Fighting in Iraq damped global equity markets, although merger activity and strong U.S. economic data offset downward pressure on Wall Street, where stocks advanced slightly.

Investor unease hit the Nikkei .N225 early in the day as Tokyo suffered its biggest fall in a month, while European shares .FTEU3 were in the red for the third time in four days.

Russian natural gas exporter Gazprom GAZP.MM reduced supplies to Ukraine after Kiev failed to meet a deadline to pay its gas debts in a dispute that could disrupt supplies to the rest of Europe.

"There was a reasonable flight-to-quality bid overnight with the developments in Iraq and Gazprom, so global equities were under a fair amount of pressure and that gave a bid to longer-dated Treasuries," said Ian Lyngen, senior government bond trader at CRT Capital in Stamford, Connecticut.

MSCI's all-country world equity index .MIWD00000PUS edged down 0.06 percent. The FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.42 percent at 1,383.95.

The Dow Jones industrial average .DJI rose 4.53 points, or 0.03 percent, to 16,780.27. The S&P 500 .SPX gained 1.24 points, or 0.06 percent, to 1,937.4 and the Nasdaq Composite .IXIC added 8.028 points, or 0.19 percent, to 4,318.682.

Argentina's Merval index .MERV fell 8.4 percent 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 default.

Brent crude for August delivery LCOc1 rose 48 cents to settle at $112.94 a barrel. U.S. oil CLc1 fell 1 cent to settle at $106.90 a barrel.

The yen and the Swiss franc rose, with the Japanese currency hitting a four-month high against the euro as investors sought safety.

The dollar slipped as traders await clues from the U.S. Federal Reserve on the timing of an interest rate increase amid doubts about the economic recovery.

The dollar fell 0.22 percent to 101.83 yen JPY=, while the euro fell to a four-month low against the yen before paring much of its decline. It was last at 138.16 yen EURJPY=EBS.

U.S. Treasuries prices rose as Iraq and Ukraine developments increased demand for safe-haven bonds, though solid U.S. economic data limited gains.

Benchmark 10-year notes US10YT=RR rose 1/32 in price to yield 2.5988 percent.

(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Dan Grebler and Nick Zieminski)

By Herbert Lash