By David Randall

NEW YORK (Reuters) - Global equity benchmarks treaded water on Friday and government bond yields edged lower as investors waited on the European Union to iron out details of an expected 750 billion-euro recovery fund that could provide another round of stimulus as the world economy reels from the coronavirus pandemic.

European, U.S. <.SPX> and other equity markets <.MIWD00000PUS> notched their third weekly gain in a row, though the pace of the rally has slowed. The U.S. Congress is set to begin debating a new aid package next week, as several states in the country's South and West implement fresh lockdown measures to curb the virus.

While retail sales for June released on Thursday beat market expectations, real-time measures of retail foot traffic and employee working hours and shifts have flatlined after steady growth since April.

"We now see higher risk of a market correction, considering the improvement in hard economic data we have seen over the past couple of months is likely to halt," said Tomo Kinoshita, global market strategist at Invesco in Tokyo.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.35% following modest gains in Europe and slight declines in Asia.

On Wall Street, the Dow Jones Industrial Average <.DJI> fell 62.35 points, or 0.23%, to 26,672.36, the S&P 500 <.SPX> gained 9.18 points, or 0.29%, to 3,224.75 and the Nasdaq Composite <.IXIC> added 29.36 points, or 0.28%, to 10,503.19.

European leaders will continue to meet through Saturday, trying to overcome opposition from the Netherlands and Hungary to issue joint euro debt that could provide another boost of stimulus [nL3N2EO1U9].

Dutch Prime Minister Mark Rutte, one of the main resisters to the recovery fund, which includes mass grants, said he was "not optimistic" an agreement would be reached on Friday.

The Netherlands wants countries receiving EU support from the fund to agree to reforms in their labor markets and pension systems, and is leading a group of several smaller EU nations calling for stricter conditions..

"Presumably, as is the way of Europe, they will agree to come back from more talks followed by a compromise and a watered-down deal," Societe Generale's Kit Juckes said of the EU discussions. "The positive, though, is that we are getting a recovery fund."

The dollar index <=USD> fell 0.362%, with the euro <EUR=> up 0.48% to $1.1438. Benchmark 10-year notes <US10YT=RR> last fell 4/32 in price to yield 0.625%, from 0.612% late on Thursday.