* 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 on Thursday against a basket of currencies, hitting its strongest level in more than two months and pressuring gold prices, as strong 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 the closely watched U.S. jobs report due out on Friday. In an encouraging sign for the labor market, data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low.
Oil prices continued to climb, with U.S. crude breaking through $50, helped by news of an informal meeting among the world's biggest producers on output cuts and a surprise drop in U.S. crude stockpiles.
Wall Street was little changed, as energy and materials sector gains countered a drag from Wal-Mart Stores, which tempered its profit expectations.
The dollar rose to its highest against the yen in a month, and pinned sterling firmly to a three-decade low on worries about Britain's exit from the European Union. Against a basket of currencies, the greenback gained 0.5 percent.
Strong U.S. jobs numbers could cement expectations of a Federal Reserve rate increase later this year and ripple through markets. Economists polled by Reuters forecast nonfarm payrolls to increase by 175,000.
Traders were betting on a 64 percent chance the Fed will hike 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, pretty much across the board it's better and in some cases materially better than expectations," said Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina. "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&P 500 gained 2.12 points, or 0.1 percent, to 2,161.85 and the Nasdaq Composite dropped 7.54 points, or 0.14 percent, 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 back above zero, reversing earlier falls, as a selloff in the British government bond market spilled over into the euro area.
Britain's 10-year gilt yield jumped nearly 10 basis points during the session to a three-week high.
Benchmark 10-year U.S. notes were last down 5/32 in price to yield 1.7319 percent, up from nearly 1.72 percent late on Wednesday.
Oil rallied to fresh four-month highs.
Brent crude futures rose 1.4 percent to $52.57 a barrel. U.S. futures climbed 1.3 percent to $50.48 a barrel, eclipsing $50 for the first time since June.
"The fact that you've got crude look like it's willing to hold around that $50 level I think is a positive for the (stock) market," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "That's maybe another confirmation giving a positive tone to future economic activity."
Spot gold fell 1.2 percent to more than three-month lows. (Additional reporting by Barani Krishnan, Richard Leong and Karen Brettell in New York, Marc Jones and Clara Denina in London; Editing by Bernadette Baum and Nick Zieminski)