By Sophie Kiderlin and Rae Wee
LONDON, Jan 16 (Reuters) - Global stocks hovered near record peaks on Friday, as international tensions simmered and the dollar held near a six-week high as traders trimmed bets on Federal Reserve interest rate cuts.
Safe-haven gold fell, while oil prices rebounded from an earlier retreat after U.S. President Donald Trump adopted a wait-and-see attitude towards Iran, having earlier threatened intervention.
International politics has been the major focus for markets since
the start of year following Trump's action in Venezuela and threats to take over Greenland.
"Although it appears that we’ve sort of dialled down the probability of U.S. intervention in the Middle East for the time being, I don’t think we can entirely rule that out,” Michael Brown, senior research strategist at Pepperstone, said.
US PUBLIC HOLIDAY CURBS MARKET ACTIVITY
Market participants may lack conviction ahead of the Martin Luther King Jr. Day U.S. holiday on Monday, Brown said.
"I wouldn’t be entirely confident if I was running a book to be long-risk or short-crude into a three-day weekend with this amount of Middle East tension going on," he said.
The pan-European Stoxx 600 index was flat, after notching a record high on Thursday.
France’s CAC 40 was 0.4% lower, underperforming regional peers on political uncertainty.
The French government on Friday postponed talks about its 2026 budget as lawmakers failed to reach a compromise.
U.S. stock futures pointed to a firm start on Wall Street, where an earnings-packed week will end with State Street results.
In Asia, tech-heavy indexes in Taiwan .TWII and South Korea .KS11 notched all-time peaks as stellar results from Taiwanese chipmaker TSMC 2330.TW revived the AI trade.
The U.S. and Taiwan clinched a trade deal on Thursday that cuts tariffs on many of the semiconductor powerhouse's exports, directs investments towards the U.S. technology industry and risks infuriating China.
"I guess with the TSMC report yesterday being pretty solid and sounding optimistic, it certainly provided a much-needed shot in the arm for those AI names which have been struggling on Wall Street in recent months," said Tony Sycamore, a market analyst at IG.
TRADERS ARE ON YEN INTERVENTION WATCH
The yen grabbed the spotlight in the currency markets after Japanese Finance Minister Satsuki Katayama said on Friday Tokyo would not rule out any options to counter excessive foreign exchange volatility, including coordinated intervention with the United States.
Her comments lifted the yen JPY= slightly. The currency extended gains after a Reuters report that some Bank of Japan policymakers see scope to raise interest rates sooner than markets expect, with April a distinct possibility.
The dollar was last down 0.3% at 158 yen.
The yen has been sold off on the prospect of a snap election in Japan as early as next month, which investors bet could lead to expanded fiscal stimulus from Prime Minister Sanae Takaichi.
The dollar hovered near a six-week high after U.S. economic releases this week including data that showed the number of Americans filing new applications for unemployment benefits unexpectedly fell last week.
Against a basket of currencies, the dollar =USD stood at 99.28, close to Thursday's peak of 99.493, its highest since early December. FRX/
Markets have priced in a 20% chance of Fed rate cut in March, down from roughly 50% a month ago.
In oil markets, prices rose slightly as supply risks remained in focus despite the receding likelihood of a U.S. military strike against Iran.
Brent crude and U.S. West Texas Intermediate both traded just over 1% higher.
Spot gold XAU= was down 0.12% at around $4,609 an ounce. GOL/
(Reporting by Sophie Kiderlin in London and Rae Wee in Singapore; Editing by Dhara Ranasinghe and)
