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Asian shares slipped on Thursday after a retreat on Wall Street and escalating violence in Iraq delivered a one-two punch to risk appetite, which in turn kept oil prices near three-month highs.
Japan's Nikkei share average led the pull back, falling 0.7% while MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3%.
A tentative start is expected for European shares after a 0.5% fall the previous day, with Britain's FTSE seen rising 0.1% and Germany's DAX dropping 0.1%.
The S&P 500 lost 0.35% to 1,943.89, its first significant loss in about three weeks. As recently as Monday it hit a record closing high of 1,951.27.
"I think it was just natural profit-taking after the strong rally we have seen so far. I continue to expect the world's shares to remain solid," said Kensaburo Suwa, senior strategist at Okasan Securities.
Some market players said a lower global growth forecast from the World Bank was being used as grounds to sell while others said fighting in Iraq may have sapped investor appetite.
Adding to the cautious mood, a surprise primary defeat of the second-ranking US House Republican, Eric Cantor, by a Tea Party candidate stoked worries of a possible return of acrimonious budget fights that in the past have caused government shutdowns.
Fighting in Iraq also prompted concerns about the oil supply outlook, lifting US crude futures 0.3% to $104.69 per barrel, near a three-month high of $105.06 hit on Tuesday.
Militants from an al-Qaeda splinter group captured Mosul, the country's second largest city, and closed in on the biggest oil refinery in Iraq.
The insurgency has also hurt financial markets in Turkey, where stocks fell 3.3% and the lira tumbled 1.7% on Wednesday as the militants took 80 Turkish nationals as hostage.
Among major currencies, the New Zealand dollar jumped 1.3% after the country's central bank raised interest rates and retained a hawkish bias, surprising some investors who had bet on a slower pace of rate hikes.
The kiwi hit a three-week high of $0.8661 and last traded at $0.8658.
Other major currencies were little changed with the euro still stuck near the four-month low hit after the European Central Bank cut rates last week.
The euro traded at $1.3539, compared to low of $1.3503 hit on Thursday. The yen fetched 102.06 yen on the dollar, after hitting a one-week high of 101.86.
US debt yields rose slightly, with the 10-year yield hitting a one-month high of 2.662% after a disappointing Treasury auction. It last stood at 2.642%.
Palladium was firm near a 13-year high hit the previous day on supply worries from a five-month-long miners' strike in South Africa.
It has gained 20% so far this year after the crisis in Ukraine raised concerns on supply from Russia, the world's largest producer.
