UPDATE 1-European stocks recover slightly as bond selloff eases

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Airlines rise as oil under pressure

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Pandora surges on forecast lift

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Alstom slumps on cash flow forecast cut

(Updated at 0842 GMT)

By Sruthi Shankar

Oct 5 (Reuters) - European shares regained some poise on Thursday after a three-day selloff, as retreating government bond yields and an overnight slump in oil prices relieved some pressure on equity investors.

The STOXX 600 index was up 0.3% by 0842 GMT, after closing at a six-month low on Wednesday.

Global equities took a hit this week as U.S. and European bond yields surged on bets that interest rates will remain higher for longer, with U.S. economy staying resilient and policymakers claiming rates will not fall anytime soon.

Longer-dated U.S. Treasury yields, however, eased from 16-year highs on Wednesday after data showed U.S. private jobs growth in September was below economists' expectations.

Investors will closely watch the U.S. monthly non-farm payrolls report on Friday to gauge if the Federal Reserve will raise interest rates to 5.5-5.75% in November. The odds of such a move currently stand at 25%.

"Market participants most likely want to see some weakness in tomorrow's U.S. labour market release to counteract the current bear market in bonds," UniCredit analysts noted.

Euro zone bond yields also eased, after Brent crude futures shed more than 5% overnight on uncertain fuel demand outlook. Brent prices recovered slightly on Thursday, to trade at $85.9 per barrel.

The oil & gas index slid 0.5%, but the travel & leisure index jumped 1.9% as the prospect of easing fuel costs boosted airline stocks.

Air France KLM climbed 5.5%, while British Airways-owner IAG added 2.4%.

Jewellery retailer Pandora jumped 9.8% to one-and-half year highs after it raised its growth targets, saying investments in the brand and store network were paying off.

Meanwhile, Alstom tanked to an over 18-year low at 13.84 euros after the French train manufacturer warned its full-year free cash flow would be negative due to a ramp-up in production and delays in some orders.

"We see this as a major blow to management's credibility," Deutsche Bank analysts noted. "The group's investment grade rating now looks at risk, with a capital increase becoming increasingly likely."

Metro Bank hit a record low after the mid-sized bank confirmed it was evaluating its options including a potential fundraising, following press reports it was seeking around 600 million pounds. (Reporting by Sruthi Shankar in Bengaluru; Editing by Janane Venkatraman and Varun H K)