* U.S. stocks open lower despite strong corporate earnings
* Donetsk fighting counters hopes of swift resolution of crisis
* Safe-heaven gold, yen, bonds rally; oil edges higher (Updates with U.S. market openings, changes dateline, previous LONDON)
By Caroline Valetkevitch
NEW YORK, July 21 Major global stock markets declined and bond prices rallied on Monday as worries over the Gaza Strip and Ukraine overshadowed optimism over corporate earnings.
The safe-haven yen and Swiss franc inched up, and gold prices rose above $1,300 an ounce, as the market focused on uncertainty after last week's downing of a Malaysian jetliner over Ukraine.
Prices of U.S. and European debt rose. German 10-year yields fell to about 1.14 percent, within reach of a 2012 record of 1.126 percent.
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. Investigators began to inspect the bodies of victims of the downing of Malaysia Airlines flight MH17 last week.
"The market is taking a break in reassessing (U.S.) second-quarter earnings. The development over the weekend was less than reassuring with the escalation of violence in Gaza and investigation of the downed Malaysian airliner," said Jim Russell, senior equity strategist at U.S. Bank Wealth Management in Cincinnati.
The Dow Jones industrial average fell 88.68 points or 0.52 percent, to 17,011.5, the S&P 500 lost 8.31 points or 0.42 percent, to 1,969.91 and the Nasdaq Composite dropped 18.04 points or 0.41 percent, to 4,414.10.
MSCI's All-World Index was down 0.5 percent, while European stocks were down 0.6 percent.
Shares of Halliburton Co shares rose 0.9 percent to $71.58 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's in line with the 67 percent average for the past four quarters and above the 63 percent average since 1994.
In the foreign exchange market, the safe-haven yen and Swiss franc benefited.
The dollar was slightly lower at 101.30 yen, while the dollar also dipped against the Swiss franc.
Benchmark 10-year Treasuries were up 8/32 in price to yield 2.45 percent.
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.
Any limitations on trade would be liable to hurt businesses, with Germany and its strong ties with the Russian economy a particular concern.
Shocks to the system from Ukraine and Israel's ground invasion of Gaza come at a time when markets have been digesting conflicting economic signals from either side of the Atlantic.
Oil prices edged higher after Iran and six world powers failed to meet a July 20 deadline for a settlement over Tehran's nuclear activities. Brent crude oil was up 7 cents at $107.31 a barrel, while U.S. crude was up 81 cents at $103.94. (Additional reporting by Patrick Graham in London and Richard Leong in New York; Editing by Susan Fenton and Nick Zieminski)