* Wall St closes higher as strong earnings cheer investors
* Sterling at 11-month low after official's comments
* Chinese state media slams Trump, markets nervous
* Dollar rallies, FX markets fret about tariff escalation
* Oil gains after unexpected Saudi production fall (Updates with close of U.S. markets, oil report)
By Laila Kearney
NEW YORK, Aug 6 (Reuters) - Stock markets lifted on Monday after strong corporate earnings helped Wall Street close higher, but a tariff dispute between the United States and China limited gains in equities while boosting the dollar and helping keep Treasury yields lower.
Sterling dropped to an 11-month low after the British trade minister warned that the nation was headed for a no-deal Brexit, stoking investor fears that Britain could soon leave the European Union without securing a trade agreement.
U.S. Treasury yields dipped, with the 10-year yield holding below 3 percent on moderate buying, on trade concerns and in advance of this week's August refunding, where the government will sell $78 billion in coupon-bearing securities.
"It's the trade tension between U.S. and China that's caused a pickup in bids for Treasuries," said James Barnes, director of fixed income at Bryn Mawr Trust in Devon, Pennsylvania.
After opening lower, all three major U.S. indexes closed higher. The Dow Jones Industrial Average rose 39.60 points, or 0.16 percent, to 25,502.18, the S&P 500 gained 10.1 points, or 0.35 percent, to 2,850.40 and the Nasdaq Composite added 47.66 points, or 0.61 percent, to 7,859.68.
The prolonged trade dispute between Washington and Beijing has rattled financial markets across the globe.
Kristina Hooper, global market strategist at Invesco in New York, said there were some signs China is "hunkering down and getting ready for a significant trade war” and that the impact could be more far-reaching than previously assumed.
Chinese state media attacked President Donald Trump's trade policies on Monday, calling the U.S. plan "extortion," in a bid to reassure investors as growth concerns battered China's financial markets.
The media campaign comes days after China proposed tariffs on $60 billion worth of U.S. imports in retaliation for the Trump administration's plans to impose 25-percent tariffs on $200 billion of Chinese imports.
Chinese stocks fell nearly 1.3 percent on Monday.
Still, U.S. equities have been able to offset some of the fallout of the trade spat with a strong earnings season to date.
Of the more than 400 S&P 500 companies that have reported so far, 78.6 percent have topped earnings estimates, well above the average of 72 percent for the past four quarters.
Berkshire Hathaway Inc, which rose 2.9 percent after the Warren Buffett-led conglomerate reported a 67 percent surge in quarterly operating profit on Saturday, helped bump up the S&P.
European shares followed their Asian counterparts lower, hurt by weak European bank earnings and trade fears, but a falling euro boosted exporters and helped halt the slide. The pan-European FTSEurofirst 300 index lost 0.15 percent and MSCI's gauge of stocks across the globe edged up 0.06 percent.
Worries about trade were evident in currency markets.
The dollar index, which benefits as investors rush to safety, rose on Monday, building on two consecutive weeks of gains as investors bet that trade war rhetoric and a strong U.S. economy would continue to boost the greenback.
Against a broad basket of currencies, the dollar was last up 0.25 percent to 95.378, within striking distance of a more than one-year peak of 95.652 reached on July 19.
Sterling fell to $1.2920, its lowest since September 2017, before settling down half a percent on the day. It slumped 0.4 percent against the euro to 89.33 pence and was the biggest loser among major currencies against a broadly strong greenback.
Oil prices gained after OPEC sources said Saudi crude production unexpectedly fell in July, raising concerns about global oil supplies as the United States prepares to reinstate sanctions against major exporter Iran.
Brent crude futures rose 54 cents to settle at $73.75 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 52 cents to settle at $69.01.
Additional reporting by Tommy Wilkes in London, Swati Pandey in SYDNEY, Helen Reid in LONDON, Sruthi Shankar in Bengaluru and Richard Leong, Stephanie Kelly, James Thorne, Sinéad Carew and Karen Brettell in New York; Editing by Nick Zieminski and James Dalgleish