Traders have become increasingly nervous about the prospect of a weaker than expected U.S. non-farm payrolls report for March, due out at 1230 GMT, after disappointing data this week on manufacturing activity and private sector hiring.

The FTSEurofirst 300 index of Europe's top companies was down 1.5 percent at 1,163.40, a one-month low, after falling 1.1 percent in the previous session. It is still up about 2.5 percent so far this year, however.

"Recent weakness in global economic data has certainly spooked investors and prompted them to stay very cautious," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets. "If U.S. jobs data turns out to be weaker than anticipated, it would certainly add to already jittery sentiment."

London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 were up to 1.7 percent lower.

A drop of around 0.6 percent in U.S. stock futures suggests a lower start on Wall Street, although much depends on the jobs data which comes out before the market opens.

An improving U.S. economic growth trend has encouraged investors to take on more risk this year, although any signs of weakness would also encourage hopes that the Federal Reserve will sticks to its massive bond-buying programme.

The payrolls report is expected to show employers added 200,000 jobs last month, below the 236,000 created in February, leaving the unemployment rate steady at 7.7 percent, according to a Reuters poll of economists.

Reports of a new strain of bird flu in China and escalating tension on the Korean peninsula also weighed on equities, and earlier sent MSCI's broad index of Asia-Pacific shares outside Japan down 1.1 percent to a three-month low.

In Europe, the STOXX 600 Travel and Leisure index fell 3.1 percent and was the worst-performing European sector. Airline stocks were particularly hard hit by fears about the effect on demand for flights to Asia.

BOJ SHOCKS

Effects were still being felt from Thursday's radical overhaul of Japanese monetary policy by new central bank governor Haruhiko Kuroda, which will see $1.4 trillion injected into the economy to end decades of deflation.

Yields on Dutch, Belgian and Austrian bonds all fell to record lows, with market participants pointing to expectations of strong demand from Asia. In Tokyo, yields on the 10-year Japanese government bond (JGB) fell as much as 12 basis points to a record low of 0.315 percent.

"There've been stories of life (assurance) companies switching out of JGBs overnight in search of yield, potentially into European bonds," said Philip Tyson, a strategist at ICAP.

The Dutch 10-year yield sank 4 basis points to 1.44 percent as investors opted for euro zone assets that carry higher yields than German Bunds but boast strong credit ratings. French 10-year bond yields sank 7 basis points to 1.81 percent, the lowest on record.

The preference for euro zone bonds offering a pick-up over Germany comes as German borrowing costs fell to eight-month lows on Thursday after the European Central Bank said it was ready to act to boost the region's economy.
U.S. 10-year Treasury debt yields hit their lowest level in three months on the speculation of a rise in Japanese investor demand for foreign debt. The 10-year T-note yield touched a low of 1.744 percent.

The yen staged a small recovery against the dollar after falling a hefty 3.6 percent on Thursday, as investors and speculators began to book profits when it touched a 3-1/2 year low of 97.20 to the dollar.

The Japanese currency settled around 96.20 yen, up around 0.15 percent on the day and leaving the dollar with gains of about 11 percent against the yen this year.

Against the euro, the yen was about 0.25 percent firmer at 124.30 following losses of 4.3 percent on Thursday, its biggest one-day fall against the common currency since November 2008.

Earlier the Nikkei share average jumped as much as 4.7 percent, extending Thursday's 2.2 percent rise and breaking through 13,000 points for the first time since August 2008.


DEMAND FEARS

In the oil market Brent crude was close to a five-month low around $106 per barrel on Friday as the bleaker U.S. data this week and signs of a surge in inventories dimmed the outlook for fuel demand. Brent was down 3.4 percent, its biggest weekly fall since December, and U.S. crude down 4.3 percent , its sharpest drop since September.

Copper was also weak and not far from eight-month lows on the London Metal Exchange, where it traded around $7,425 a tonne . "Commodity markets are telling us the real story, and that is there is simply no demand out there," said Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin.