* European shares lower after ZEW sentiment index dips, Bernanke in focus
* U.S. dollar index wobbles, but holds off last week's lows
* Aussie dollar surges after central bank says stance appropriate
European shares took a break from their recent climb on Tuesday and safe-haven German Bunds rose, as a surprise dip in German confidence fed mild profit-taking while markets awaited fresh clues on U.S. monetary stimulus.
German analyst and investor sentiment unexpectedly fell in July as a slew of negative data on Europe's largest economy and renewed signs of tension in the euro zone hit confidence.
Having jumped almost 8 percent in the last few weeks on renewed promises of support from major central banks, European shares were already in profit-taking mode ahead the data, which also hit the euro and sent safe-haven Bunds higher.
The broad FTSEurofirst 300 index was down 0.3 percent by 1100 GMT though it had clawed back some ground as the larger falls on Frankfurt's DAX and Paris's CAC 40 were offset by focus on the Federal Reserve's stimulus plans.
Rate strategist Piet Lammens at KBC played down the potential impact of the fall in German sentiment on the European Central Bank, which is widely expected to keep rates on hold throughout this year and next.
"The ECB might cut rates, but rather than on sentiment indicators I think it will depend on conditions in the financial markets," Lammens said.
London's FTSE outperformed and sterling hit a session low of $1.5046 after UK inflation data came in slightly below consensus keeping alive chances that the Bank of England will keep monetary policy easy.
Federal Reserve Chairman Ben Bernanke's twice-yearly monetary policy report to Congress on Wednesday and Thursday was set to offer more clues on the U.S. central bank's policy as it looks to wind down its stimulus programme.
Markets went into mild panic in mid-June after the Fed laid out a rough timetable for phasing out its $85 billion-a-month stimulus programme, but stock markets in particular have bounced back strongly as the Fed has softened its tone.
"The recent mixed data shows how difficult it is for the Fed, and also consequently for the markets, to read when the first tapering will be." said Rabobank economist Philip Marey.
"If he (Bernanke) seems more or less satisfied with how things are going then that would be taken as an indication that we are going to see something in September."
RECORD WALL STREET
U.S. stock futures, pointed to a steady for Wall Street after Citigroup's strong results on Monday had helped the S&P 500 end higher for an eighth day, the longest such streak since mid-January.
In debt markets, benchmark German Bunds moved into positive territory as investors went in search of safe-haven paper after the ZEW data and U.S. Treasuries recovered after some selling in Asia.
Periphery euro zone bonds remained choppy, however, as political turmoil continued to rumble in the background.
Italian and Spanish bonds swayed to and fro, while Portuguese bonds firmed as the bailed-out country's political parties agreed to talks, though investors doubted a deal would be reached soon.
Major central bank assets: http://link.reuters.com/cew98s
Asset returns in 2013: http://link.reuters.com/dub25t
Asian foreign fund flows: http://link.reuters.com/rad59t
With Monday's mixed U.S. data adding to the U.S. policy debate ahead Bernanke's testimony on Wednesday the dollar edged down 0.35 and 0.5 against the yen to 99.32 yen, well below last week's high of 101.21.
Commodities including oil, gold and copper all inched higher as the dollar eased, the main currency for raw material trading.
Brent oil has risen nearly $9 in the last three weeks and U.S. crude more than $13, lifted by tumbling U.S. crude oil stocks, an improving economic outlook and supply disruption after turmoil in Middle East countries such as Egypt.
"Global demand has picked up strongly. There are huge supply problems at a time when refineries are increasing output," said Amrita Sen, analyst at Energy Aspects.
In Asian trading, shares had firmed as Japan's Nikkei added 0.64 percent to its recent 18 percent rally.
The yen, a key driver in the jump in the Nikkei, could face more pressure as the week progresses.
The ruling party of Japanese Prime Minister Shinzo Abe is expected to post a big win in Sunday's upper house election, clearing the way for him to pursue his aggressively reflationary policies.
Further south, the Australian dollar surged half a U.S. cent after minutes from this month's Reserve Bank of Australia meeting gave little hint of a near-term rate cut.