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* Oil prices gain, stay near four-month highs
* Wall St flat, European equities slip
* Sterling sinks to fresh 31-yr low
* U.S. jobless claims fall; focus on Fri payroll report (Updates with U.S. afternoon trading)
By Lewis Krauskopf
NEW YORK, Oct 6 (Reuters) - The U.S. dollar gained onThursday against a basket of currencies, hitting its strongestlevel in more than two months and pressuring gold prices, asstrong labor market data gave support to a possible U.S.interest rate hike later this year.
U.S. Treasury yields rose to three-week highs, ahead of theclosely watched U.S. jobs report due out on Friday. In anencouraging sign for the labor market, data on Thursday showedthe number of Americans filing for unemployment benefitsunexpectedly fell last week to near a 43-year low.
Oil prices continued to climb, with U.S. crude breakingthrough $50, helped by news of an informal meeting among theworld's biggest producers on output cuts and a surprise drop inU.S. crude stockpiles.
Wall Street was little changed, as energy and materialssector gains countered a drag from Wal-Mart Stores,which tempered its profit expectations.
The dollar rose to its highest against the yen in amonth, and pinned sterling firmly to a three-decade lowon worries about Britain's exit from the European Union. Againsta basket of currencies, the greenback gained 0.5 percent.
Strong U.S. jobs numbers could cement expectations of aFederal Reserve rate increase later this year and ripple throughmarkets. Economists polled by Reuters forecast nonfarm payrollsto increase by 175,000.
Traders were betting on a 64 percent chance the Fed willhike rates in December, up slightly from a day earlier,according to the CME FedWatch website.
"If you look at the economic data for the past month, prettymuch across the board it's better and in some cases materiallybetter than expectations," said Walter Todd, chief investmentofficer at Greenwood Capital Associates in Greenwood, SouthCarolina. "All of that would seem to push the Fed to move."
In the U.S. equity market, the Dow Jones industrial average fell 12.46 points, or 0.07 percent, to 18,268.57, the S&P500 gained 2.12 points, or 0.1 percent, to 2,161.85 andthe Nasdaq Composite dropped 7.54 points, or 0.14percent, to 5,308.48.
The pan-European STOXX index fell 0.4 percent. Shares of British budget airline easyJet tumbled after a weak profit report.
MSCI's gauge of stocks across the globe dipped 0.1 percent.
Europe's benchmark German bond yield edged briefly backabove zero, reversing earlier falls, as a selloff in the Britishgovernment bond market spilled over into the euro area.
Britain's 10-year gilt yield jumped nearly 10basis points during the session to a three-week high.
Benchmark 10-year U.S. notes were last down 5/32in price to yield 1.7319 percent, up from nearly 1.72 percentlate on Wednesday.
Oil rallied to fresh four-month highs.
Brent crude futures rose 1.4 percent to $52.57 abarrel. U.S. futures climbed 1.3 percent to $50.48 abarrel, eclipsing $50 for the first time since June.
"The fact that you've got crude look like it's willing tohold around that $50 level I think is a positive for the (stock)market," said Chuck Carlson, chief executive officer at HorizonInvestment Services in Hammond, Indiana. "That's maybe anotherconfirmation giving a positive tone to future economicactivity."
Spot gold fell 1.2 percent to more than three-monthlows. (Additional reporting by Barani Krishnan, Richard Leong andKaren Brettell in New York, Marc Jones and Clara Denina inLondon; Editing by Bernadette Baum and Nick Zieminski)
