* World stocks steady after selloff
* Oil off highs as Iran strike against U.S. seen unlikely
* European stocks rise 0.5%
* MSCI world index 0.5% away from all-time high
By Thyagaraju Adinarayan
LONDON, Jan 7 (Reuters) - World shares steadied and oil
pulled back from multi-month highs on Tuesday after dramatic
post-new year moves, as investors judged that prospects of an
all-out conflict between the United States and Iran had eased.
After a strong rally, oil gave back some of its gains amid
signs that Iran would be unlikely to strike against the United
States in a way that would disrupt supplies. O/R
Brent crude LCOc1 futures fell 44 cents to $68.48 a
barrel, having been as high as $70.74 on Monday, while U.S.
crude CLc1 dropped 34 cents to $62.93.
European equities .STOXX meanwhile rose as much as 0.7%,
tracking similar gains in Asia. Technology stocks were among the
top picks in Europe, mirroring trends in the U.S. overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS recouped almost all of Monday's losses. Stock
futures for the S&P 500 ESc1 firmed 0.1%.
"Geopolitical risk has always felt much worse for markets in
the heat of the moment than it does in hindsight, but it's
always possible that the next one will bring us into a different
era," Deutsche Bank strategist Jim Reid said.
Risky assets started 2020 on the back foot as Tehran and
Washington traded threats after a U.S. air strike on Baghdad
airport killed a top Iranian commander.
On Monday the mood began to calm, helping U.S. shares
recover ground. The Dow .DJI ended 0.24% higher, the S&P 500
.SPX 0.35% and the Nasdaq .IXIC 0.56%.
Risk assets continued their rally even as Iran said it was
considering 13 scenarios to avenge the killing of General Qassem
Soleimani. Marija Veitmane, a senior strategist at State Street, said
she sticks to her expectation of a slight improvement in
economic and earnings outlook.
"The world is well stocked with oil and can stomach short
disruptions, while large U.S. shale production should soften its
impact," said Veitmane, brushing aside worries that an oil price
spike would dent global growth.
SAFETY PLAYS OUT OF FAVOUR
On Tuesday emerging markets, which had been hit hardest by
spiking oil prices, bounced back, with stocks .MSCIEF up 0.4%.
That left the MSCI world equity index .MIWD00000PUS , which
tracks shares in 49 countries, just 0.5% from a record high.
"Markets got a lift from the lack of follow-through (after
the air strike) as yesterday progressed, and by the end of the
session had actually staged a reasonable recovery," Reid added.
Safety plays were out of favour, with gold XAU= retreating
to $1,569.41 an ounce, after scaling a near seven-year peak
overnight. Euro zone government bond yields edged up from around
three-week lows.
The calmer mood also saw the yen lose much of its safe-haven
gains, with the dollar bouncing to 108.38 yen JPY= from a low
of 107.75 hit on Monday.
Against a basket of currencies, the dollar drifted off to
96.752 .DXY but stayed well above a recent six-month trough of
96.355.
The euro EUR= and sterling GBP= were trading slightly
lower ahead of this week's vote in Britain's parliament on Prime
Minister Boris Johnson's European Union withdrawal deal.
Bitcoin BTC=BTSP , the world's biggest cryptocurrency,
broke above $8,000 overnight and is up 13% since the U.S. drone
attack in Iraq last week. Though it is not seen as a safe-haven
asset given its wild swings, the surge has coincided with the
equities sell off.
Oil price spikes and Mideast tensions https://tmsnrt.rs/2QWv5oT
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