

TAKE, TAKE, TAKE

Broader risk sentiment was also still jittery after

Republican presidential candidate Donald Trump said on Wednesday

Taiwan "did take about 100% of our chip business" and should pay

the U.S. for its defence as it does not give the country

anything.

China stocks had wavered as investors awaited policy news

from a key leadership gathering in Beijing. The Shanghai

Composite index made a late push to end up 0.55%

although the tech sector still finished down.

The dollar index, which measures the U.S. currency

versus six peers, was 0.1% higher at 103.78, not far from the

four-month low of 103.64 it touched on Wednesday.

Jobs data just out showed the number of Americans filing

new applications for unemployment benefits rose more than

expected last week, although there has been no material shift in

the labor market it suggested.

The data is typically noisy in July anyway because of

summer breaks and temporary factory closures.

The yen was last at 156, while the euro was

hovering at $1.0930 as ECB chief started to speak in Frankfurt.

Bank of Japan data suggested Tokyo may have bought nearly 6

trillion yen last week to lift the frail yen away from the

38-year lows it has been rooted to since the start of the month.

The yen has dropped 9.5% against the dollar this year as the

wide interest rate difference between the U.S. and Japan weigh,

creating a lucrative trading opportunity, in which traders

borrow the yen at low rates to invest in dollar-priced assets

for a higher return, known as carry trade.

Analysts, however, said last week's suspected moves by Tokyo

might lead to traders unwinding some of their positions.

"It feels like the tide is shifting a little here and it's

generating some discomfort for yen funded carry traders," said

James Athey fixed income portfolio manager at Marlborough

Investment Management.

In commodities, gold was 0.5% higher at $2,469 per

ounce just below the record high of $2,483.60 it touched on

Wednesday.

Oil prices were on the rise again, with Brent

futures 0.4% higher at $85.45 a barrel, while U.S. West Texas

Intermediate (WTI) crude gained 0.7% to $83.43.

(Editing by Arun Koyyur)