GLOBAL MARKETS-Stocks hold steady; sterling near five-year high

* Dow slips from record closing high

* U.S., UK factory data beat forecasts; China PMI misses

* Oil prices fall on China; gold loses shine after Fed outlook

* May Day holiday mutes trading volume in Europe, Asia

(Updates market action, changes byline, dateline previously LONDON) NEW YORK, May 1 (Reuters) - World stock prices held steady on Thursday on solid corporate earnings, while sterling hit a near five-year high on unexpectedly strong data on the British factory sector, which posted its strongest level in five months. Equities markets overcame a brief hiccup after data on China's vast manufacturing sector missed forecasts. "Globally, things are fairly valued," said Jason Pride, director of investment strategy at Glenmede in Philadelphia. "There is no reason for a material downside for stocks right now." With stocks steady, bond prices were little changed, and benchmark U.S. yields held near two-week lows. But the disappointing data on Chinese manufacturing activity pressured oil prices, driving them to a three-week low. Gold prices fell 1 percent a day after the U.S. Federal Reserve reiterated confidence in the U.S. economic outlook despite weak first-quarter growth. May Day holidays in Europe, much of Asia and parts of Latin America reduced trading volume, mitigating the impact of the Chinese data, a day after the stunningly weak data on U.S. economic growth. China's official manufacturing PMI came in at 50.4 in April, up a tick from March but below forecasts of 50.5, stoking concerns about the world's No. 2 economy. A reading above 50 indicates expansion. On the other hand, the latest manufacturing data on the United States and Britain surpassed expectations, signaling economic momentum in both countries. The Institute for Supply Management said its index on U.S. factory activity rose to its highest level since December, while Markit reported its UK manufacturing gauge rose to its strongest level since November. Sterling hit its highest level against the dollar in nearly five years, and last traded at $1.6894. It rose toward a two-month high against the euro, last quoted at 1.2173 euro . The greenback held steady against other currencies. The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.06 percent to 79.524. London's blue-chip FTSE index gained 0.2 percent, hitting a seven-week high, boosted by results from Lloyds Banking Group and TV and media group BSkyB.

On Wall Street, the factory data gave a mild lift to investor appetite, although the Dow Jones Industrial average dipped below its record close set on Wednesday. In mid-morning trading, the Dow fell 3.76 points or 0.02 percent, to 16,577.08, the S&P 500 gained 1.01 points, or 0.05 percent, to 1,884.96, and the Nasdaq Composite added 18.092 points, or 0.44 percent, to 4,132.647. The Commerce Department reported that consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.9 percent in March, which was was the biggest gain since August 2009. "This is a bit more of a confirmation that there is momentum building in the economy," said Carl Riccadonna, senior U.S. economist at Deutsche Bank in New York. Not all signs on the economy were positive. First-time claims for U.S. jobless benefits rose more than expected, supporting the view the Federal Reserve is unlikely to raise short-term interest rates until the second half of 2015. The claims figures did not, however, alter the view for fairly strong payrolls data for April The government's monthly labor market report is to be released on Friday. Economists polled by Reuters projected a 210,000 increase in jobs.

Earlier, upbeat earnings helped Japanese stocks stage their biggest rally in two weeks. The Nikkei closed 1.3 percent higher. The MSCI world equity index, which tracks shares in 45 nations, rose 0.71 points or 0.17 percent, to 414.8.

In commodity markets, oil stayed under pressure after stocks of the fuel in the United States hit a record high. Brent crude for June delivery was last down $1.10, or 1.02 percent, at $106.97 a barrel. U.S. crude was last down 45 cents, or 0.45 percent, at $99.29 per barrel. Spot gold prices fell $11.73 or 0.91 percent, to $1,279.56 an ounce.

(Additional reporting by Marc Jones in London; Wayne Cole in Sydney; Editing by Leslie Adler)