* FTSEurofirst 300 falls 1 pct, hits 4-week lows
* Banks, commodity shares top weighted losers
* U.S. non-farm payrolls due at 1230 GMT
* For up-to-the-minute market news, click on []
By Dominic Lau
LONDON, Oct 2 (Reuters) - European shares hit a four-week
low on Friday, extending the previous day's sharp losses, as
investors were nervy before the U.S. jobs figures after data
this week cast doubt about the strength of the recovery.
By 0757 GMT, the FTSEurofirst 300 <> was down 1
percent at 971.93 points, after falling 1.6 percent on Thursday
to a three-week closing low.
The index, posting its best quarterly gains in nearly 10
years in the last quarter, was on track for a third day of
losses.
"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."
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>, Barclays <BARC.L>, Societe
Generale <SOGN.PA>, BNP Paribas <BNPP.PA>, Deutsche Bank
<DBKGn.DE>, Credit Suisse <CSGN.VX> and Commerzbank <CBKG.DE>
lost 1.1 to 6.8 percent.
But HSBC <HSBA.L> put on 0.6 percent, as traders said the
bank was the most defensive in the sector.
Heavyweight commodity shares, which have also performed
strongly in the rally, were out of favour. BP <BP.L>, Royal
Dutch Shell <RDSa.AS>, BG Group <BG.L> and Total <TOTF.PA>
dropped 0.4 to 1.1 percent.
Among miners, BHP Billiton <BLT.L>, Rio Tinto <RIO.L>, Anglo
American <AAL.L>, Xstrata <XTA.L>, Vedanta Resources <VED.L> and
Kazakhmys <KAZ.L> were down 0.3 to 2.1 percent.
All eyes will be on the U.S. non-farm payrolls data, due at
1230 GMT, for further evidence 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 is seen at 9.8 percent,
compared a 9.7 percent rate the prior month.
The dollar held steady against most major currencies with
investors sitting tight ahead of the jobs data.
The pan-European index, which slumped 45 percent last year,
has rallied nearly 51 percent since hitting a floor in early
March, and is up 16.8 percent so far this year.
LOW RISK APPETITE
The VDAX-NEW volatility index <.V1XI> was up 6 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 <> lost 0.7 percent,
Germany's DAX <> fell 0.8 percent and France's CAC 40
<> shed 1.3 percent.
Overnight, the Dow Jones industrial average <> and the
S&P 500 <.SPX> suffered their worst one-day fall in three
months, while Japan's Nikkei average <> fell 2.5 percent.
"Consumer expectations are now extremely stretched relative
to the dismal reality. This also occurred during the early 1990s
credit crunch," Societe Generale's Albert Edwards said in a
note.
"Back then expectations also ran up far ahead of reality.
Interestingly, after the recession had ended in March 1991,
excessively optimistic expectations slumped three more times
until muddling reality caught up with excessive hope. Markets
still have too much hope."
European automakers <.SXAP> were also weak after September
U.S. auto sales tumbled by 23 percent as showrooms emptied after
the government-funded boom from the "cash for clunkers"
programme. []
Daimler <DAIGn.DE>, Renault <RENA.PA>, Peugeot <PEUP.PA>,
BMA <BMWG.DE> and Volvo <VOLVa.ST> were off 0.4 to 2.8 percent,
but Volkswagen <VOWG.DE> advanced 0.8 percent.
Alcatel-Lucent <ALUA.PA>, ASML Holding <ASML.AS>, Cap Gemini
<CAPP.PA> and STMicroelectronics <STM.PA> lost 2.4 to 5.2
percent, leading the tech sector lower.
Carlsberg <CARLb.CO> eased 4.5 percent after Deutsche Bank
downgraded the brewer to "sell" from "hold".
