TOKYO Asian shares slipped on Thursday after Wall Street shares stepped back from record levels while civil war in Iraq supported oil prices.
Japan's Nikkei share average .N225 led the retreat, falling 0.9 percent while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped 0.15 percent.
The S&P 500 .SPX lost 0.35 percent 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.
Some market players blamed a lower global growth forecast from the World Bank being used as grounds to sell while others said fighting in Iraq may have sapped investor appetite.
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.
"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.
Oil prices also stayed near recent peaks as fighting in Iraq prompted worries about the supply outlook.
Militants from an al-Qaeda splinter group who seized the second-biggest city of Mosul earlier this week rapidly advanced into the oil refinery town of Baiji.
U.S. crude futures CLc1 traded at $104.46 per barrel, near a three-month high of $105.06 hit on Tuesday.
In the currency market, the New Zealand dollar jumped 0.6 percent in early trade 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 $0.8627 and last traded at $0.8610.
Elsewhere, 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 $1.3534, compared to low of $1.3503 hit on Thursday. The yen traded at 101.99 yen to the dollar, after hitting one-week high of 101.86.
U.S. debt yield rose slightly, with the 10-year yield hitting a one-month high of 2.662 percent after a disappointing Treasury auction. It last stood at 2.642 percent.
Palladium hit a 13-year high on supply worries from a five-month-long miners' strike in South Africa.
It has gained 20 percent so far this year after the crisis in Ukraine raised concerns on supply from Russia, the world's largest producer.
(Editing by Eric Meijer)