* World equity index <.MIWD00000PUS> down 1.5 pct
* Weaker than forecast U.S. payrolls hit equities, lift dlr
* European shares <>4-week low
* Dollar index 0.2 pct up at 77.35 <.DXY> but wary of G7
(Updates with U.S. payrolls, fresh quotes, changes byline)
By Emelia Sithole-Matarise
LONDON, Oct 2 (Reuters) - Equity markets across the globe
extended losses and oil prices fell on Friday after a weaker
than expected key U.S. jobs report fanned doubts about the pace
of economic recovery.
U.S. crude futures shed $2 to $68.82 a barrel and gold fell
more than 1 percent to as low as $986.20 an ounce as the dollar
initially gained versus the euro after the data.
The Labor Department said U.S. employers cut 263,000 jobs,
lifting the unemployment rate to 9.8 percent, the highest since
June 1983 and payrolls have now dropped for 21 consecutive
months. []
Analysts polled by Reuters had expected non-farm payrolls to
drop 180,000 in September and the unemployment rate to rise to
9.8 percent from 9.7 percent the prior month.
European shares slid, hitting a four-week low with the
pan-European FTSEurofirst 300 index <> down more than 2
percent on the day as investors sought the relative safety of
government bonds.
The index, which posted its best quarterly performance in
nearly 10 years in the last quarter, was on track for a third
day of losses.
The MSCI world equity index <.MIWD00000PUS> fell to 277.18
from 278.76 just prior to the release of the data and was down
1.34 percent on the day. It fell for a second day running after
rising 17 percent in the third quarter which ended Wednesday.
"I was thinking we'd actually have a lot priced in because
of the bad data earlier in the week but apparently that was not
the case. Risk aversion is going to be the key for today," said
Dan Cook, senior market analyst at IG Markets in Chicago.
"This could drive the market for a couple of days. As we're
getting into the earnings season in the equities side, it is
going to take a lot of good news on the earnings front to make
up for this terrible job situation."
G7 MEETING
Benchmark 10-year Treasury notes <US10YT=RR> traded 18/32 in
price on the day, having been up by 5/32 moments before the jobs
data. The 10-year bond yield, which moves inversely to price,
was at 3.11 percent, compared with 3.16 percent before the data.
Spot gold <XAU=> extended falls, dropping more than 1
percent to $986.60/oz.
The euro <EUR=> fell to session lows against the dollar to
$1.4481 from $1.4539 before the data but later reversed to hit
session highs at $1.4566, as traders likely reassessed the
impact of the weak jobs report on the economy.
The currency market also remained wary on expectations the
Group of Seven finance chiefs, who meet in Istanbul this
weekend, would repeat its call to rebalance the world economy --
a process which will likely involve a weaker dollar.
U.S. stocks opened lower, with the Dow Jones industrial
average <> down 0.65 percent and the S&P 500 <.SPX> falling
0.78 percent.
They suffered their worst one-day fall in three months the
previous day after a survey of national factory activity
declined in September and weekly jobless claims were worse than
expected.
Tokyo's Nikkei average hit a two-month closing low on
Friday, down 2.5 percent <>. It slid 5.2 percent on the
week for its biggest weekly drop in about three months.
(Editing by Mike Peacock)
