* Asian stock markets: 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 shed some of its 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, shaky investor confidence continued to support safe-haven assets. Gold edged higher and Treasury prices rose on Tuesday. Investors otherwise broadly remained on the sidelines ahead of an expected interest rate cut from the U.S. Federal Reserve on Wednesday and the next round of U.S.-China trade talks on Thursday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.66%. Chinese shares fell 1.07%, while Hong Kong shares slumped 1.18%.
Euro Stoxx 50 futures were down 0.11%, German DAX futures were down 0.02%, while FTSE futures fell 0.31%.
“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, fell 0.96% to $68.39 per barrel on Tuesday. On Monday, it surged 14.6% for its biggest one-day percentage gain since at least 1988.
U.S. West Texas Intermediate futures were down 1.29% to $62.09 per barrel following a 14.7% surge on Monday, the biggest one-day gain since December 2008.
Saturday’s attack on Saudi oil facilities has halved the kingdom’s oil output, 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.
Trump said on Monday it looked like Iran was behind the attacks but stressed that he did not want to go to war, striking 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 was already running high over Iran’s suspected ambitions to assemble nuclear weapons. The strikes in Saudi Arabia are likely to raise regional tensions even further.
The People’s Bank of China extended 200 billion yuan ($28.27 billion) of loans from its medium-term lending facility on Tuesday to maintain liquidity but kept the one-year lending rate unchanged at 3.3%.
Disappointment that the PBOC did not lower the one-year lending rate weighed on Chinese shares.
Many analysts expect China to lower benchmark rates for new loans on Friday to keep pace with monetary easing by other central banks.
Hong Kong shares headed for their biggest decline in three weeks after Moody’s lowered its outlook for the city’s credit rating due to protests in the Asian financial hub.
The Chinese-ruled territory has been rocked by more than three months of clashes, with demonstrators angry about what they see as creeping interference by Beijing in their city’s affairs despite a promise of autonomy.
U.S. stock futures fell 0.08%. On Wall Street, the S&P 500 ended 0.31% lower.
Spot gold traded a shade higher at $1,499.77 an ounce following a 0.7% increase on Monday.
The yield on benchmark 10-year Treasury notes fell slightly to 1.8362%.
The dollar was little changed at 108.19 yen.
The Fed 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.
Trump said on Monday that the United States has reached initial trade agreements with Japan, but 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. ($1 = 7.0758 Chinese yuan)
Editing by Sam Holmes, Simon Cameron-Moore and Himani Sarkar