GLOBAL MARKETS-Oil trims gains but Middle East risks keep stocks on back foot

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Oil futures pull back, but risks to sentiment remain
* Stocks edge lower on risk-off trade
* Some investors waiting for Fed meeting

By Stanley White
TOKYO, Sept 17 (Reuters) - Oil futures shed some of their
massive gains on Tuesday as the United States flagged the
possible release of crude reserves, but the threat of military
action over the attacks on Saudi oil facilities kept prices
elevated and stocks under pressure.
While equity market losses have not been large, the shaky
investor confidence continues to support safe-haven assets, with
gold edging higher on Tuesday and Treasury prices rising.
Investors otherwise broadly remain on the sidelines ahead of
an expected rate cut from the U.S. Federal Reserve on Wednesday.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.1%. Japanese stocks .N225 slid
0.48%, while Australian shares .AXJO were down 0.18%.
"There is certainly a risk-off tone, but I'm surprised the
markets are not reacting more," said Tsutomu Soma, general
manager of fixed income business solutions at SBI Securities in
Tokyo.
"The U.S. and other countries have oil reserves, which helps
sentiment in a case like this. You also have a lot of positions
riding on the Fed meeting."
Brent crude, the international benchmark, LCOc1 fell 1.2%
to $68.18 per barrel in Asia on Tuesday. On Monday Brent surged
by 14.6% for its biggest one-day percentage gain since at least
1988.
U.S. West Texas Intermediate CLc1 futures were down 1.7%
to $61.86 per barrel in Asia following a 14.7% surge on Monday,
the biggest one-day gain since December 2008.
The drone attack over the weekend has cut the kingdom's oil
production in half, creating the biggest disruption to global
oil supplies in absolute terms since the overthrow of the
Iranian Shah in 1979, International Energy Agency data show.
U.S. President Donald Trump has authorised the release of
emergency crude stockpiles if needed, which could ease some
upward pressure on crude futures, but risks to the outlook
abound. Trump said on Monday it looked like Iran was behind the
attacks but stressed that he did not want to go to war, which
was a slightly less bellicose tone than his initial reaction.
Iran has rejected U.S. charges that it was behind the
attacks. Tension between the two countries were already running
high over Iran's ambitions for nuclear weapons. The strikes in
Saudi Arabia are likely to raise regional tensions even further.
In Asia on Tuesday, U.S. stock futures ESc1 rose 0.05%,
but sentiment remained fragile. On Wall Street, the S&P 500
ended 0.31% lower.
Spot gold XAU= traded a shade higher in Asia at $1,498.60
an ounce following a 0.7% increase on Monday.
The yield on benchmark 10-year Treasury notes US10YT=RR
fell slightly to 1.8327%
The dollar was little changed at 108.17 yen JPY=EBS . Some
traders said it would be difficult to take big positions in the
currency pair before the outcome of two important central bank
meetings this week.
The Federal Reserve is expected to cut interest rates at a
policy meeting ending on Wednesday, which could put pressure on
the Bank of Japan to ease policy at a meeting the following day.
Traders are also focused on the U.S.-Sino trade war.
Deputy-level talks between the United States and China are
scheduled to start in Washington on Thursday, paving the way for
high-level talks next month aimed at resolving a bitter trade
row that has dragged on for more than a year. Any sign of progress to put an end to the trade war between
the world's two-largest economies could help improve risk
sentiment, but negotiations have been fraught, making it
difficult to judge whether the two sides can narrow their
differences.

(Editing by Sam Holmes)