* European shares flat, Wall Street modestly higher
* Oil bounces off 10-month lows; crude glut still weighs
* Yield curve steepens slightly (Updates with close of U.S. markets)
NEW YORK, June 22 (Reuters) - World stock markets edged higher on Thursday, buoyed by a modest rebound in oil prices after the commodity hit 10-month lows, while the U.S. yield curve managed to stall its recent flattening.
Brent edged up from November lows hit in the prior session, when U.S. crude hit its lowest intraday level since August 2016, but sentiment remained negative as a supply glut has persisted despite OPEC-led cuts to output.
U.S. crude settled up 0.5 percent at $42.47 per barrel and Brent settled up 0.9 percent at $45.22 on the day.
"I would not be surprised if it breaks down, considering momentum is still in that direction as well as supply concerns that didnt really change overnight," said Andres Garcia-Amaya, CEO at Zoe Financial in New York.
"It could carry lower and I wouldnt be surprised if it breaks $40, but to go down below where it was before there would have to be much stronger downward pressure than just supply."
With the gains, the energy sector in Europe remained under pressure, down 0.3 percent, but managed to close well off earlier lows. The index is down nearly 2 percent on the week and is on track for its fifth straight weekly drop.
Those declines weighed on European shares and U.S. energy shares gave up earlier gains to close 0.1 percent lower.
The Dow Jones Industrial Average fell 12.74 points, or 0.06 percent, to 21,397.29, the S&P 500 lost 1.11 points, or 0.05 percent, to 2,434.5 and the Nasdaq Composite added 2.73 points, or 0.04 percent, to 6,236.69.
Healthcare was up 1.1 percent as the best performing group on Wall Street after Senate Republicans unveiled a draft bill to replace the Affordable Care Act.
The pan-European FTSEurofirst 300 index rose 0.05 percent to snap a two-session skid and MSCI's gauge of stocks across the globe gained 0.11 percent.
Since peaking in late February, crude has dropped around 20 percent, with only brief rallies, completely erasing gains at the end of the year after the initial OPEC-led production cut.
Oil's decline has hurt energy stocks and curbed investor expectations for higher inflation that would enable major central banks to pursue tighter monetary policies.
Subdued inflation and concerns about the outlook for world growth when the U.S. Federal Reserve is raising interest rates have led to a flattening in bond yield curves.
The gap between yields on U.S. five-year notes and 30-year bonds on Wednesday narrowed to 94.9 basis points, holding near its smallest since December 2007. The curve steepened slightly to 95.7 basis points on Thursday, suggesting the flattening of the yield curve this week was stalling.
A flattening yield curve is often viewed as a negative economic indicator. It shows concern about the future pace of growth and inflation, because buyers of long-dated debt would demand higher yields if they expected higher costs.
Benchmark 10-year notes last rose 2/32 in price to yield 2.1494 percent, from 2.155 percent late on Wednesday.
The dollar index fell 0.02 percent, with the euro down 0.15 percent to $1.1149.
(Reporting by Chuck Mikolajczak; Editing by Lisa Shumaker and Nick Zieminski)