* European shares flat, Wall Street modestly higher
* Oil prices edge up
* Yield curve steepens slightly (Updates with close of European markets)
By Chuck Mikolajczak
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.
Oil edged up from November lows hit in the prior session, when U.S. crude hit its lowest intraday level since August 2016, sentiment remained negative from a supply glut that has persisted despite OPEC-led efforts to balance the market.
U.S. crude rose 0.75 percent to $42.85 per barrel and Brent was last at $45.32, up 1.12 percent on the day.
"Oil's had a tough run in the last handful of weeks," said Michael Scanlon, managing director, portfolio manager at Manulife Asset Management in Boston.
"I wouldn't say oil being up today gives anybody a high degree of confidence we've seen a floor in oil yet," he said.
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 but the picture was reversed on Wall Street, with energy up 0.1 percent.
The Dow Jones Industrial Average rose 28.03 points, or 0.13 percent, to 21,438.06, the S&P 500 gained 4.62 points, or 0.19 percent, to 2,440.23 and the Nasdaq Composite added 18.51 points, or 0.3 percent, to 6,252.46.
Healthcare was up 1.4 percent to pace the advance on Wall Street as 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 0.22 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 96.5 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 were unchanged in price to yield 2.1546 percent.
The dollar index rose 0.06 percent, with the euro down 0.22 percent to $1.1141.
Reporting by Chuck Mikolajczak; Editing by Bernadette Baum and Lisa Shumaker