* FTSEurofirst 300 falls 1.8 percent ahead of jobs data
* Banks among top losers, Greek banks down 5.2 percent
* Charts paint bearish technical picture
LONDON, Sept 2 (Reuters) - European shares fell sharply on Friday, snapping a four-session rally, on concerns that U.S. non-farm payrolls numbers could signal the world's biggest economy was headed for a recession.
Financials came under renewed pressure, with Greek banks falling 5.2 percent and Greek shares down 3.4 percent after the country said on Thursday it would miss its budget deficit target.
Talks between Greece and European Union, International Monetary Fund and European Central Bank inspectors on whether it has met conditions for a new aid tranche have been put on hold, a Greek official said.
The STOXX Europe 600 banking index fell 2.7 percent, weighed by a New York Times report that a lawsuit was being prepared to be filed against big U.S. banks such as Bank of America and Goldman Sachs .
The report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.
At 0845 GMT, the FTSEurofirst 300 index of top European shares was down 1.8 percent at 955.61 points after rising 0.7 percent in the previous session. The index fell 10.6 percent in August and is down 14 percent so far this year, with recent macroeconomic data raising fears about a recession.
"I think the job figures are going to be worse than expected. It could be a wake-up call for the market and share prices could go down even further," said Koen De Leus, strategist at KBC Securities, in Brussels.
"Expectations of the QE3 (another round of quantitative easing) have helped shares in the past days, but at the end of the day, the market needs better economic environment that stimulates growth and company results."
The U.S. non-farm payrolls data is expected to show an increase of 75,000 jobs, although market talk points to the possibility of a much lower number at 1230 GMT, following a decline in the employment component of the Institute for Supply Management's factory activity index on Thursday.
"Despite the fact we recently got some better than expected economic releases, recession fears are dominating the markets. The U.S. jobs report, the mother of all economic releases, will be quite important. A weak figure may bring QE3 a step closer," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
Automobile shares featured among the biggest fallers, with the sector index dropping 3.4 percent on concerns that slower economic growth will hurt global demand for vehicles.
BEARISH TECHNICAL OUTLOOK
Technical analysts said the Euro STOXX 50 , the euro zone's blue chip index, could fall back towards the 2,170 area where it had got the trendline support connecting the recent lows. The index was down 2.5 percent at 2,247.07 points.
"It looks like the damage done in July and August will likely resonate for many months to come. Although it's going sideways at the moment, it's going sideways at lower levels and ultimately that doesn't bode well for the index," said Phil Roberts, chief European technical strategist at Barclays Capital.
"The long-term negative outlook is based on the successive closes below the 12- and 24-month averages and historically that hasn't been a bullish signal," he said adding, the near-term upside target for the index was 2,359. (Graphics by Vincent Flasseur; Editing by Erica Billingham)
============================================================ For rolling updates on what is moving European shares please click on ============================================================ For pan-Europeanmarket data and news, click on codes in brackets: European Equities speed guide................... FTSEurofirst 300 index.............................. STOXX Europe index.................................. Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurofirst 300 sectors................... Top 25 European pct gainers....................... Top 25 European pct losers........................
Main stock markets: Dow Jones............... Wall Street report ..... Nikkei 225............. Tokyo report............ FTSE 100............... London report........... Xetra DAX............. CAC-40............... World Indices.....................................<0#.INDEX> Reuters survey of world bourse outlook......... Western European IPO diary......................... European Asset Allocation........................ Reuters News at a Glance: Equities................. Main currency report:.................................