GLOBAL MARKETS-Stocks mixed, commods off ahead of Greek audit

* Euro holds slight gains, German inflation supports

* Benchmark Treasury yield edges above 2 pct

* U.S. stock markets volatile in morning trade (Recasts, updates prices, adds comment)

By Rodrigo Campos

NEW YORK, Sept 28 (Reuters) - U.S. stocks edged higher while caution ahead of an audit of Greece's finances halted a three-day rally in global stocks on Wednesday.

The euro held to slight gains and prices of commodities like oil and copper fell.

Following its best day in a year and a half, an index of world stocks dropped as investors awaited news on whether Greece will be allowed another round of aid in order to avoid a default.

The European Union confirmed negotiators would return to Greece this week to discuss issuing its next tranche of aid. Investors will remain focused on Europe as the region's sovereign debt crisis spooks the regional economy and threatens banks across the euro zone and beyond.

"The price action in the markets suggests that the patience of investors is wearing thin," said Kathy Lien, director of currency research at GFT Forex.

It has been widely expected that the EU, IMF and European Central Bank would eventually approve the release of money Greece needs to avoid default. But after a boost to commodities and equities in the past days, markets acknowledge the risk is that optimism has been premature.

"It is certainly interesting that we had that nice rally (in U.S. stocks) yesterday and gave it all back late afternoon," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

"It just shows how nervous the markets are and it is tough to commit; we will probably continue like this until there is a little more clarity (in Europe), and who knows when that comes."

Close to noon in New York, the Dow Jones industrial average <.DJI> was up 37.08 points, or 0.33 percent, at 11,227.77. The Standard & Poor's 500 Index <.SPX> was down 0.93 points, or 0.08 percent, at 1,174.45. The Nasdaq Composite Index <.IXIC> was down 4.85 points, or 0.19 percent, at 2,541.98.

U.S. stocks were supported by data showing new orders for long-lasting U.S. manufactured goods slipped less than expected in August while a rebound in a gauge of business spending supported views the economy would likely avoid another recession.

An index of world stocks <.MIWD00000PUS> fell 0.5 percent after rising more than 3 percent on Tuesday --its largest daily percentage advance since mid-May 2010.

Equity markets have rallied over the past few sessions on expectations European officials will aggressively tackle the debt crisis by boosting the euro zone's 440 billion euro rescue fund, known as the EFSF.

But an increase in the EFSF faces opposition in Germany and there are signs of a split within the currency bloc over the terms of Greece's next bailout.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Benchmark U.S. Treasury yields edged above 2 percent before a $35 billion sale of five-year notes. The less-pessimistic U.S. data added to hopes for bold steps to combat Europe's debt crisis, keeping a lid on demand for safe-haven bonds.

U.S. 10-year Treasury prices fell 22/32 of a point to yield 2.056 percent.

While the euro briefly turned negative against the U.S. dollar, it was supported by the Greece headlines and by data showing inflation in Germany ticked up, which should ease pressure on the European Central Bank to lower rates. The single currency had previously hit a one-week high versus the greenback. (Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak and Julie Haviv; Editing by Dan Grebler)