GLOBAL MARKETS-Oil prices slip on Saudi pledge, financial markets look to Fed

* Oil stabilise as Saudi says has restored supply
* But geopolitical tensions still support crude
* Investors expect Fed to cut rates by 25 basis points on
Wed
* European shares tread water, luxury under pressure
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates with latest data)
By Tom Arnold
LONDON, Sept 18 (Reuters) - Oil prices cooled on Wednesday
as Saudi Arabia's pledge to quickly restore production eased
supply worries, while caution ahead of an expected U.S. interest
rate cut kept wider financial markets in tight ranges.
European stocks were largely subdued, with luxury stocks one
of the few sectors seeing activity. Swiss luxury goods group
Richemont CFR.S fell more than 5%, weighing on the
pan-European STOXX 600 index .STOXX , while Swatch UHR.S
declined 3.3% after a bearish note by UBS.
The pan-European STOXX 600 index .STOXX edged 0.5% higher.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 47 countries, edged down 0.02%.
Wall Street futures ESc1 pointed to a softer opening.
Brent crude LCOc1 futures dipped 0.5% to $64.23 a barrel,
having conceded a chunk of their gains made after the weekend
attack on Saudi Arabian oil facilities.
U.S. West Texas Intermediate (WTI) crude CLc1 lost 0.8% to
$58.86 per barrel.
Saudi Energy Minister Prince Abdulaziz bin Salman on Tuesday
sought to reassure markets, saying the kingdom would restore its
lost oil production by month-end having recovered supplies to
customers to the levels they were prior to the weekend's
attacks. The comments prompted oil prices to tumble 6% on
Tuesday. "I would think a spike in oil prices will likely prove to be
short-term given that the global economy isn't doing too well,"
said Akira Takei, bond fund manager at Asset Management One.
Still, heightened geopolitical tensions underpinned oil as well
as some safe-haven assets such as U.S. bonds.
A U.S. official said on Tuesday the United States believes
the attacks originated in southwestern Iran, an assessment that
could heighten the rivalry between Tehran and Riyadh. Iran has
denied involvement in the strikes. Adding to uncertainties in the Middle East were exit polls
from Israel's election, which showed the race too close to call
suggesting Prime Minister Benjamin Netanyahu's fight for
political survival could drag on. Spot gold XAU= was steady at $1,501.34 per ounce.
In a subdued session ahead of the Federal Reserve meeting
later on Wednesday, Euro zone benchmark 10-year bond yields fell
2-3 basis points. Germany's 10-year bond yield dipped to -0.49%
DE10YT=RR , holding below last week's six-week high of -0.43%.
Spain's bond market shrugged off news that the country will
hold its fourth election in four years on Nov. 10, after rival
parties failed to break a months-long impasse in a deeply
fragmented parliament. While a 25-basis point rate cut by the Fed is seen as
near-certain, investors look to the statement and economic
projections from Fed policymakers, given signs of deep
disagreements among them. "People are very cautious right now," said Christophe
Barraud, at Market Securities in Paris. "They're waiting for the
Fed meeting and potential new development in Saudi Arabia."
"For the Fed meeting, people are not betting on a big
positive surprise."
The ongoing U.S.-China trade war has raised policymakers'
concerns about slowing factory output although resilient
domestic consumption has given hawks some reasons to worry about
cutting rates too hastily.
Possibly further complicating their discussions, short-term
U.S. interest rates shot up this week, with overnight repo rates
rising to 7%, due largely to seasonal factors such as huge
payments for taxes and bond supply. That prompted the New York Fed to conduct its first repo
operation in more than a decade to inject funds to stressed
money markets. The New York Federal Reserve said late Tuesday it would
conduct a repurchase agreement operation early on Wednesday "in
order to help maintain the federal funds rate within the target
range of" 2.00% to 2.25%. Jeffrey Gundlach, chief executive of DoubleLine Capital,
said on Tuesday that the repo market squeeze makes it more
likely that the Federal Reserve will resume expansion of its
balance sheet "pretty soon." Also in focus is the Bank of Japan's policy meeting due
Thursday. While the latest Reuters poll suggests the BOJ will
keep its policy on hold, 28 of 41 economists expect it will ease
its policy this year and 13 believe it may surprise by taking
action at the Thursday meeting. In currencies, sterling fell after British consumer prices
in August grew at a their slowest pace since late 2016, while
concerns about whether a last-minute Brexit deal was achievable
acted as an added drag on the currency. The pound fell 0.3% to $1.2457 GBP=D3 , but that followed a
decent gain on Tuesday to $1.2528 on the back of optimism that
Prime Minister Boris Johnson was trying to secure a Brexit deal
with the European Union before the Oct. 31 deadline.
The lower-than-forecast rate comes ahead of the Bank of
England's monetary policy meeting on Thursday. The BoE targets a
2% inflation rate.
Against the euro sterling was unchanged at 88.585 pence
EURGBP=D3 .
Against the yen JPY= , the dollar edged up 0.1% to 108.23
yen, below a seven-week high of 108.37 yen tested overnight.