* Russian troop build-up, sanctions keep risk appetite in check
* Australian dollar dives after surprise jump in jobless rate
* Worries grow over economic cost of Ukraine crisis in Europe
* Investors seek shelter in safe-haven bonds, gold
* European shares seen down
By Hideyuki Sano
TOKYO, Aug 7 Asian shares retreated while investors flocked to safe haven assets such as bonds and gold on Thursday, spooked by a Russian troop build-up on the border with Ukraine and tit-for-tat economic sanctions between the West and Moscow.
Sentiment soured further in Asia after the Australian dollar, seen as a barometer of risk appetite, sank after Australia's unemployment rate jumped unexpectedly to a 12-year high, sparking talk of an interest rate cut there.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.3 percent but Japan's Nikkei average turned positive after Reuters reported Japan's public pension fund will increase allocations to stocks.
European shares are also expected to fall, with spread betters seeing Germany's DAX falling up to 0.2 percent and France's CAC40 0.1 percent.
"We had negative factors when investors had already felt that stocks are a bit risky because they are supported by expectations of easy monetary policy rather than a strong economy," said Akito Fukunaga, chief yen bond strategist at Barclays in Tokyo.
"That is why risk asset prices are taking a big hit now," he added.
Russia said on Wednesday it will ban all imports of food from the United States and all fruit and vegetables from Europe, in a sweeping response to Western sanctions imposed over its support for rebels in Ukraine.
As fighting has intensified on the ground in eastern Ukraine, NATO also said Russia massed around 20,000 combat-ready troops on Ukraine's border.
"I think the chances of Russia invading Ukraine are low. But you can't be entirely sure when a large number of troops are in confrontation. Investors will be inclined to avoid risk and take profits," said Hidenori Suezawa, analyst at SMBC Nikko Securities.
U.S. shares hit two-month lows on Wednesday before ending almost flat while shares in Europe, seen as more vulnerable due to Europe's closer economic ties with Russia, fell to near-four-month lows.
There are signs the crisis in Ukraine was affecting Germany, Europe's biggest economy.
Data showed on Wednesday German industrial orders slid 3.2 percent in June, the steepest fall since September 2011 and confounded expectations for a 1.0 percent rise. The economy ministry said political tensions had probably led to more consumer caution.
In further evidence of economic weakness in Europe, Italy's economy unexpectedly slid back into recession in the second quarter as gross domestic product shrank 0.2 percent from the first three months of the year.
While the European Central Bank is expected to keep its policy on hold at its meeting later in the day, Wednesday's data and persistently low inflation in the euro zone should keep alive market expectations for the bank to eventually turn to quantitative easing.
Against this backdrop, the euro slid to a nine-month low of $1.3333 against the dollar on Wednesday. The single currency last stood at $1.3386.
The biggest mover in Asia was the Australian dollar, which fell 0.7 percent to $0.9288 after a poor employment report revived expectation that the Reserve Bank of Australia may cut interest rates again from the current record low.
The depressed mood lifted gold and pushed down bond yields in the United States and Europe to new lows. Gold also held firm at $1,306.89 per ounce, staying near one-week high of $1,309.60 touched on Wednesday.
The 10-year U.S. debt yield hit a two-month low of 2.433 percent on Wednesday and last stood at 2.462 percent.
In Europe, German 10-year bund yield slid to a record low of 1.097 percent while the 10-year UK gilts yield hit a one-year low of 2.503 percent.
U.S. crude futures steadied around $97.09 after having slipped to a six-month low of $96.69 per barrel on Wednesday. They have fallen more than $10 a barrel over the past six weeks, as excess global supply built up a glut in the Atlantic Basin and Asian markets. (Editing by Shri Navaratnam and Eric Meijer)