(Adds quote in paragraph 4, updates prices throughout)

* Yen pushes away from 40-year low after joint intervention

* Trump calls joint currency operation a sign of friendship

* Oil prices drop after Trump says Iran talks to happen on

Monday

By Nell Mackenzie and Ankur Banerjee

LONDON/SINGAPORE, Aug 3 (Reuters) - Oil prices fell sharply

while European stock markets jumped on Monday as hopes of a

peace deal in the Middle East grew, while the yen firmed to a

three-month high after the U.S. and Japan confirmed joint

intervention to support the weak currency.

Brent crude futures sank $4.50, more than 5%, to $83.40

a barrel after U.S. President Donald Trump said talks with Iran

will happen on Monday. He had earlier called off an attack on

Iran to pursue a deal to reopen the Strait of Hormuz.

European shares ticked up 0.4% Monday to start

August on a firm note. The German DAX notched an

intra-day record and was last up 1.3%.

"For equity markets, the fundamental picture remains

encouraging," said Bruno Schneller, managing partner at

multi-family office Erlen Capital Management.

"Earnings have generally held up well, and companies with

strong pricing power and resilient business models continue to

outperform."

S&P 500 futures rose 0.5% while Nasdaq futures

gained 0.6%.

Over half of the S&P 500 component companies have reported

earnings so far, with 86% of firms beating earnings

expectations, research on Monday from Florian Ielpo, head of

macro at Lombard Odier Investment Managers, noted.

Asian stocks struggled as the new month began after a

turbulent July marked by wild swings as investors fretted over

massive capital spending on AI and whether it will provide

returns quickly enough.

Japan's Nikkei dropped 1%, while South Korea's KOSPI

slid more than 5%. This weighed on the MSCI's broadest

index of world shares leaving the flat.

YEN BEARS COWER AFTER JOINT INTERVENTION

The Japanese yen strengthened over 0.5% to 156.70 per

U.S. dollar after a sudden move earlier in the day to its

strongest since early May of 155.2, putting traders on alert for

another bout of intervention.

Japan and the U.S. conducted coordinated yen-buying

intervention and will not hesitate to take further action,

Japan's finance ministry said on Monday, confirming a rare

bilateral action to halt the yen's slide to 40-year lows.

U.S. Treasury Secretary Scott Bessent also said the United

States would consider increasing in coming months the size of

the Federal Reserve's repurchase facility providing temporary

dollar liquidity, calling the tool an "important backstop".

"Bessent's comments arguably carry more weight than the

intervention itself," said Matt Simpson, senior market analyst

at StoneX. "It feels like a safe bet that the Japanese yen has

troughed for the year. The words 'joint intervention' carry a

lot of weight in these markets and is a term rarely used."

Trump said on Sunday the United States was helping Japan prop up

the yen as a sign of friendship and to help the world economy.

Tokyo's solo intervention conducted between late April and

early May caused only a brief yen rebound, while a rate hike in

June by the Bank of Japan provided little boost, underscoring

the challenge policymakers face of rising oil prices and a wide

interest-rate differential against other major economies.

The yen had been rooted near 40-year lows of 163.99 per U.S.

dollar in recent weeks before the latest interventions, with net

short positions on the yen of roughly $12.5 billion, the highest

in two years, data from a U.S. regulator showed.

Over the near term, 155 remains the level to watch, noted

Masahiko Loo, senior fixed income strategist at State Street

Investment Management.

The action and comments from Bessent repeating his calls for

further interest-rate hikes by the BOJ have put monetary policy

in focus.

Elsewhere, U.S. Treasury yields retreated as oil prices

fell.

The yield on the 30-year bond fell 4.5 basis

points to around 5.23%, easing away from a 19-year high it

touched last week.

It jumped around 37 basis points in July as investors

grappled with confusion around the Iran war and the policy

outlook for the Federal Reserve.