* AI leads stocks higher, European futures point to

strong opening

* Dollar stands tall on rate hike wagers, safe-haven

demand

* Oil above $100/barrel as Iran war impasse weighs

* Trump-Xi meeting likely to dominate investors thoughts

By Ankur Banerjee

SINGAPORE, May 14 (Reuters) - Stocks rose on Thursday,

powered by AI fervour as investors looked past the risk of

higher interest rates, while a high-stakes summit between U.S.

President Donald Trump and China's Xi Jinping provided few

surprises.

Xi told Trump that trade talks were making progress at the

start of a two-day summit but warned that disagreement over

Taiwan could send relations down a dangerous path.

Market reaction was muted as details from the summit were still

sparse.

European futures pointed to a strong open while

U.S. stock futures were up 0.13%.

China's blue-chip stocks eased about 0.8% after

hitting their highest level since late 2021 at the start of the

session, while the yuan rose to a three-year high

against the dollar.

Charu Chanana, chief investment strategist at Saxo, said

markets were looking for the absence of a new shock. "So far,

that seems to be enough."

"With expectations low and AI momentum still strong,

investors are treating vague diplomacy as a reason to move on

rather than a reason to de-risk."

The Trump-Xi talks are likely to also feature the Iran war,

which erupted at the end of February, amid an impasse in

negotiations to end the conflict that has sent energy prices

higher and left governments scrambling to roll out relief

measures for consumers.

Michael Strobaek, global chief investment officer at Lombard

Odier, said preserving the status quo may be the most the

Trump-Xi meeting can achieve.

"I think that, amid the uncertainties around the Middle East

ceasefire, that may be enough for now."

STOCKS FLY ON AI

The lack of negative surprises meant investors could focus

on taking tech-heavy stocks even higher.

Japan's Nikkei was perched at a new all-time peak

with data showing AI-linked demand partly helped lift earnings

for Japanese firms. Seoul's KOSPI gave up most of its

early gains to trade 0.17% higher.

SK Hynix, one of the AI darlings in Asia, is on

the verge of reaching a $1 trillion market cap, becoming the

second South Korean firm after Samsung to break into the

trillion-dollar club. SK Hynix stock is up over 200% this year.

That left MSCI's broadest index of Asia-Pacific shares

outside Japan up 0.2%, hovering near the

record-high hit last week.

Analysts, though, caution that elevated oil prices and the

impasse in negotiations to end the war in the Middle East could

bring inflationary worries back into view.

"Markets are trying to run two playbooks at once: AI and

earnings say buy growth, but geopolitics and energy prices are

quietly re-writing the inflation trajectory in the background,"

said Saxo's Chanana.

Brent crude futures were slightly higher at $105.89 a

barrel, while U.S. West Texas Intermediate futures fetched

$101.33 per barrel, well above pre-war levels.

DOLLAR GETS A LIFT FROM INFLATION DATA

In currencies, the U.S. dollar held on to its gains as investors

wagered the Federal Reserve's next rate move would be a hike

after hotter-than-anticipated inflation reports this week.

U.S. producer prices posted their biggest gain since early 2022,

following Tuesday's consumer price data that showed annual

inflation rose at its fastest pace in three years.

Higher inflation and stronger labour market have led some

traders to price in the prospect of a potential hike in the

first half of 2027, although most economists and analysts

continue to see a rate cut as the likely next move by the Fed.

The euro bought $1.1716, near its lowest in a week.

Sterling was at $1.3519as traders kept a wary eye on the

widening political crisis in Britain.

The yen fetched 157.93 per U.S. dollar, keeping traders

wary of fresh Tokyo intervention after recent sharp spikes that

sources say were driven by officials stepping in to prop up the

battered currency. The two-year U.S. Treasury yield

was at 3.9708%, down 1.1 basis points but near the 1-1/2-month

high it hit in the previous session. The benchmark 10-year yield

stood at 4.468%, having touched close to a one-year

high on Wednesday.