* Ex-Japan Asian shares down 0.3 pct, Nikkei bounces back
after Monday losses
* Oil prices elevated on deepening Iraq conflict
* Aussie dollar slips after dovish central bank minutes
* Indian rupee hits 7-week low, RBI steps in market
* European shares seen rising up to 0.3 pct
By Hideyuki Sano
TOKYO, June 17 Most Asian stock markets fell on
Tuesday as the deepening conflict in Iraq and a gas dispute
between Ukraine and Russia sapped investors' appetite for
MSCI's broadest index of Asia-Pacific shares outside Japan
shed 0.3 percent. Japan's Nikkei bucked
the trend with rise of a 0.3 percent, though it was still down
on the week so far.
European shares were expected to rise, buoyed by merger
activity, with Germany's DAX and France's CAC 40
seen gaining up to 0.3 percent, after Wall Street shares
eked out small gains.
Oil prices remained not far from nine-month highs after
militants from the Islamic State of Iraq and the Levant seized a
large swathe of northern Iraq and threatened to capture a key
The insurgent advance forced Washington to not only consider
options for military action but also hold brief talks with Iran,
its long-time foe, to support the besieged government in
Although hopes of more support for Baghdad helped U.S. crude
futures edge down 0.3 percent to $106.54 per barrel,
investors remain wary of potential disruptions to oil exports.
"The advance of extremists to Baghdad or bombing by U.S
forces will be a trigger a rise in U.S. oil prices above $110.
That would be a burden for the world economy in the near term,"
said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking
Higher energy costs are likely to curb growth in
oil-importing economies, with the Indian rupee already falling
victim to worries over rising inflation and a deterioration in
the balance of payments.
The rupee dropped to seven-week low of 60.51 to the dollar
, having fallen more than 2 percent in the past three
sessions, at which point the Indian central bank started buying
the rupee to stem its fall.
Tension in Ukraine showed no sign of abating as Russia cut
off gas to Ukraine on Monday in a dispute over unpaid bills that
could disrupt supplies to the rest of Europe and set back hopes
for peace between the former Soviet neighbours.
As investor risk sentiment was hit, flight-to-quality bids
underpinned U.S. Treasuries prices despite solid U.S. industrial
output data on Monday.
The 10-year yield stood at 2.592 percent, off
last week's peak of 2.662 percent.
The immediate focus is on the Federal Reserve's monetary
policy statement on Wednesday, when the U.S. central bank is
expected to announce it will continue paring its bond purchase
In the currency market, the Australian dollar slipped after
minutes of the Australian central bank's June 3 meeting were
more dovish than expected.
The Aussie dipped 0.4 percent to $0.9361 as the
minutes showed the Reserve Bank of Australia was not sure the
current stimulus would be enough to offset a drag from falling
mining investment and government belt-tightening.
The British pound held near a five-year high hit on Monday,
maintaining momentum after Bank of England chief Mark Carney
surprised markets last Thursday by suggesting the Bank of
England may tighten its policy before year-end.
The pound stood at $1.6975, near Monday's high of
$1.7011, with close attention falling on consumer inflation data
due later in the day given the focus on the BoE's policy.
Elsewhere, Argentina's Merval index fell 10.1
percent on Monday after the U.S. Supreme Court declined to hear
the country's appeal over its battle with hedge funds that
refused to take part in its debt restructurings.
The move risks sending Argentina into a fresh sovereign
(Editing by Eric Meijer & Kim Coghill)