* Bundesbank cuts growth outlook as euro zone crisis bites
* Euro falls 0.3 pct as rate cut talk grows
* European stocks flat, ending 4 days of gains
* U.S. November nonfarm payrolls due at 1330 GMT
By Richard Hubbard
LONDON, Dec 7 (Reuters) - The darkening outlook for the
European economy sent the euro to a nine-day low against the
dollar on Friday and ended a week-long rally in the region's
But the moves were limited by the approaching jobs report
from the United States, due at 1330 GMT, which could fuel
expectations that the Federal Reserve will announce a fresh
round of monetary policy easing next week.
The yen also briefly rose when a powerful earthquake struck
north-eastern Japan, triggering a tsunami warning. A strong
earthquake in March 2011 had led to a sharp rise in the yen on
expectations that Japanese investors will repatriate funds held
abroad back home.
The euro was down 0.3 percent at $1.2927, extending
its retreat from a seven-week peak of $1.3127 hit on Wednesday,
on heightened talk that the weakening economic outlook will
prompt an early rate cut by the European Central Bank.
The gloom surrounding euro zone deepened on Friday when
Germany's central bank cut its growth outlook and pointed to
risks of a recession as the three-year old debt crisis takes its
toll on the region's largest economy.
The bleak warning came just a day after the ECB slashed its
own economic forecasts for the entire 17-nation euro area next
year, while leaving its main interest rate at a record low 0.75
percent for the fifth month running.
"The discussion on interest rates is what started the slide
in the euro in the last 24 hours and the Bundesbank report has
just compounded that," said Neil Mellor, currency strategist at
Bank of New York Mellon.
The shift in focus back to Europe's problems and away from
the outlook for China and the U.S., were hopes had been growing
of gradual strengthening in economic activity, brought a rally
in European shares to a close.
The FTSEurofirst 300 index of top European shares,
which hit an 18-month peak on Thursday, was virtually unchanged
at 1,130 points while Germany's Dax, London's FTSE 100
, and Paris's CAC-40 were all little changed.
"You cannot stand in the way of the numbers, which tell us
Europe will be in a recession next year and earnings will be
poor," Justin Haque, a broker at Hobart Capital Markets, said.
The bad news extended to the British economy as well with
manufacturing output falling in October at the fastest pace
since June and well below most economists forecasts.
Analysts said the data pointed to further contraction in the
economy as a whole in the fourth quarter.
A slight dip in U.S. stock futures hinted at a cautious Wall
Street open, although much hangs on the nonfarm payrolls data.
Analysts expect the U.S. economy added about 93,000 extra
jobs in November, against October's gain of 171,000 as
superstorm Sandy took its toll on the figures. The unemployment
rate is seen holding steady at 7.9 percent.
A weak payrolls number, with a higher unemployment rate,
would increase expectations that Federal Reserve policymakers
would opt to further ease policy at its next meeting scheduled
for Dec 11-12.
Many economists think the U.S. central bank will announce
monthly bond purchases of $45 billion after the meeting, and
signal it will continue to pump money into the U.S. economy
during 2013 in a bid to bring down unemployment.
The concern about economic weakness in Europe and the U.S
kept oil prices on course for their biggest weekly decline in a
month, though expectations of a recovery in China limited the
"The big picture is that Europe is weak, (the) U.S. is
undecided and China is strong, so the news flow from these three
will be what determines prices," said Jonathan Barratt, chief
executive officer at research firm Barratt's Bulletin.
Brent crude added 33 cents to $107.36, while U.S.
crude futures inched up 15 cents to $86.41.
Gold prices eased back below $1,700 an ounce but again but
trading was cautious ahead of a U.S. employment report.