* S&P 500, Dow edge higher

* Benchmark 10-yields rise

* Yield curve further flattens

* Dollar gains

* Oil prices decline

* Safe-have gold drops

NEW YORK, Aug 16 (Reuters) - Global equity markets were flat while U.S. Treasury yields rose on Tuesday as recession worries weighed amid concerns that the Federal Reserve will continue its steep interest rate hikes despite nascent signs of a slowdown in inflation.

A steady stream of economic data, including a drop in U.S. single-family housing starts and New York state factory activity, indicate that the world's largest economy is softening in response to the Fed's rate actions.

But recession worries persist among traders. The closely watched yield curve between two- and 10-year Treasury notes - viewed as a reliable indicator of an impending recession - headed towards inversion at minus 38.60 basis points on Tuesday. "It seems that the bond market doesn't quite reflect the inflation happening in the economy," said George Young, a portfolio manager at Villere & Company in New Orleans. "The weird thing is that in the last couple of weeks bond yields have gone up and stayed up so there's kind of a disconnect. There's kind of a question maybe inflation isn't that bad and we may actually be going into a recession. Market participants are all over the place," he added. MSCI's gauge of stocks in 50 countries across the globe shed 0.01%. Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.07% lower, while Japan's Nikkei lost 0.01%. U.S. Treasury yields edged higher as encouraging data from U.S. retail giants suggested the U.S. Federal Reserve has room to further raise rates to cool inflation. Benchmark 10-year Treasury yields were at 2.844% from 2.791% on Monday On Wall Street, the benchmark S&P 500 and the Dow reversed earlier losses and were trading higher, with stocks in consumer discretionary and consumer staples leading the rebound. The Dow Jones Industrial Average rose 0.47% to 34,071.45, the S&P 500 lost 0.01% to 4,296.5 and the Nasdaq Composite dropped 0.52% to 13,059.82. (Reporting by Chibuike Oguh; Editing by Sandra Maler)