European shares hit a four-week low on Friday, extending the previous day's sharp losses, with investors anxious before key U.S. jobs figures after data this week raised doubt about the strength of economic recovery.
By 1033 GMT, the FTSEurofirst 300 .FTEU3 was down 1.2 percent at 970.14 points, after losing 1.6 percent on Thursday to a three-week closing low.
The index, which has just posted its best quarterly gain in nearly 10 years, was set for a third day of losses.
There is a lot of negative in the background, which suggests you don't want to be complacent about this being a short-term correction, said Geoff Wilkinson, head of investment research at Mint, in London.
Clearly people are buying bonds, we have got through the key 3.3 percent yield level in U.S. 10-year (Treasury), and people are buying yen.
Banks .SX7P, which have rallied 160 percent since March, were among the top losers on concerns over the growth picture.
KBC (KBC.BR), UBS (UBSN.VX), Royal Bank of Scotland (RBS.L), BNP Paribas (BNPP.PA), Deutsche Bank (DBKGn.DE), Credit Suisse (CSGN.VX) and Commerzbank (CBKG.DE) lost 0.6-4.5 percent.
The key thing ... is whether we are going to get a turn in financials. If they have another lurch lower, 2 or 3 percent, it will move beyond a gradual pullback to a more significant correction of 10 percent plus, Wilkinson said.
British insurer Legal & General (LGEN.L) shed 5.5 percent, partly reversing a four-day rally on the back of bid speculation.
Commodity shares, which have also performed strongly in the rally, were out of favour. Royal Dutch Shell (RDSa.AS), BG Group (BG.L) and Total (TOTF.PA) dropped 0.4-0.8 percent.
Among miners, BHP Billiton (BLT.L), Rio Tinto (RIO.L), Lonmin (LMI.L), Xstrata (XTA.L), Vedanta Resources (VED.L) and Kazakhmys (KAZ.L) were down 0.9 percent to 4 percent.
All eyes will be on the U.S. non-farm payrolls data for September, due at 1230 GMT, for indications of the pace of the recovery in the world's largest economy.
Economists in a Reuters survey forecast 180,000 jobs were lost in the month compared with a loss of 216,000 jobs in August, while the unemployment rate was seen at 9.8 percent, compared to a 9.7 percent rate the prior month.
The dollar was flat against a basket of major currencies as investors squared positions ahead of the jobs data and a meeting of Group of Seven finance chiefs over the weekend.
International Monetary Fund managing director Dominique Strauss-Kahn said it was not yet time to withdraw government economic stimulus because of rising unemployment and a still-damagaed financial sector.
The pan-European index, which slumped 45 percent last year, has rallied 50 percent since hitting a floor in early March, and is up 16.6 percent so far this year.
LOW RISK APPETITE
The VDAX-NEW volatility index .V1XI was up 5.1 percent after hitting a four-week closing high on Thursday. The higher the index, the lower is investors' appetite for risky assets.
Across Europe, Britain's FTSE 100 .FTSE was down 0.8 percent, Germany's DAX .GDAXI fell 0.7 percent and France's CAC 40 .FCHI shed 1.3 percent.
U.S. stock index futures SPc1 DJc1 NDc1 pointed to a softer start for Wall Street.
We have been waiting for a correction for quite a while, said Heino Ruland, strategist at Ruland Research, in Frankfrut.
The third quarter performed pretty strongly. With the beginning of the fourth quarter, we have to realise that the economy is by far not in the shape which the performance of the equity market would suggest.
Technology shares .SX8P also came under pressure, tracking weakness from U.S. semiconductors after poor results by technology outsourcing and consulting firm Accenture (ACN.N).
TomTom (TOM2.AS), Alcatel-Lucent (ALUA.PA), ASML Holding (ASML.AS), Cap Gemini (CAPP.PA) and STMicroelectronics (STM.PA) lost 2.8-7.6 percent.
Carlsberg (CARLb.CO) sagged 5 percent after Deutsche Bank downgraded the brewer to 'sell', but SABMiller (SAB.L) added 1.5 percent, helped by Cazenove's positive comments.
Munich Re (MUVGn.DE) gained 1.2 percent after receiving a boost from two broker price target upgrades.