European shares extended losses yesterday as a surprisingly weak report on the state of the US labour market rekindled doubts about the economic recovery and oil shares fell after Shell cut its proven reserves.

Wall Street also opened lower after data showed the number of workers on US payrolls outside the farm sector rose by just 1,000 in December. Economists polled by Reuters were forecasting non-farm payrolls to grow by 130,000.

"It was a bad set of numbers because we need to see employment growth to keep this recovery going," said Matthew Wickens, global economist at ABN AMRO.

"Evidence from other surveys suggest the trend in the labour market is good, so maybe it's a blip."

By 1434 GMT, the FTSE Eurotop 300 index of pan-European blue chips was one per cent lower at 966.6 points, reversing Thursday's gains, but the index is still up about 10 per cent in the past three months.

The narrower DJ Euro Stoxx 50 index fell 1.2 per cent to 2,788.9 points.

In New York, the blue-chip Dow Jones industrial average was 0.6 per cent weaker at 10,533.8 points, while the Nasdaq Composite Index shed 0.8 per cent to 2,083.3 points.

Oil stocks led the retreat as Royal Dutch/Shell Group, the world's second-largest oil group, fell 7.7 per cent after cutting its proven oil and gas reserves estimate by 20 per cent.

Shell said the move would have no effect on its results, but analysts said valuations and ratings on the stock would fall.

Among retailers, Dutch food group Ahold rallied five per cent after reporting a 10.5 per cent slide in its 2003 sales, a better result than some analysts had expected.

But France's Carrefour shed 5.1 per cent after announcing late on Thursday a smaller-than-expected rise in fourth-quarter sales, as a drop in consumer spending hit its hypermarkets in France.

Volkswagen led a decline in auto stocks as it retreated 2.9 per cent, while troubled Dutch distribution firm Hagemeyer slumped 8.8 per cent as shareholder voted on a rescue plan that will dilute their holdings.