By Caroline Valetkevitch

NEW YORK (Reuters) - Global stock markets were mostly lower on Tuesday while benchmark U.S. Treasury yields jumped to their highest levels since June as a U.S. services industry report underscored expectations the Federal Reserve will need to keep hiking interest rates.

The U.S. dollar strengthened, while the Japanese yen hit a fresh 24-year low.

Wall Street's three major indexes ended lower, led by losses in the Nasdaq, in the market's first session after the U.S. Labor Day holiday.

A survey from the Institute for Supply Management (ISM) showed the U.S. services industry picked up in August for the second straight month amid stronger order growth and employment, while supply bottlenecks and price pressures eased.

The ISM non-manufacturing PMI edged up to a reading of 56.9 last month, beating economists' expectations.

The European Central Bank is widely expected to lift rates sharply when it meets later this week. The next U.S. Fed rate decision comes on Sept. 21.

The Fed is expected to raise the fed funds rate by another 75 basis points then, which would bring the range to between 3.0% and 3.25%. That is up from the zero to 0.25% band in March.

Benchmark 10-year note yields were last at 3.336%, the highest since June 16. They have risen from a four-month low of 2.516% on Aug. 2.

"You have all this fear that more rate increases are going to happen at the central bank level, inflation is not going to dissipate and then you've got the quantitative tightening that's coming pretty rapidly," said Tom di Galoma, managing director at Seaport Global Holdings in New York.

The Dow Jones Industrial Average fell 173.14 points, or 0.55%, to 31,145.3; the S&P 500 lost 16.07 points, or 0.41%, to 3,908; and the Nasdaq Composite dropped 85.96 points, or 0.74%, to 11,544.91.

The pan-European STOXX 600 index rose 0.24% and MSCI's gauge of stocks across the globe shed 0.47%.

The dollar index rose 0.6%, while the euro was sliding again, having failed to get back above parity against the dollar [/FRX]. The euro was last down 0.27% to $0.9899.

The Japanese yen weakened 1.53% versus the greenback to 142.80 per dollar.

Sterling, which has been one of the world's weakest major currencies over the last month, edged up as Liz Truss's installation as new UK prime minister fed expectations of a big energy relief package there.

Sterling was last trading at $1.1516, up 0.03% on the day.

In energy, oil prices fell as concerns resumed about the prospect of more rate hikes.

Brent crude settled at $92.83 a barrel, losing $2.91, or 3%. U.S. West Texas Intermediate (WTI) fell from Monday's trading to settle at $86.88 a barrel, up 1 cent from Friday's close.