* Long-dated Treasury yields scale back from multi-year highs
* Wall St stocks mixed, uncertainty prevails in Asia
* Italian bond yields fall as govt moots "collaboration" with EU
* Sterling strengthens on hopes for Brexit deal (Updates throughout)
By Sujata Rao
LONDON, Oct 10 (Reuters) - World stocks flatlined on Wednesday just above eight-week lows, curbed by U.S. long-dated borrowing costs near multi-year peaks, renewed fears for the global economy and the possibility of an Italy-EU clash over budget spending.
The effects on world markets of this week's bond selloff that took U.S. 10-year bond yields to seven-year highs were exacerbated by economic growth concerns stemming from trade conflicts and $80-per-barrel oil, as the International Monetary Fund cut its world GDP forecasts for the first time in two years.
The IMF's estimates for the United States and China were both reduced, with the fund predicting the countries would feel the brunt of their trade war next year. It also slashed 2019 forecasts for emerging markets.
MSCI's world equity index which has spent four days in the red, was flat. While most Asian markets rose , European shares slipped 0.2 percent as the technology and luxury sectors were hit by U.S. tech weakness and fears of a Chinese economic slowdown.
Wall Street futures indicated a flat opening for the S&P500 , while the tech-heavy Nasdaq was tipped to fall.
"We are seeing more investors opting to wait and see how risks surrounding rising U.S. Treasury yields, global growth and China play out", Jasper Lawler of London Capital Group said.
"Near-term risks to global financial stability have increased rapidly over the past few months. The markets have been relatively complacent, but we are starting to see an acknowledgement of these risks."
In China, the yuan slipped against the dollar for the fifth session out of the past six to approach four-year lows hit in August .
The focus is on next week's semi-annual U.S. report on currencies which, many reckon, could accuse Beijing of manipulating the yuan depreciation.
Stocks have been rocked this week by a heavy selloff on U.S. Treasuries where 10-year borrowing costs hit a 7-1/2-year peak of 3.261 percent. Yields stand off those levels but rose 2 basis points on the day to 3.23 percent.
"We are at some sort of critical moment, a crossroads, for bond and equity markets," said Marie Owens Thomsen, global head of economic research at Indosuez Wealth Management.
U.S. 10-year yields at 2 percent unequivocally favour equity investment but this is not the case above 3 percent, she said.
"This January we took out the 2 percent (yield) handle and now we are wondering if we are permanently taking out the 3 percent handle as well. That makes the climate for equities much more challenging."
Owens Thomsen warned though that deceleration in economic growth could curb the rise in yields. The Treasury selloff may have paused also after President Donald Trump complained the Federal Reserve was going too fast with rate hikes.
In Europe, there has been more bellicose rhetoric from Italian politicians, many of whom appear to be girding for battle with European Union authorities after unveiling a bigger-than-expected budget deficit.
However, Italian stocks rose 0.3 percent after Economy Minister Giovanni Tria said he expected "collaboration" with the EU. He had pledged on Tuesday to restore calm if market turbulence escalated into financial crisis.
His comments also took Italian bond yields further off multi-year highs, with 10-year borrowing costs down six bps .
Shares in Italian banks, volatile because of the lenders' government bond holdings, also got a boost after an EU official told Reuters Italian banks' there was no cause for alarm about Italian banks' liquidity levels .
"At the current junction I don't think (Italy) are anywhere near a position where they can provoke another crisis in Europe," Owens Thomsen said.
Politics were in focus in Britain too, where reports of progress in negotiating a Brexit deal with the EU pushed the pound to 3-1/2-month highs versus the dollar. . The dollar was flat against a basket of currencies, easing from seven-week peaks.
The IMF growth forecast cuts pulled oil prices off 4-1/2-year highs above $85, though they were supported by Hurricane Michael which has shut nearly 40 percent of crude output in the Gulf of Mexico.
Additional reporting by Tomo Uetake in Tokyo,