* Equity markets turn risk-off on AI blip, US-Iran

hostilities

* Oil edges back from recent peaks on Israel-Lebanon

ceasefire

* Yen rises from intervention zone; bitcoin hits

four-month low

(Updates after start of European trading)

By Marc Jones and Gregor Stuart Hunter

LONDON/SINGAPORE, June 4 (Reuters) - World stocks were

facing a second straight day of falls on Thursday as a glitch in

the AI rally and renewed fighting between the U.S. and Iran

dampened the mood, while oil prices eased after Israel and

Lebanon agreed a ceasefire.

Europe's bourses got off to a steady start as both crude and

bond yields dipped, but Wall Street futures were

pointing lower again and it had been a difficult session in Asia

due to weakness in tech stocks.

Korea's stock market had fallen as much as 2.6%,

while Japan's Nikkei 225, Hong Kong and Taiwan all ended

between 1.4% and 1.7% lower following a 13% plunge in chipmaker

Broadcom's ( AVGO ) shares in extended U.S. trading on

Wednesday.

Not only had the firm's second-quarter revenue numbers

missed expectations, but it left its long-range sales forecast

unchanged, disappointing traders, who viewed it as a rare sign

that a major AI chipmaker may be losing steam.

"You have had a bit of softness in equity markets following

Broadcom ( AVGO ), which suggests we need a bit of time to consolidate

what has been a very strong rally," said Marlborough fund

manager James Athey.

"It wasn't about hope and expectation, it raised the notion

that demand for chips is not just going to expand exponentially

into the future."

Brent crude prices were almost 1% lower at $97 a

barrel after Lebanon and Israel agreed a ceasefire, contingent

on a complete cessation of fire from the Iran-aligned Hezbollah

militia.

There were few obvious signs that a U.S.-Iran peace deal was

imminent, however, despite U.S. President Donald Trump saying

there could be progress by the weekend.

Bahrain said it had intercepted three missiles and several

drones, whilst Kuwait had to suspend air traffic briefly after

an attack.

Meanwhile, Iran's foreign minister Abbas Araghchi posted

that "no tangible progress" had been made in talks with the U.S.

and that "any hostile act will be met with an immediate,

decisive response".

COORDINATED MOVES

In the currency markets, the yen edged up to 159.9

per dollar, opening up a little bit of breathing room from the

key 160 threshold viewed as the Bank of Japan's trigger point

for FX intervention.

Chief Cabinet Secretary Minoru Kihara had said in Tokyo that

he expects the central bank to coordinate its moves with the

government after BOJ Governor Kazuo Ueda had given fresh hints

that an interest rate hike is on the cards this month.

The U.S. dollar index, which measures the greenback's

strength against a basket of six currencies, was broadly steady

near a two-month high at 99.45 after better-than-expected U.S.

ISM services sector PMI data on Wednesday.

Businesses preemptively placed orders and rebuilt

inventories, the figures had showed, in anticipation of

shortages and higher prices in the wake of the Iran war.

The Republican-led U.S. House of Representatives had

approved a war powers resolution on Wednesday to block Donald

Trump from continuing the conflict against Iran.

The measure is largely symbolic, however, as it must still

pass the Senate and would need a two-thirds majority in both

chambers to override an almost certain presidential veto.

Bond markets saw U.S. 10-year Treasury yields steady at

4.489%, while Germany's Bund yield was down 1.5

basis points at 3.02% ahead of an expected ECB rate hike next

week.

The Aussie dollar and gold got a brief lift too after

a rebound in resource exports helped swing Australia's trade

balance back into the black, although bitcoin fell 2.4%

to below $64,000, having now lost almost 25% in recent weeks.