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Tech stocks struggle amid tariff worries

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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

By Marc Jones

LONDON, July 18 (Reuters) - Europe's traders were trying

to pull stock markets out of tech-led tumble on Thursday, as

attention turned to whether the European Central Bank would

signal September is its next likely point to cut interest rates.

It was already a busy day.

Japan's yen had scaled a six-week high amid speculation of

an sustained intervention, while the equity markets

were still shaky after chipmaker tariff worries

gave the Nasdaq its worst day since December 2022 on Wednesday.

Bond markets were broadly steady and at $1.0930 the euro

was holding near a four-month peak against an

unusually subdued dollar ahead of the ECB meeting where the

questions were all on when it cuts next.

Given that the bank's policymakers have not been pushing

back against current market expectations, BNP Paribas economist

Luca Pennarola said "barring any shocks" September was their

preferred date for the next rate cut.

His colleague Mariana Monteiro said it would be important to

hear whether Thursday's decision - in which rates are expected

to be kept unchanged - will be unanimous given an emerging

divergence over a potentially spluttering economic recovery but

also stubborn pockets of inflation.

Back in the FX market, the U.S. dollar was 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. That in turn meant gold

was perched near its recent record highs.

European stocks were battling to stay positive with the

STOXX 600 on track to snap a three-session losing streak. Oil

and gas boosted the benchmark index with a 1% rise, as

the sector tracked higher crude prices.

Tech was 0.75% lower again after a 4.4% slump on

Wednesday - also its worst day since December 2022 - following a

report that the United States 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 strength and the sharp drop in chip stocks took

Japan's Nikkei down more than 2%.

"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 also took a hit 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.

The yen hit a six-week high against the dollar at

155.375 in early trading after a sharp rise on Wednesday that

had traders suspecting Japanese authorities were once again in

the market supporting the currency. It was last at 156.

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.

(Additional reporting by Ankur Banerjee in Singapore; Editing

by Arun Koyyur)