By Marc Jones
LONDON (Reuters) - More weak data from Europe ensured shares worldwide were set to end their first full week of 2015 in the red on Friday, while both the dollar and oil prices dipped as investors waited for monthly U.S. jobs data.
Friday's jobs report is expected to show that non-farm payrolls increased by 240,000 in December. That would mark the 11th consecutive month of job gains above 200,000, the longest stretch since 1994.
A deluge of U.S. data this week has already bolstered expectations the Federal Reserve will raise interest rates for the first time in almost a decade around the middle of the year and has sent the dollar surging to a nine-year high.
"At the moment the U.S. is the only party on the street," said Kully Samra at Charles Schwab in London. "Where else are you going to go for growth."
Europe though continues to paint a much bleaker picture. German exports fell sharply and industrial output declined in November new figures showed, as industrial production also fell in France and an equivalent reading in Spain was revised down.
The region's shares extended early falls to be down 0.7 percent, with the euro zone's biggest bank, Spain's Santander, plunging 11 percent after it announced a 7.5 billion euro ($8.8 billion) capital increase and dividend cut.
Wall Street was also expected to open in the red after gains of roughly 3 percent in the last two days, while as the dollar paused in the currency market the euro was buying just over $1.1810, after a fourth week of falls.
Equities worldwide suffered deep losses early this week as plunging oil prices and global growth woes triggered investor flight from risk assets. But optimism about the U.S. economy and prospects of more stimulus from the European Central Bank and China have diffused risk aversion for the time being.
MSCI's broadest index of Asia-Pacific shares outside Japan eked out a 0.7 percent rise overnight but had faded late on as Chinese shares, last year's global star performers, gave up gains.
"With worries over the Chinese economy slowing down and risks from Greece still in place, further evidence of continuing recovery in the U.S. economy will be needed if risk appetite is to recover fully," said Junichi Ishikawa, market analyst at IG Securities.
OIL PRESSURE
A strong non-farm payrolls reading would strengthen prospects of the Federal Reserve hiking rates later this year and again highlight the contrast in policies between the ECB, now facing euro zone deflation and seen on the brink of adopting quantitative easing.
News agency Bloomberg reported that ECB staff have drawn up a 500 billion euro plan to buy investment grade bonds.
But as that excludes Greece, the bloc's main problem country, and with the impact likely to be eroded by the 200 billion euros of old ECB crisis loans that banks need to repay next month, markets were unmoved.
Euro zone government bond yields held just above record lows ahead of the U.S. data. About a quarter of the whole euro zone bond market is now yielding less than 10 basis points.
The dollar, which hit a fresh nine-year high on Thursday, was down 0.2 percent against the euro at just over $1.1810. It was also lower against the Japanese yen at 119.29 yen. Nevertheless against a basket of major currencies it was still set for what will be its fourth straight week of gains.
Like in the euro zone, the grip of falling prices is now becoming evident even in China. Data on Friday showed inflation in the world's second-largest economy hovered close to a five-year low. That could give policymakers more room to cut rates.
Providing another source of nervousness for still wary global markets, crude oil prices were on the back foot again after a 10 percent loss earlier in the week.
U.S. crude oil fell 20 cents to $48.60 a barrel after plumbing a 5-1/2-year low of $46.83 on Wednesday. Brent slipped to $50.38. Both have fallen for all but one of the last 15 weeks.
"Without any changes to fundamentals, selling appears largely to be jittery investors looking for supply-demand equilibrium," ANZ analysts said in a note.
Russia's rouble also weakened on the drop in oil prices and Moscow's still tense relations with the West, and shares in Moscow retreated.
Emerging market stocks overall were heading for a fourth week of gains, however, thanks to China, Thailand and Brazil.
(Editing by Toby Chopra and Susan Fenton)
