(Updates throughout after European market open)

* STOXX 600 briefly touches record high

* Oil below $80 a barrel as traders wait for U.S.-Iran news

* U.S. payrolls data due later in session

By Elizabeth Howcroft

PARIS, Aug 6 (Reuters) - Investor sentiment rebounded on

Thursday, as optimism about company earnings drove stock markets

to new highs and traders interpreted a proposed deal between

Iran and Oman as progress towards ending the U.S.-Iran conflict.

Stock markets faltered on Wall Street overnight and during Asian

trading hours, as investors turned cautious about AI spending,

and some earnings - including chipmakers Sandisk and Advanced

Micro Devices and data storage company Western Digital - failed

to meet investors' lofty expectations.

But the rally resumed as European markets opened, with the

pan-Europen STOXX 600 touching an all-time high, driven by media

and telecoms stocks. It was last up 0.4% on the day at 0912 GMT

, while London's FTSE 100 was up 0.3%, France's

CAC 40 was up 0.8% and Germany's DAX was up

0.1%.

Hani Redha, multi-asset portfolio manager at MetLife, said the

overnight losses were a natural correction to a rally that was

set to continue. Strong earnings and renewed enthusiasm for

AI-related tech stocks have pushed Wall Street to record highs

in recent sessions.

"This is just part of an overall hangover from a tremendous

party we've had in the market over the last few trading

sessions," he said.

"We remain pretty constructive... I don't expect the pace of

returns that we saw over the last few weeks, but we should be

still in a market environment which is conducive for risk

assets, equities in particular."

PROPOSED IRAN-OMAN DEAL

Oil prices fell below $80 a barrel after Reuters reported a

proposed deal between Iran and Oman to help end the U.S.-Iran

conflict, which could give Tehran control over ships entering

the Gulf through the Strait of Hormuz. The U.S. did not comment

on the proposal, which would be one of the biggest concessions

to Iran yet.

Still, traders remained cautious, and Brent crude futures were

up 0.3% on the day at $79.70 a barrel while U.S. West

Texas Intermediate futures were up 0.2% at $75.37.

MetLife's Redha said that although the U.S.-Iran conflict

has been one of the main factors influencing markets this year,

along with AI spending, the market was becoming less sensitive

to it.

"Overall, we've been less concerned, I'd say, about what

look like negative developments from that region. It is a

headwind when oil prices do spike, but we don't think that

they're going to derail the cycle," he said.

MARKETS WAIT FOR PAYROLLS DATA

Euro zone government bond yields were steady, with the benchmark

10-year German yield up by less than one basis point, at 3.1118%

. Nearly €13 billion ($15.00 billion) of French

government bonds are set to hit the market later in the session.

Currency markets were also calm. The euro was down by less than

0.1% at $1.1540, while the U.S. dollar index was up 0.1%

on the day at 99.767.

The Japanese yen was at 157.85 yen per dollar, having declined

slightly over the last two sessions and given back some of the

gains it reached after the U.S. and Japanese governments

intervened in the market on Friday.

Investors await U.S. payroll data, due later in the session,

to give an indication of the Federal Reserve's plan for interest

rates.

Federal Reserve Bank of San Francisco President Mary Daly - who

is not a voting member of the Federal Open Market Committee -

said on Wednesday she was "completely supportive" of the

decision last week to hold interest rates steady as the central

bank gathers more data about how it should respond to inflation

that is well above its 2% target.

($1 = 0.8664 euros)