GLOBAL MARKETS-Stocks fall from records, oil up on Iraq

Wed Jun 11, 2014 11:19am EDT

* Appetite for European shares dented by profit warnings

* Palladium hits 13-year high, underpinned by South Africa strike

* Oil climbs on worries over Iraq (Updates to U.S. market open, changes dateline; previous PARIS)

By Rodrigo Campos

NEW YORK, June 11 (Reuters) - Stocks retreated from recent highs on Wednesday while the euro was pressured by rate differentials and oil prices rose on fears of disrupted supply from Iraq.

Stocks on Wall Street opened lower in broad selling. Analysts, however, saw no threat to the recent strong trend.

"There's a bid underneath this market, and anytime we're lower it isn't long before buyers materialize, which should allow us to keep grinding higher until the next earnings season," said Chris Bertelsen, chief investment officer of Global Financial Private Capital in Sarasota, Florida.

The Dow Jones industrial average dropped 97.10 points, or 0.57 percent, at 16,848.82. The Standard & Poor's 500 Index was down 7.39 points, or 0.38 percent, at 1,943.40. The Nasdaq Composite Index was down 6.87 points, or 0.16 percent, at 4,331.13.

MSCI's global stocks gauge fell 0.3 percent after earlier flirting with a record high. The FTSEurofirst 300 index lost 0.5 percent, weighed by a profit warning from German airline Lufthansa.

Japan's Nikkei gained 0.5 percent after MSCI's decision to keep South Korea and Taiwan indexes in the emerging markets classification guaranteed Japan will retain its status as the only developed market in the region.

In a cautious note, the World Bank late on Tuesday cut its global economic growth forecast for 2014 to 2.8 percent from 3.2 percent due to the impact of the Ukraine crisis and a harsh U.S. winter. The Bank was, however, confident economic activity was shifting to a stronger footing.

Benchmark U.S. Treasury yields retreated from a one-month high hit early in the session, though the 10-year Treasury note was up 3/32 to yield 2.624 percent.

The euro hovered near a four-month low versus the dollar, down 0.12 percent at $1.3531, under pressure due to a widening yield gap between euro zone bonds and their peers.

Speculation that the U.S. Federal Reserve could raise interest rates sooner than previously expected has supported the dollar and put pressure on the euro this week.

"Against the dollar, we will see a slow grind toward the $1.35 level, where there will be some support from sovereign players," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

Oil markets watched the unfolding crisis in Iraq as militants who seized Mosul, the second-biggest city, advanced into an oil refinery town..

"We already have Libya out, Iran's exports are low, and there is no prospect of an immediate return for either of them," said Bjarne Schieldrop, analyst at SEB in Oslo.

Brent rose 0.4 percent to $109.98 while U.S. crude also added 0.4 percent to $104.75.

Palladium rose 1 percent to hit a more than 13-year high, underpinned by a five-month strike in South Africa. (Additional reporting by Ryan Vlastelica in New York, Blaise Robinson in Paris and Wayne Cole in Sydney; Editing by Dan Grebler)

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