MILAN/SYDNEY - World shares started the third quarter cautiously on Wednesday ahead of key US jobs data, as uncertainty over US-Iran negotiations weighed and traders watched for possible Japanese intervention after the yen hit fresh 40-year lows.
The MSCI World Price Index slipped 0.1 percent in early European trade after posting its strongest quarter in around six years, rising 13 percent on rallying chipmakers and tech stocks.
Bond markets were under pressure after US Treasury yields spiked overnight ahead of crucial jobs figures on Thursday.
All eyes will be on Federal Reserve Chair Kevin Warsh when he appears at a European Central Bank conference later in the session for any guidance on the need for a tightening.
Warsh has long been against the Fed providing forward guidance and may keep his policy cards close to his chest.
Futures imply a 33 percent chance of a Fed rate hike at its meeting later this month, while the probability of a September move is priced at 67 percent to 88 percent.
Europe's region-wide STOXX 600 index was down 0.2 percent at 0750 GMT, steadying after a 10 percent quarterly rise that marked its strongest performance since late 2020.
Falling oil prices after the Iran ceasefire have buoyed European stocks in recent weeks, though investors doubt this signals a move away from tech-driven US and Asian markets.
"The second quarter GDP data isn't going to be great. But clearly prospects of the Strait of Hormuz (opening) and lower oil prices is a major positive factor for Europe," said Kevin Thozet, member of the investment committee at Carmignac.
"Europe equities have also been a funder of AI trades, so any weakness there is expected to be a relative tailwind too."
Japan's Nikkei gained 0.6 percent after surging 37 percent last quarter, with strong tech demand lifting sentiment among big manufacturers to an eight-year high and factory activity to its strongest quarter since 2014.
South Korea's main index fell 2 percent, following a 68 percent quarterly rally driven by AI-fuelled chip demand. The semiconductor boom helped propel June exports to a record $100 billion, with the fastest growth in nearly 50 years.
S&P 500 and Nasdaq futures fell 0.4-0.5 percent.
A lot resting on earnings
A pause in markets was understandable after Wall Street posted its strongest quarter since 2020, driven by an 88 percent surge in the Philadelphia Semiconductor Index.
"The historical record certainly favours the bulls," said Pepperstone's Chris Weston, noting Nasdaq futures have recorded only one negative July since 2008.
With earnings season starting in mid-July, investors are banking on strong tech results to justify lofty valuations and continued inflows into the sector.
Goldman Sachs noted the consensus is for earnings per share to grow 22 percent from a year earlier, with AI infrastructure stocks accounting for nearly 60 percent of that increase.
Yet higher Treasury yields, with the 10-year last at 4.46 percent, up 4.3 basis points, and the risk of further policy tightening could challenge equities.
The rise in yields helped lift the dollar to as high as 162.84 yen, a four-decade high.
The climb has drawn the usual threats of intervention from Tokyo, though the authorities seem reluctant to act, having spent almost 12 trillion yen ($74 billion) through April and May to little lasting effect.
The euro was down 0.2 percent at $1.1398 ahead of euro zone inflation data expected to show further cooling, reinforcing expectations the European Central Bank is nearing the end of its tightening cycle. Germany's 10-year bond yield, the benchmark for the bloc, rose 2 bps to 2.934 percent.
Brent crude edged up 0.1 percent to $73.02 a barrel, far below its May peak, while gold fell 0.9 percent to $3,970 an ounce after a difficult quarter.
