* MSCI world equity index down 0.3 pct at 240.78
* Asia, Europe shares dip as US data puts recovery in doubt
* Oil falls; dollar firms
By Natsuko Waki
LONDON, July 3 (Reuters) - World stocks fell on Friday after
a disappointing U.S. jobs report and a sluggish euro zone
services sector survey reinforced expectations that the process
of recovery in the global economy would be long and slow.
U.S. employers cut far more jobs than expected last month and
the unemployment rate hit 9.5 percent, the highest in nearly 26
years.
While analysts caution that jobs data is a lagging indicator
and unemployment can still rise when the economy is turning
around, it was enough to prompt investors to reduce their risk
assets especially before a long weekend in the United States.
Furthermore, signs of a recovery in the euro zone's dominant
service sector took a backwards step in June with the final
services purchasing manager index coming in at 44.7 in June,
down from May's seven-month high of 44.8.
This marks the thirteenth consecutive month the index has
been below the 50.0 mark that divides growth from contraction.
"Payrolls were a wake up call," said Jacques Henry, analyst
at Louis Capital Markets, in Paris.
"The data showed that the economic recovery remains fragile
and more downbeat data is to be expected, particularly on the
jobs front. Stocks are ripe for a consolidation period."
MSCI world equity index <.MIWD00000PUS> fell 0.2 percent on
the day, having hit the 1-1/2 week low earlier.
The pullback comes after the MSCI world equity index rose
more than 21 percent in the second quarter, its biggest ever
quarterly gain in its 21-year history.
"The equity rally hasn't ended, but it is moving into a new
phase. We're moving from a period of very cheap equities and
extreme risk aversion into one where equities are more fairly
valued," Bill O'Neill, portfolio strategist at Merrill Lynch
Global Wealth Management, said in a note to clients.
"Future advances will be driven by earnings upgrades, rather
than the recovery of investor demand that we have seen over the
past few months."
The FTSEurofirst 300 index <> was down 0.4 percent,
led by mining shares. while emerging stocks <.MSCIEF> were
steady on the day.
U.S. markets are closed for a holiday on Friday.
U.S. crude oil <CLc1> fell 0.3 percent to $66.53 a barrel.
After the employment report, U.S. short-term interest rate
futures <FFF0> jumped, trimming chances of rate hikes from the
Federal Reserve this year.
"The BLS (Bureau of Labour Statistics) sprayed weed killer
on our green shoots," RBS said in a note to clients.
"Weaker-than-expected payrolls were a dose of grim reality
for financial markets and expectations of US rate hikes and
general optimism in markets can correct further."
The September bund futures <FGBLc1> fell 11 ticks.
The dollar <.DXY> rose a quarter percent against a basket of
major currencies while the euro rose 0.4 percent to $1.3997
<EUR=>.
(Additional reporting by Blaise Robinson; Editing by Ron Askew)
