* Palladium hits 13-year high, underpinned by South Africa strike
* World Bank shaves global growth estimate
* Oil climbs on worries over Iraq supply (Updates to U.S. market close)
NEW YORK, June 11 A gauge of world stock markets retreated from recent highs on Wednesday, pressured by a lower growth forecast from the World Bank and a profit warning from Lufthansa, while Brent crude rose on fears of disrupted supply from Iraq as violence escalates.
The euro fell for a fourth straight session against the U.S. dollar as monetary policy between the European Central Bank and the Federal Reserve diverges.
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.
Stocks were lower in broad selling on Wall Street, with financials hurt by a report Bank of America's mortgage settlement with the U.S. government reached an impasse.
"The World Bank cutting estimates for global GDP got everybody's attention in an environment where people are looking for a reason to take stocks down a little bit," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
The Dow Jones industrial average fell 102.04 points or 0.6 percent, to end at 16,843.88, the S&P 500 lost 6.9 points or 0.35 percent, to 1,943.89 and the Nasdaq Composite dropped 6.07 points or 0.14 percent, to 4,331.93.
Adding to the sour tone, the defeat in a primary election of House Majority Leader Eric Cantor, a Republican, further dampened expectations of Washington passing any significant legislation before the November elections.
MSCI's global stocks gauge fell 0.2 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.
Benchmark U.S. Treasury yields retreated from a one-month high hit early in the session, but prices fell after a 10-year auction. The benchmark note was last unchanged in price to yield 2.6367 percent.
The euro hovered near a four-month low versus the dollar, down 0.15 percent on the day at $1.3527, pressured by 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 weighed on the euro this week.
The greenback weakened further against the Japanese currency , falling 0.3 percent to 102.02 yen.
Oil traders watched the unfolding crisis in Iraq as militants who seized Mosul, the second-biggest city, advanced into an oil refinery town..
"In the context of the risks to Baghdad, U.S. oil production starts to look downright timely; otherwise oil prices could go much higher," said Richard Hastings, macro strategist at Global Hunter Securities.
Brent rose 0.5 percent to $110.06 while U.S. crude added 0.1 percent to $104.47.
Palladium hit a more than 13-year high and was recently up 0.9 percent, underpinned by a five-month strike in South Africa and demand from the auto sector. (Reporting by Rodrigo Campos; additional reporting by Lorenzo Ligato and Sam Forgione; Editing by Dan Grebler)