* S&P drops negative outlook for U.S. government debt
* Dollar gains on the news, government debt prices fall
* Equity markets trade near break-even as Fed policy weighs
* Uncertainty reins over when Fed might ease its bond buying
The dollar bounced higher after rating agency Standard & Poor's dropped its negative credit outlook for U.S. government debt on Monday and global equity markets edged higher amid uncertainty over the Federal Reserve's next move on its monetary policy.
S&P upgraded its credit outlook for U.S. government debt to "stable" from "negative," saying the chances of a downgrade of the country's rating is "less than one in three."
The dollar extended gains versus the yen to hit a session high after S&P revised its sovereign credit outlook for the United States.
The dollar rose as high as 99.28 yen and last traded at 99.22, up 1.73 percent on the day, according to Reuters data.
Against the euro, the dollar gained about 0.23 percent to 1.3192.
Analysts and investors said the news was unlikely to spur a sharp rally or impact speculation about when the Fed might ease back on its bond buying, but added to generally upbeat sentiment about the outlook for the U.S. economy.
Stocks fell in Europe and mostly eased on Wall Street as investors assessed equity valuations that no longer are as attractive as last year or at the beginning of 2013.
"Join less convincing evaluations and this developing uncertainty with respect to global central bank policy and it's enough to put the markets in a period of what I think will be drawn-out consolidation," said Steven Einhorn, vice chairman at hedge fund Omega Advisors Inc in New York.
"Not a lot of downside, just not a lot of upside," he said.
MSCI's all-country world equity index rose 0.18 percent even as the FTSEurofirst 300 of leading European shares were at break-even, or 1,194.25.
The Dow Jones industrial average was up 4.37 points, or 0.03 percent, at 15,252.49. The Standard & Poor's 500 Index was up 0.84 points, or 0.05 percent, at 1,644.22. The Nasdaq Composite Index was up 5.59 points, or 0.16 percent, at 3,474.80.
Prices on U.S. 30-year Treasury bonds added to earlier losses, with their yield rising to a 14-month high, after the S&P revision.
The 30-year or long bond fell 13/32 in price to yield 3.3661. The benchmark 10-year U.S. Treasury note was down 8/32 in price to yield 2.2061 percent.
Chinese data at the weekend suggesting the world's No. 2 economy weakened slightly in May undermined some of the positive sentiment by raising questions around Beijing's 7.5 percent growth forecast for this year.
Key commodity prices suffered from the signs of weaker Chinese demand.
Brent crude traded near $104 per barrel, off 29 cents at $104.26. U.S. light sweet crude oil fell 26 cents to $95.78 per barrel.