* World equity index <.MIWD00000PUS> down 0.98 pct
* Dollar index steady above 77 <.DXY>
* Investor caution ahead of U.S. employment report
By Tamawa Desai
LONDON, Oct 2 (Reuters) - World stocks fell and the U.S. dollar broadly held firm on Friday as doubts grew about the pace of economic recovery and the week's major data on U.S. jobs loomed large.
European shares tumbled at the open, following steep losses in Asia and on Wall Street overnight as investors moved to the relative safely of bonds.
Markets were on edge ahead of U.S. non-farm payrolls, due at 1230 GMT, fearing more disappointing news after a report on Thursday showed U.S. manufacturing growth was slower than expected in September. [ID:nN01395512]
The MSCI world equity index <.MIWD00000PUS> fell 0.98 percent to 278.78, the second straight day of decline after rising 17 percent in the third quarter which ended Wednesday.
European shares <.FTEU3> were down 1.0 percent in early trade after tumbling 1.6 percent on Thursday to hit a three-week closing low.
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.
"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."
ASIA SLIDES
Shares in Tokyo's Nikkei average hit a two-month closing low on Friday, falling 2.5 percent or 246.77 points to 9,731.87 <.N225>. The average slid 5.2 percent on the week for its biggest weekly drop in about three months.
Toyota Motor <7203.T> and Honda Motor <7267.T> shed more than 3 percent and concerns about the strength of the yen
Trade across Asia was quieter than usual with markets in China, India and South Korea closed for public holidays.
U.S. Treasuries rose, with the yield on benchmark 10-year notes falling to 3.16 percent
Economists polled by Reuters estimate the U.S. economy shed 180,000 jobs in September, fewer than the 216,000 jobs lost in August, while unemployment rose to 9.8 percent in September from 9.7 percent in August. [ECI/US]
But Goldman Sachs called for even bigger job losses on Thursday, saying it now sees non-farm payrolls falling 250,000 from its previous estimate of 200,000 after recent weak data.
A figure out of line with forecasts either way is likely to have dramatic market impact.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, held steady above 77 <.DXY>.
"For today, it's all about being square, not being too aggressive on positioning," said Roberto Mialich, FX strategist at Unicredit in Milan, adding that the dollar will "perversely" benefit from falling U.S. stocks and weak jobs data.
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Gold