World stocks fell on Friday as investors focused on the latest U.S. jobs data due later in the day while the dollar strengthened slightly.
Euro zone government bonds traded in a narrow range. The U.S. July employment report is due at 1230 GMT. Economists polled by Reuters expect it to show that companies shed 75,000 workers in July, marking the seventh straight month of job losses.
Hopes of a speedy economic recovery were dented on Thursday by a surprise jump in U.S. weekly jobless claims, a lower than expected second-quarter gross domestic product and a shock revision of data that showed the U.S. economy shrank in the final quarter of 2007, revealing a brush with recession.
"The global economic outlook is deteriorating," said Yoku Ihara, manager at investment information department at Retela Crea Securities in Japan.
European shares slid, tracking hefty losses elsewhere and weighed down further by a profit warning from carmaker BMW. It said it would not reach its 2008 targets due to a significant deterioration in business conditions.
The FTSEurofirst 300 index of top European shares fell 0.7 percent.
Earlier, Japan's Nikkei average fell 2.1 percent to hit a two-week closing low, dragged down by financial stocks after two of Japan's largest banks — Mizuho Financial Group and Sumitomo Mitsui Financial Group — posted sharp declines in first-quarter core profitability.
The Nikkei shed 282.22 points to 13,094.59, the lowest close since July 18. The broader TOPIX lost 2.4 percent to 1,272.93.
DOLLAR, BONDS STEADY
The dollar was up slightly against a basket of major currencies, gaining against the euro but losing to the Japanese yen.
The euro was down 0.2 percent at $1.5564 while the dollar lost 0.3 percent to 107.55 yen.
"This morning the yen has moved quite a long way and that reflects the fall in equity markets," said Daragh Maher, deputy head of global FX strategy at Calyon.
The yen tends to perform well when risk aversion, fuelled by economic gloom, increases.
Euro zone government bond prices lost ground ahead of the jobs data.
Two-year paper yielded 4.255 percent, 2 basis points more than in late Thursday trade while 10-year Bunds yields were up the same at 4.370 percent.
