By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - European shares climbed on Friday and Wall Street looked set for a positive start as investors sought to balance a new era of lower interest rates with signs of a deteriorating world economy.
The latest U.S. non-farm payrolls report was worse than expected, coming in with losses of 240,000 jobs versus a median forecast of 200,000.
The data led to equity investors paring gains but staying in positive territory.
"There is no doubt we are seeing deteriorating labor market conditions, but for those expecting down 300,000 the report didn't quite measure up today," said Kevin Flanagan, a fixed income strategist at Morgan Stanley's wealth management arm.
Markets have been highly volatile with the world's developed economies heading for the first full-year contraction since World War Two.
Central banks have been slashing interest rates to shore up deteriorating economies. The Bank of Korea cut for the third time in a month on Friday, following half-point cuts on Thursday from the European Central Bank and the Swiss National Bank.
The Bank of England also slashed its key rate by 1.5 percentage points on Thursday, much more than the market expected, taking borrowing costs to the lowest since the 1950s.
"The rate cuts send a signal on how committed the central banks are in reviving the global economy," said Jackson Wong, investment manager at Tanrich Securities in Hong Kong. "They inspire some confidence among investors."
Some of this fed into European stock markets.
The pan-European FTSEurofirst 300 was 0.1 percent up after earlier gaining more than one percent.
"We expect the rescue packages of governments for the banking system, global rate cuts by central banks and the latest recovery of share prices to have at least trimmed fears," said Ralph Solveen, an economist at Commerzbank in Frankfurt.
Earlier, however, Japan's Nikkei average dropped 3.6 percent as growing global economic worries sent the yen higher and hit exporters.
The Nikkei ended down 316.14 points at 8,583.00. The broader Topix lost 3.3 percent to 879.00.
DOLLAR FALLS
The dollar was weak against most currencies, particularly the euro, which gained 0.6 percent to $1.2774.
It also lost 0.4 percent to 97.30 yen.
Trade-weighted sterling fell to a 12-year low.
"The general thinking is that things must have been pretty bad for the Bank of England to have cut by 150 basis points," a London-based trader said.
Shorter-dated euro zone government bond yields slipped.
Two-year paper yielded 2.417 percent, some 2 basis points less than in late Thursday trade while the 10-year Bund yield was up 2 basis points at 3.729 percent.
(Additional reporting by Sarah Marsh, editing by Tony Austin)
