GLOBAL MARKETS: Stocks edge up as oil price goes down to less than $90 per barrel

Stocks edged higher on Thursday and oil stayed below $90 with investors turning their attention back to the conflict in Iran, after softer-than-expected U.S. data reinforced expectations that the Federal Reserve will keep rates unchanged next month.

Traders scaled back their bets on a September rate hike, pricing in a 65% probability of the Fed staying on hold next month versus 50% on Wednesday before the release of the latest economic data and inflation figures.

Oil prices slipped slightly to $88, as signals of lower demand outweighed the ongoing stalemate in peace negotiations over Iran. Commercial crude oil inventories posted their largest weekly gain since January 2023, and the Organization of the Petroleum Exporting Countries lowered its world oil demand growth forecast for 2026.

A raft of upbeat earnings from AI infrastructure firms boosted technology stocks on Wall Street on Wednesday with the broader semiconductor index .SOX advancing about 2.5%, the biggest daily rise in almost a week, and the Nasdaq outperforming peers.

MSCI's main world stocks index <.MIWD00000PUS> rose 0.10%. Europe's STOXX 600 .STOXX was up 0.11%, with tech stocks .SX8P rising 0.13%.

Nasdaq futures NQcv1 edged 0.03% and S&P 500 futures EScv1 increased 0.09%. The S&P 500 index <.SPX> edged 0.17% higher on Thursday at 7,445.72, after hitting 7,517.12 last week, a fresh record high.

"Earnings season (for AI infrastructure names) has been strong and shows no signs of slowdown in Capex," Mohit Kumar, an economist at Jefferies, said, before stating the bank remained with an overweight position in the AI sector.

"The background of high amounts of cash in the system and Fed not hiking (Jefferies view) should continue to support risky assets," he added.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.08%, led by South Korean shares .KS11 jumping 3.78%. Japan's Nikkei .N225 gained 1.67% on chip-related stocks and a robust earnings outlook.

Attention now shifts to the producer prices data, due later in the day, for confirmation that inflation pressures ​are moderating.

Washington and Tehran traded accusations on Thursday over a deal to reopen the strategically vital Strait of Hormuz, with the United States saying Iran had failed to meet its obligations and Iran countering that Washington had not delivered on ending a blockade of Iranian ports.

US DOLLAR INDEX AT 2-WEEK HIGH

The U.S. dollar edged higher to its strongest level in nearly two weeks on concerns about the stalemate in Iran. High energy prices are expected to weigh more heavily on the economies of the euro zone and Japan, both large energy importers, while the United States is seen as relatively insulated from oil shocks.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, was up 0.32% at 100.01 after hitting 100.08, its highest level since July 31.

However, against the yen JPY=, the dollar softened 0.03% to 159.38. Expectations that the Bank of Japan would hike interest rates next month, earlier than previously expected, were reinforced by Japan's producer price index, which rose 7.2% in July from a year earlier.

Bloomberg News reported Prime Minister Sanae Takaichi’s government is supportive of a near-term rate hike, with the next move likely either in September or October, citing people familiar with the matter. The dollar/yen pair barely reacted to the report.

In Sydney, Reserve Bank of Australia Assistant Governor Christopher Kent warned of the risk of further policy tightening at a Reuters NEXT Newsmaker event, saying inflation threats remain on the upside and "a lot of things" would need to go right to avert another rate hike.

The Australian dollar AUD= edged lower versus the greenback at $0.7050. Spot gold XAU= fell 0.74% to $4,375.88 an ounce.

-Reporting by Stefano Rebaudo and Satoshi Sugiyama; Editing by Shri Navaratnam and Sharon Singleton/Reuters