European shares fell sharply on Friday, snapping a four-session rally, as traders feared U.S. non-farm payrolls numbers could signal a return to recession.

At 3:06 a.m. EDT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 962.97 points after rising 0.7 percent in the previous session.

I think the job figures are going to be worse than expected. It could be a wake-up call for the market and share prices could go down even further, Koen De Leus, a strategist at KBC Securities in Brussels, told Reuters.

Expectations of the QE3 (another round of quantitative easing) have helped shares in the past days, but at the end of the day, the market needs better economic environment that stimulates growth and company results.

The U.S. non-farm payrolls data is expected to show an increase of 75,000 jobs, although market whispers point to a much lower number at 1230 GMT (8:30 a.m. EDT) following a decline in the employment component of the Institute for Supply Management's factory activity index on Thursday.

European bank shares fell 1.6 percent, with investors trading cautiously after a New York Times report said a suit was being prepared to be filed against big U.S. banks such as Bank of America (BAC.N), JPMorgan Chase (JPM.N), Goldman Sachs (GS.N) and Deutsche Bank (DBKGn.DE) by the agency that oversees U.S. mortgage markets.

The report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.