* Europe shares drop 2 percent before U.S. jobs report
* Euro edges up after hitting two-week low vs dollar
* Asia shares down for seventh straight week, worst run
since 2011
* Oil sags back to $50 a barrel but up for second week
By Marc Jones
LONDON, Sept 4 (Reuters) - World shares slid towards their
fourth weekly loss in the last five on Friday, as a boost from a
supportive-sounding European Central Bank gave way to caution
before U.S. jobs data.
Concerns about China consigned Asian shares .MIAPJ0000PUS
to a seventh straight weekly loss and Europe's markets fell 2
percent after rising almost 2.5 percent on Thursday.
"Markets are worried about a too strong U.S. job report
which could spark the Fed into hiking rates in September," said
Philippe Gijsels, head of research at BNP Paribas (PARIS:BNPP) Fortis Global
Markets.
Wall Street was set to follow suit, with index futures
ESc1 pointing to a fall of 1.1 percent in the S&P 500 .SPX .
Thursday's gains in Europe were driven by ECB President
Mario Draghi saying the bank was prepared to expand its 1
trillion euro stimulus programme aimed at lifting growth and
inflation in the euro zone.
But Friday's focus was on whether U.S. jobs data due at 1230
GMT would keep the Federal Reserve on track to raise its record
low interest rates later this year.
Economists polled by Reuters expect the U.S. economy to have
produced 220,000 new jobs last month, continuing the robust
employment creation of the past five years. Average hourly
earnings are predicted to have risen by 0.2 percent, as they did
in July. ID:nLNN7JEBEB
A strong reading will keep alive chances that a first Fed
hike in almost a decade could come this month. Following a tough
last month for global markets however, markets now see December
or early next year as more likely.
"We were until recently firm Septemberists but now it's very
much on a knife edge," said Luke Bartholomew at Aberdeen Asset
Management in London.
"Market volatility has shaken them (Fed policymakers)
somewhat ... so seeing that markets are very fragile, do they
want to shock them with hiking now? I think that is a very live
debate now."
In the foreign exchange markets, the dollar fell 0.8 percent
against the yen to 119.10 JPY= as the safe-haven Japanese
currency capped a third week of gains.
The euro was fractionally stronger at $1.1130 having been
driven to a two-week low of $1.10875 and a four-month low
against the yen EURJPY=R by Draghi's talk of more money
printing. ID:nL5N1190VG
The ECB also cut its growth and inflation forecasts and
warned of possible further fallout from China. Coupled with a
potential delay to a Fed move, euro zone bond yields fell
further on Friday, with German 10-year yields DE10YT=TWEB ,
hitting their lowest level in nearly a week at 0.69 percent.
"Fundamentally market reaction to U.S. data can be
short-lived. In the medium-term perspective ECB QE matters more
than U.S. non-farm payrolls so we think the bias is bullish for
(German) Bunds," said BNP Paribas strategist Patrick Jacq.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
China's volatile markets http://link.reuters.com/myh35w
China PMIs http://link.reuters.com/zut45w
Global assets in 2015 http://link.reuters.com/dub25t
European bourses in 2015 http://link.reuters.com/pap87v
Currencies vs dollar http://link.reuters.com/tak27s
World interest rates: http://link.reuters.com/xyb96s
Oil prices http://link.reuters.com/beb23v
Commodities performance http://link.reuters.com/rac73w
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
CRISIS PROPORTIONS
Strains in Asia stayed close to the surface despite hard-hit
Chinese markets being closed for a second day for a holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS chalked up its worst weekly losing streak since
2011 as it ended down 0.9 percent on the day and more that 4
percent on the week.
Japan's Nikkei .N225 fared even worse. It fell 2.5 percent
on the day and 7 percent for the week as it slumped to a
seven-month low.
There was so sign of relief for the region's emerging market
currencies either.
Bank Negara Malaysia was spotted intervening to stem the
ringgit's weakness as confidence continued to be hit by a
corruption scandal swirling round Prime Minister Najib Razak.
The Institute of International Finance warned the current
slump in emerging market stocks -- down 40 percent since April
.MSCIEF -- and currencies had now reached "crisis proportions"
ID:nL5N1194VS
In commodities markets, which have been battered by fears of
a hard landing in China, trade remained highly volatile.
Brent crude LCOc1 slipped 0.4 percent to $50.47 per barrel
although it was clinging to a second week of modest gains.
Copper CMCU3 fell 1.6 percent to $5,160 per tonne after
surging to $5,314 on Thursday, a more than three-week high, as
investors closed out positions before the U.S. jobs data.