Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar

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

The yield curve between two- and 10-year Treasury notes , viewed as an indicator of impending recession, remained inverted at minus 40 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 (.MIWD00000PUS) was up 0.05%. Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.07% lower, while Japan's Nikkei (.N225) lost 0.01%.

U.S. Treasury yields edged higher as encouraging data from U.S. retail giants suggested the Fed has room to further raise rates to cool inflation. Benchmark 10-year Treasury yields were at 2.8077% from 2.791% on Monday

On Wall Street, the benchmark S&P 500 and the Dow reversed earlier losses and closed higher, with stocks in consumer discretionary, consumer staples, financials and industrials leading the rebound.

The Dow Jones Industrial Average (.DJI) rose 0.71% to 34,152.01, the S&P 500 (.SPX) gained 0.19% to 4,305.2 and the Nasdaq Composite (.IXIC) dropped 0.19% to 13,102.55.

Oil prices dropped nearly 3% in volatile trading as recession worries raised uncertainty over global crude demand, even as markets awaited clarity on talks to revive a deal that could allow more Iranian oil exports. read more

Brent crude futures fell 2.9% to settle at $92.84 a barrel, after hitting a session high of $95.95. West Texas Intermediate crude (WTI) decreased 3.2%, settling at $86.53 a barrel, after rising to $90.65.

The dollar was flat, pulling back from earlier gains, amid expectations the U.S. economy would be stronger than peers in the event of a slowdown in growth.

The dollar index was down 0.009%, with the euro up 0.1% to $1.017. read more

Safe-haven gold fell for a second straight session on Tuesday as an initially firmer dollar made the greenback-denominated metal more expensive.

Spot gold dropped 0.2% to $1,774.91 an ounce, while U.S. gold futures fell 0.36% to $1,774.90 an ounce.

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The board of Monte dei Paschi di Siena will meet on Tuesday over a planned 2.5 billion euro ($2.4 billion) new share sale, a person close to the matter said, while it is still unclear whether the state-owned bank can proceed with the capital raising.

A British court has granted permission for U.S.-based hedge fund Elliot Associates and Jane Street Global Trading to sue the London Metal Exchange (LME) for cancelling nickel trades in March, a court document showed.

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