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* Airline stocks rally after Ryanair lifts profit forecast
* Weak Christmas season undercuts British retailers
* German utility RWE up on prospects of 2 bln euros fund (Updates to close)
By Medha Singh
Jan 10 (Reuters) - European shares fell modestly on Friday on weaker than expected U.S. jobs growth, but travel and leisure stocks gained after Ryanair raised its profit forecast and Evolution Gaming Group announced an online U.S. casino deal.
The better than expected Christmas and New Year numbers from Europe's largest low-cost operator lifted its shares to a two-year high and boosted budget carriers Easyjet and Wizz Air, which gained about 4% and 7% each.
Sweden's Evolution Gaming Group jumped 6% after it announced an agreement with U.S.-based Parx Casino to deliver online services.
The travel and leisure subsector closed at its highest in more than one and a half years.
The pan-European STOXX 600 slipped in the final minutes of trading after spending most of the session in positive territory. It was the first decline in four days.
Slower-than-expected U.S. jobs growth in December pressured Wall Street's advance. However, the pace of hiring remained more than enough to keep the world's largest economy humming.
"The recent stock surge has ground to a halt after an underwhelming U.S. jobs report," said Joshua Mahony, Senior Market Analyst at IG.
"However, with the U.S.-China issue coming back into focus, next week is likely to see a shift onto more positive topics."
The benchmark STOXX 600 had pulled back from record levels at the start of the week on concerns about an all-out conflict between United States and Iran.
However, indications from both sides that they would refrain from further military action, as well as signals that a U.S.-China trade deal will be inked next week helped markets resume their record run.
British retailer B&M, suffered its sharpest fall in more than a year after it said sales growth slowed in the key Christmas quarter partly due to a tough market.
Superdry also plunged about 7%, joining a spate of reports this week that signalled UK retailers struggled for sales growth in the run-up to Christmas.
The European retail index ended Friday with its steepest weekly drop in 14.
Utilities were the best performing European subsector on the day, helped by shares of Germany's RWE which hit a more than 5 year high.
The firm could expect around 2 billion euros ($2.2 billion) in compensation over government orders to turn off lignite power stations, government and industry sources said. (Reporting by Medha Singh and Ambar Warrick in Bengaluru)