* Microsoft ( MSFT ), Amazon ( AMZN ) earnings reassure markets

* South Korean stocks up more than 15%; US, European futures

rise

* BOJ holds rates, yen reverses some intervention gains

(Updates with European trading)

By Niket Nishant and Rae Wee

July 31 (Reuters) - A late-week rally in global shares left

them on track for weekly gains after earnings from some U.S.

tech giants eased concerns about AI returns, while the yen

declined after the Bank of Japan kept interest rates unchanged

on Friday.

South Korea's battered KOSPI leapt 17.91%, mounting

a record comeback after heavy losses earlier this week. The

tech-heavy bourse, still about 30% off its all-time high, has

become emblematic of the sharp swings in investor sentiment

towards artificial intelligence-related stocks.

Jittery investors concerned that the AI rally may soon run

out of steam were reassured by Microsoft's ( MSFT ) earnings on

Wednesday, where it forecast generating cash throughout fiscal

2027.

Amazon ( AMZN ) followed a day later with its strongest

cloud growth in more than four years, satiating investors eager

for signs that the billions being poured into AI buildout are

bearing fruit.

"Investors are increasingly focused on capital efficiency,

financing and the long-term economics of hyperscalers' AI

spending rather than on near-term demand," said Saverio Papagno,

portfolio manager of North Square Growth Opportunities ETF.

While worries about competition from China and AI

hyperscalers' debt reliance swirl, selloffs could be a buying

opportunity for long-term investors as "the sector will resume

its leadership" once there is greater clarity, he said.

Futures tracking the tech-heavy Nasdaq 100 index

rose 0.83%, while S&P 500 and Dow futures rose

0.35% and 0.46%, respectively.

In Europe, the STOXX 600 index hit a record high

and was poised for its fourth consecutive month of gains.

The MSCI All Country World Price index

gained 0.87% and was on track to snap a two-week losing streak.

It will still end the month with losses of 0.33% should current

levels hold.

YEN RESUMES RETREAT

Investors are watching the yen, which resumed its

decline versus the dollar a day after Tokyo's intervention

brought some reprieve.

The dollar was up 0.56% at 160.38 yen, after a 2.42% slide

on Thursday, when Japan conducted yen-buying, dollar-selling

intervention, a market source said.

"I don't think intervention can or will be significantly

potent in reversing the trend in yen weakness. It will have to

come alongside the promise of more reinvestment in domestic

assets and quicker pace of hiking from the BOJ," said Edward

Acton, rates strategist at GMO.

The BOJ kept interest rates unchanged on Friday, but

signalled its resolve to push up borrowing costs. At a press

conference, Governor Kazuo Ueda said inflation risks were skewed

to the upside, and the central bank was prepared to speed up the

pace of rate hikes should monetary conditions be accommodative.

WAR KEEPS MARKETS ON EDGE

The Middle East conflict remains a major overhang for global

equities. Fresh strikes in the region have dashed hopes of an

imminent resolution, and diplomatic efforts to end the war have

proceeded in fits and starts.

Oil prices rose sharply in July, with Brent crude

headed for monthly gains for the first time since March.

"The shock absorbers in oil markets are dwindling fast, so a

failure to de-escalate would be materially costlier than

previous rounds of tension," wrote Teddy Bunzel, head of Lazard

Geopolitical Advisory at Lazard Asset Management.

Shipments through the crucial Strait of Hormuz remain

disrupted. The alternative route through the Bab el-Mandeb

Strait has also come under attack from the Iranian-backed

Houthis, further worsening the outlook.

The yield on the 30-year U.S. Treasury slipped 2.32 basis

points but held close to 19-year highs. Short-end yields eased,

steepening the curve as doubts grow over the Federal Reserve's

ability to anchor inflation expectations.

The Fed stood pat on rates earlier this week, but commentary

from the chair confused markets.