(Corrects to clarify June 19 milestone in paragraph 4 was in 2018, and changes slug for media clients to Wrapup 3)
* MSCI Asia ex-Japan +0.05%, trims gains
* European shares expected to fall after recent rallies
* Nikkei ends year up more than 18%, fell 12.1% in 2018
* China rate reform, retail sales boost bullish mood
* Asian stock markets: tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, Dec 30 (Reuters) - A broad gauge of Asian share markets rose to an 18-month high on Monday as Chinese equities gained, while oil touched three-month highs on a combination of U.S. crude inventory drawdowns, trade optimism and unrest in the Middle East.
But European shares were expected to open lower as investors take a breather from recent rallies.
In early European trade, the pan-region Euro Stoxx 50 futures were down 0.16% at 3,764, German DAX futures were down 0.22% at 13,291.5 and FTSE futures were down 0.11% at 7,578.5.
MSCI's broadest index of Asia-Pacific shares outside Japan rose to its highest since June 19, 2018, before trimming gains. It was last up 0.05%.
Chinese blue chips, which had started the day lower, were up 1.13% in afternoon trade, bolstered by a report that 2019 retail sales are forecast to rise 8% and expectations that a new benchmark for floating-rate loans could lower borrowing costs and boost flagging economic growth.
But Australian shares finished 0.25% lower as investors continued to consolidate recent gains.
Japan's Nikkei stock index finished its last trading day of the year down 0.76%. The index gained 18.2% in 2019 after dropping 12.8% last year.
Easing trade war worries and reduced uncertainty over the United Kingdom's plans to leave the European Union after British elections returned a strong Conservative majority have offered a lift to global equities this month, helping the broad MSCI Asia index rise more than 6% and putting it on track for its strongest month since January.
Kay Van-Petersen, global macro strategist at Saxo Capital Markets, said that limited liquidity near the year-end and the easing of U.S.-China trade and Brexit uncertainties has "just left us drifting up higher. So even if there is a pullback... I don't think it's going to be significant by any means."
Global equity markets gained late last week, with the S&P 500 and the Dow Jones Industrial Average closing at records on Friday.
The Dow ended 0.08% higher at 28,645.26 and the S&P edged up just 0.11 points to 3,240.02. The Nasdaq Composite lost steam at the close, falling 0.17% to 9,006.62.
Oil also gained on Friday, with prices posting their fourth consecutive weekly gain to steady around their highest in three months.
On Monday, global benchmark Brent crude was up 0.31% to $68.37 per barrel, while U.S. West Texas Intermediate crude added 0.13% to $61.80, reversing an earlier decline.
Oil's gains followed news of U.S. air strikes in Iraq and Syria against Kataib Hezbollah, an Iran-backed militia group. U.S. officials said Sunday that the attacks were successful, but warned that "additional actions" may be taken to defend U.S. interests.
But Stephen Innes, strategist at AxiTrader, said that the rise of shale oil production in the United States would offset any geopolitical risks.
"Shale can really ramp up more volumes to accommodate any shortfall that could possibly be triggered by escalation in Syria," he said, adding that an upsurge in populism in Iraq posed a larger risk to markets.
Iraq's oil ministry said on Sunday that the halting of oil production at Iraq's southern Nassiriya oilfield by protestors would not affect the country's exports and operations.
Oil prices were also supported by a bigger-than-expected decline in crude inventories in the United States, the world's biggest fuel consumer. Stockpiles fell by 5.5 million barrels in the week to Dec. 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters poll, the government data showed on Friday.
Gold also continued its run-up, boosted by a weak dollar, after posting its best week in more than four months on Friday amid thin trading volumes.
The precious metal on Monday rose 0.3% to $1,515 per ounce on the spot market.
In the currency markets, the dollar was 0.27% lower against the yen at 109.11 and the euro was up 0.23% on the day at $1.1201.
The dollar index, which tracks the greenback against a basket of six major currencies, was down 0.14% to 96.786.
The yield on benchmark 10-year Treasury notes was at 1.877% compared with its U.S. close of 1.873% on Friday, while the two-year yield edged down to 1.5812% compared with a U.S. close of 1.589%.
Reporting by Andrew Galbraith; Additional reporting by Seng Li Peng in Singapore; Editing by Michael Perry and Christian Schmollinger