Updates ahead of US market open

By Marc Jones

LONDON, 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 were mostly going sideways as both crude and bond yields dipped, but Wall Street futures EScv1 were pointing lower after a dive in AI chipmaker Broadcom's shares and a difficult day for other tech-heavy indexes.

South Korea's stock market .KS11 had fallen as much as 2.6% in Asia, while Japan's Nikkei 225 .N225, Hong Kong and Taiwan all ended between 1.4% and 1.7% lower following Wednesday's after-hours 13% plunge in Broadcom's AVGO.O stock. .N

Not only had the firm's second-quarter revenue 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, 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 LCOc1 dropped 3.5%, to back below $95 a barrel, after Lebanon and Israel agreed a ceasefire, contingent on a complete cessation of fire from the Iran-aligned Hezbollah militia.

It raised hopes for progress toward ending the wider U.S.-Israeli war with Iran, though there was still uncertainty about how and when that might be implemented.

U.S. President Donald Trump had said on Wednesday that there could be progress by the weekend but Bahrain said it intercepted three missiles and several drones, while Kuwait briefly suspended air traffic at its main airport after an attack there.

Iran’s foreign minister Abbas Araghchi said that no tangible progress had been made in talks with the U.S. and posted that "any hostile act will be met with an immediate, decisive response".

COORDINATED MOVES

The Broadcom disappointment was dragging down other top chipmakers Micron Technology MU.O, Advanced Micro Devices AMD.O, Marvell Technology MRVL.O and Qualcomm QCOM.O between 4% and 7.5% in premarket Wall Street trading. .N

It is likely to end the S&P 500's .SPX impressive nine-week run of unbroken weekly gains although with it now up more than 10% for the year already, there won't be too many worries among the bulls.

In the currency markets, the yen JPY= edged up to 159.8 per dollar, providing a little bit of breathing room from the 160 threshold currently viewed as the Bank of Japan's FX intervention trigger point.

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 =USD, which measures the greenback's strength against a basket of six other major currencies, was off 0.3% from the two-month high hit on Wednesday in the wake of better-than-expected U.S. PMI services sector data.

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.

Subsiding oil prices help nudge 10-year Treasury yields - the key driver of global borrowing costs - down to 4.45%, while Germany's Bund yield DE10YT=RR was trying to get back under 3% despite an expected ECB rate hike next week. GVD/EUR

The Aussie dollar AUD= and gold got modest lifts too after a rebound in resource exports helped swing Australia's trade balance back into the black.

Bitcoin BTC= fell 2.2% to below $64,000, having now lost almost 25% in recent weeks.