GLOBAL MARKETS-Stocks head for weekly loss; U.S. yields near 2-yr highs
* World equity markets set for worst week since late June
* Dollar supported by rise in U.S. bond yields
* Oil steady as Egypt unrest sparks supply fears
NEW YORK, Aug 16 (Reuters) - World share indexes edged higher on Friday but were headed for their biggest weekly fall in almost two months, while U.S. bond yields traded near two-year highs as investors worried the Federal Reserve will start scaling back stimulus next month.
The dollar rose against major currencies, buoyed by higher yields. It briefly weakened after data showed U.S. consumer sentiment weakened in August while housing starts and permits rose less than expected in July.
U.S. shares were little changed, after the largest decline on Wall Street in nearly two months a day earlier set major indexes on course for their first back-to-back weekly declines since late June. European shares eased from two-year highs set earlier this week.
Wall Street has come under pressure as corporate revenue growth has disappointed even as companies' bottom-lines have hit the mark. From Wal-Mart and Gap to Macy's and McDonald's, chains that cater to middle- and lower-income Americans are feeling the pinch of an uneven economic recovery.
"We haven't seen the revenue growth the market was anticipating," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
"We are unlikely to see a large-scale correction in the market right now, but it certainly is losing the momentum that took it to strong highs earlier this year," he said.
MSCI's world equity index, which tracks shares in 45 countries, edged up 0.06 percent but was set for its biggest weekly drop since late June as talk of an early cutback in the Fed's $85 billion monthly cash injections resurfaced.
The Dow Jones industrial average was up 0.76 points on Friday, or 0.01 percent, at 15,112.95. The Standard & Poor's 500 Index was down 1.25 points, or 0.08 percent, at 1,660.07. The Nasdaq Composite Index was up 7.31 points, or 0.20 percent, at 3,613.43.
Europe' broad FTSE Eurofirst 300 index of top companies was little changed.
Emerging currencies though were struggling with India's rupee hitting a record lows beyond 62 per dollar, bringing its year-to-date losses to 11 percent. The Indonesian rupiah also tumbled to four-year troughs.
MSCI's broad emerging equities index shed 0.3 percent.
U.S. Treasuries prices extended a rout that has sent longer-dated yields to their highest in two years. The bond market has undergone a sharp selloff since the Fed started talking about paring back its monthly $85 billion in bond purchases.
The benchmark 10-year yield has risen from about 1.6 percent at the start of May and was last down 7/32 with its yield at 2.7885 percent. Yields reached as high as 2.823 percent on Thursday, the highest since August 2011.
Treasuries have been roiled along with German, British and other government bonds as the U.S. and euro zone economies appear to have a more solid footing, increasing expectations that yields will continue their recent rise.
"Some of the likelihood of a September taper continues to strengthen and you've also seen a lot of stable news coming out of the European zone. That may provide that window of opportunity for the Fed to start in September," said Sean Murphy, a Treasuries trader at Societe Generale in New York.
A Reuters poll released on Wednesday showed a majority of economists expect the Fed to reduce bond purchases at its Sept. 17-18 policy meeting, with a consensus expecting that the U.S. central bank would reduce purchases by $15 billion initially.
The dollar rose 0.2 percent to 97.53 yen, while the euro was little changed at $1.3345.
The brighter economic picture is being reflected in demand for industrial metals, with copper reaching a 10-week peak of $7,420 a tonne, while zinc has rallied to a five-month high of $1,990 a tonne.
Precious metals like gold and platinum have gained as well, though they could be threatened if the Fed did wind down its stimulus. Gold hit a two-month high of $1,373.09, with platinum and palladium also at two month highs.
Brent crude futures for October were up 42 cents at $110.02 a barrel. U.S. oil for September rose 42 cents to $107.75.
Concerns that violence in Egypt could affect the Suez Canal, a conduit for up to 3 million barrels per day of oil and a vital seaway for bulk carriers, helped drive Brent to a four-month high on Thursday.