* U.S. stocks down despite strong corporate earnings
* Donetsk fighting counters hopes of swift resolution of crisis
* Safe-heaven gold, yen, bonds rally; U.S. oil edges higher (Updates prices, adds details)
By Caroline Valetkevitch
NEW YORK, July 21 (Reuters) - Major global stock markets fell and bond prices rallied on Monday as worries over conflict in the Gaza Strip and Ukraine raised uncertainty for investors and kept them away from riskier assets.
The safe-haven yen also inched up and gold prices rose above $1,300 an ounce as the market focused on increased turmoil in the Middle East and tensions following last week's downing of a Malaysian jetliner over Ukraine.
Israeli jets, tanks and artillery continued to pound Gaza as the death toll from a two-week conflict topped 500. Reports that Ukrainian forces were moving into the eastern city of Donetsk added to concerns that the conflict in one of Europe's biggest countries may escalate. <ID:nL6N0PV1C5]
Shocks to the system from Ukraine and Israel's ground invasion of Gaza come at a time when markets have been worried about economic growth on both sides of the Atlantic and digesting second-quarter earnings reports.
The United States and the EU last week announced further economic sanctions against Russian interests before the jet was shot down.
But Germany and other European Union members have taken a more cautious line on moves against Russia than the United States, mindful of the damage an exchange of sanctions with one of their main energy providers could do to Europe's economy. The Bundesbank said on Monday the German economy probably stagnated in the second quarter.
The situations in Gaza and Ukraine "are both quite serious, but at this point unlikely to derail the U.S. economy," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
The Dow Jones industrial average fell 70.00 points, or 0.41 percent, at 17,030.18. The Standard & Poor's 500 Index was down 7.87 points, or 0.40 percent, at 1,970.35. The Nasdaq Composite Index was down 15.07 points, or 0.34 percent, at 4,417.07.
MSCI's All-World Index was down 0.3 percent, while European stocks were down 0.5 percent.
The overseas headlines overshadowed some upbeat U.S. earnings.
Shares of Halliburton Co rose 0.6 percent to $71.35 after the world's No. 2 oilfield services provider reported a 20 percent increase in quarterly profit.
So far this reporting period, 68 percent of S&P 500 companies are beating Wall Street's profit expectations, according to Thomson Reuters data. That is above the 63 percent average since 1994.
In the foreign exchange market, the greenback was a tad lower against the yen at 101.27 yen, while the dollar also slipped against the Swiss franc, last trading at 0.8982 franc.
German 10-year yields fell to about 1.14 percent , within reach of a 2012 record of 1.126 percent.
Benchmark 10-year U.S. Treasuries were up 7/32 in price to yield 2.458 percent, while the 30-year Treasury bond was up 21/32 in price, pushing the yield down to 3.251 percent . It fell as low as 3.249, the lowest since June 2013.
Investors were also bracing for an interest rate hike from the Federal Reserve next year, with the gap between short- and long-term interest rates, mainly the spread between yields of 2-year notes and 10-year bonds, contracting on Monday to its narrowest since June last year.
U.S. oil prices were higher after Iran and six world powers failed to meet a July 20 deadline for a settlement over Tehran's nuclear activities. U.S. crude was up 83 cents at $103.99, while Brent crude oil was down 28 cents at $106.94 a barrel. (Additional reporting by Patrick Graham in London and Richard Leong and Gertrude Chavez-Dreyfuss in New York; Editing by Susan Fenton, Nick Zieminski and Dan Grebler)