* Stocks falter as investors remain cautious on Greece, Ukraine
* Oil falls below $61 barrel as other commodities weigh
* Treasury yields rise on Fed rate hike outlook (Adds U.S. market open, changes byline, dateline; previous LONDON)
By Herbert Lash
NEW YORK, Feb 17 (Reuters) - The euro recovered from initial losses and gold fell to one-month lows on Tuesday on signs Greek banks will continue to get emergency funding despite a breakdown in debt talks between Athens and euro zone finance ministers.
Even as Greek financial markets slipped, with the main Athens stock index falling as much as 4.7 percent after the open, on the whole investors kept their composure on expectations that a compromise would eventually be reached.
The European Central Bank was unlikely to pull the plug on funding for Greek banks this week, a person familiar with the matter told Reuters.
Global equity markets wavered but Greek stocks cut their losses while Italian and Spanish 10-year government debt yields rose only slightly.
Earlier safe-haven buying of U.S. Treasuries on concerns about Greece and Ukraine dissipated in New York trading.
“The decline yesterday was in very thin trading. The market recognizes that Greece is fairly isolated ... without much of a contagion impact,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The euro rose 0.33 percent against the dollar to $1.1389 and against sterling it bounced from within a whisker of a seven-year trough of 73.69 pence set last week.
The euro zone single currency was also helped by a German ZEW survey that showed analyst and investor sentiment rose in February to its highest in a year.
Spot gold fell as much as 2.1 percent to its lowest since Jan. 8 at $1,205.72 an ounce in earlier trade and was down about 1.9 percent at $1,207.95.
“People think that eventually things will move towards a solution because there is a lot at stake in the euro zone,” Julius Baer analyst Carsten Menke said.
MSCI’s all-country world stock index fell 0.18 percent, while the pan-European FTSEurofirst 300 index was down 0.1 percent at 1,500.98.
On Wall Street, the Dow Jones industrial average fell 42.66 points, or 0.24 percent, to 17,976.69. The S&P 500 slid 4.43 points, or 0.21 percent, to 2,092.56 and the Nasdaq Composite lost 7.41 points, or 0.15 percent, to 4,886.43.
Oil slipped below $61 a barrel, dragged lower by weakness in some other commodity markets, though threats to Middle East crude supplies and expectations lower prices may prompt a slowdown in U.S. output limited the fall.
Brent crude fell 68 cents to $60.72 a barrel. U.S. crude dropped $1.52 to $51.26 a barrel.
U.S. Treasury debt yields rose on growing expectations the Federal Reserve could change the language in its next monetary policy statement to flag a possible interest rate increase as early as June.
Benchmark 10-year notes were down 18/32 in price to yield 2.0853 percent, up from 2.05 percent late on Monday. (Reporting by Herbert Lash; Editing by James Dalgleish)