Asian shares mostly eased on Monday with South Korea retreating from record highs on fears the government may move to cool the market, while Brent crude was about $1 away from its highest level due to supply worries.
London's FTSE 100 Index and Germany's DAX rose about 0.2 percent in early trade while France's CAC 40 edged up nearly 0.1 percent.
Data on Friday showing improved U.S. consumer sentiment sparked optimism that shipments to Asia's top export market would stay strong, helping to limit regional stock losses and lending support to the dollar.
U.S. stock markets rallied to record highs on Friday on optimism about consumer sentiment. But many investors remain cautious ahead of the busy earnings season.
By 0630 GMT, MSCI's measure of Asia Pacific stocks excluding Japan was off 0.6 percent. Japanese financial markets were closed on Monday for a public holiday, Marine Day.
China's main stock index dropped 1.9 percent as concerns about imminent initial public offerings as well as June inflation data due later this week discouraged investors.
The stock market is facing multi-faceted pressures this month, as newly issued IPOs increase supply concerns and the authorities need to cool down the overheated economy in order to reduce excess liquidity, said Tang Zhenbin, senior analyst at Hongyuan Securities.
Seoul shares rose to a fresh record but surrendered gains as Kookmin Bank fell nearly 4 percent after saying it was ordered to pay back taxes, and due to speculation that a scorching stock rally could prompt government measures.
Shares in POSCO, the world's No.4 steel maker, hit an all-time high but ended down 0.89 percent at 555,000 won ahead of its quarterly earnings due out after the market's close.
The Korea Composite Stock Price Index (KOSPI) closed 0.7 percent lower, Taiwan's TAIEX ended 0.6 percent down and Hong Kong's Hang Seng dropped 0.3 percent.
Australia's S&P/ASX 200 erased early gains to edge down 0.1 percent, weighed down by further losses in Rio Tinto Ltd., which fell on concerns that it was paying a full price for its US$38 billion bid for Canadian aluminum firm Alcan Inc. Rio Tinto fell 4.2 percent.
Markets in India and Singapore were higher.
The dollar recovered marginally from a record low versus the euro, underpinned by a six-month high in U.S. consumer sentiment and hawkish expectations from Federal Reserve Chairman Ben Bernanke's testimony this week.
Bernanke is expected to suggest the Fed is more concerned about rising inflation than about housing market turbulence seriously damaging the world's largest economy.
That supported the dollar, helping it recover from the record low of $1.3815 struck against the euro on Friday during a month-long downtrend driven by the unexpected fall in retail sales last month and fears the U.S. subprime mortgage crisis could frighten foreign investors away from U.S. credit markets.
The euro stood at $1.3790 by 0600 GMT. Against the yen, the dollar was at 121.96 yen, around late New York levels.
The New Zealand dollar jumped about a third of a U.S. cent to a post-float 22-year high of $0.7898 on stronger than expected consumer price data before pulling back.
New Zealand's consumer prices rose 1 percent in April-June from the previous quarter, heightening expectations the central bank will raise interest rates next week.
Meanwhile, the Aussie dollar stayed above 87 U.S. cents as investors continued to favor high-yielding currencies.
London Brent crude, seen as a better indicator of the global market, held near 11-month highs after rising more than 1.5 percent in the previous session on nagging supply worries due to North Sea production problems and U.S. refinery outages.
It was up 20 cents at $77.77 a barrel, about a $1 away from last August's $78.65 all-time high.
Gold held steady and was within sight of a five-week high hit last week. Spot gold was at $667.40/668.20 an ounce, up from $666.60/667.40 late in New York on Friday.
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