GLOBAL MARKETS-Investors pause equity selling as fears of immediate Iran-U.S. escalation abate

* MSCI Asia ex-Japan down 0.72%, Nikkei -1.57%
* European share markets expected to open lower Wednesday
* Iran launches missile attacks on Iraqi bases housing U.S.
forces
* U.S. President Trump to make statement Wednesday
* Crude futures, gold up amid fears of further escalation
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

(Updates throughout, changes byline, dateline)
By Sujata Rao
LONDON, Jan 8 (Reuters) - European shares fell on Wednesday
and U.S. equity futures pointed to weakness on Wall Street after
Iran's attack on U.S.-led forces in Iraq, but earlier sharp
market moves were starting to fade as fears abated that the raid
would lead to an immediate military escalation.
Hopes grew the United States would stop short of strong
retaliation after U.S. President Donald Trump tweeted "All is
well!", and "So far, so good!". Iran's Foreign Minister Mohammad Javad Zarif also tweeted
that the Iranians "do not seek escalation or war".
Futures for the S&P500, down almost 2% at one point, were
trading just 0.10% lower by 0830 GMT, while Asian equities
closed off their lows and Japan's safe-haven yen stabilised.
Oil remained around 1% higher while gold held at new
seven-year highs after the missile attack on the Ain Al-Asad air
base and another in Erbil in Iraq, hours after the funeral of an
Iranian commander who was killed by a U.S. drone strike last
week . A U.S. official said the United States was not aware of any
casualties from the strikes. Trump is expected to make a
statement later on Wednesday. "The live situation was optically quite dramatic but the
important thing to focus on is the no-human-casualty dimension
which gives ample space to de-escalate the situation," said
Salman Ahmed, chief investment strategist at Lombard Odier
Investment Managers.
"The Trump factor is the random factor but what's visible is
that no one wants war and that's what markets are focusing on."
A pan-European equity index opened 0.5% lower .STOXX
though it remains just 1.2% off record highs hit at the end of
2019, its losses limited by a half-percent gain in energy shares
.SXEP . MSCI's index of global equities pulled back 0.2%
.MIWD00000PUS .
Futures for all three U.S. indexes were lower but they had
clawed back most of their earlier falls ESc1 YMc1 NQc1 .
Asian losses were greater, with Chinese shares closing more
than 1% lower, Japan's Nikkei losing 1.6% and an MSCI ex-Japan
Asian benchmark falling 0.6%. .CSI300 .N225 .MIAPJ0000PUS
Some reckon markets are now in wait-and-see mode, with a
hawkish statement from Trump or more attacks by Iran the likely
driver of the next stage of the risk selloff.
"If you see U.S. treasuries rallying a bit this morning,
expect them to rally quite a bit further should there be a
forceful response from the United States, which I'd imagine
there would be...from a market perspective I think this one
could run and run," Rob Carnell, Asia-Pacific chief economist at
ING in Singapore.
The yield on benchmark 10-year U.S. Treasury notes
US10YT=RR stood at 1.7951, down from a U.S. close of 1.825% on
Tuesday, but well off session lows around 1.705%. German 10-year
yields were at minus 0.287% versus an earlier low of minus
0.299% DE10YT=RR
U.S. 10-year Treasury futures TYc1 had earlier peaked at
their highest level since November, and were last up 0.18%.
On currency markets, the attacks had sent the yen spiralling
to three-month highs beyond 107.7 per dollar but gave up all
those gains to trade flat at 108.4 JPY= . Another safe-haven
currency, the Swiss franc, also gave up knee-jerk gains
CHF=EBS .
"If the market was really worried that the end of the world
was nigh, dollar/yen would have collapsed, and that's clearly
not been the case," said Stuart Oakley, global head of flow FX
at Nomura in Singapore.
The euro EUR= was 0.2 weaker, buying $1.1137 and the
dollar index .DXY , which measures the greenback against six
major peers, was flat lower at 97.0.
The buying of gold and oil also eased as the trading session
wore on - global benchmark Brent crude futures LCOc1 which had
shot $70 per dollar to their highest since mid-September, were
last up 0.5% at $68.1 per barrel.
Gold which earlier brushed through $1,600 an ounce, eased to
$1,582. GOL/
Lombard Odier's Ahmed said he had not reduced equity
holdings overall but had increased exposure to energy stocks.
"We adopted a long oil hedge to portfolio and we are
maintaining that... oil may be one market that's not reflecting
geopolitical risks."

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Tensions in the Middle East https://www.reuters.com/live-events/tensions-in-the-middle-east-id2917592
Iran missile strikes jolt gold https://tmsnrt.rs/2sNtCJB
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