* Dollar weak as jobs report disappoints
* Oil surges after OPEC output decision
* European shares rise, but not enough to offset trade worries
* GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh (Adds settled oil prices, updates throughout; changes byline)
By Hilary Russ
NEW YORK, Dec 7 (Reuters) - Concerns over China-U.S. trade tensions gave European shares their worst week of losses in two months and pulled down U.S. stocks on Friday, overshadowing the lift from higher oil prices and jobs data.
While Europe was higher on the day with a small recovery after three sessions of heavy losses, the trade standoff between Washington and Beijing was still a major lingering worry for investors.
"Volatility is high and investors are twitchy. It has been a dreadful week for European markets, and today’s positive move can't mask the previous losses," said David Madden, market analyst at CMC Markets UK.
The pan-European STOXX 600 index rose 0.62 percent, while an index of London's 100 largest listed companies rose 1.1 percent.
The Dow Jones Industrial Average fell 554.24 points, or 2.22 percent, to 24,393.43, the S&P 500 lost 59.98 points, or 2.22 percent, to 2,635.97 and the Nasdaq Composite dropped 199.50 points, or 2.78 percent, to 6,988.76.
The Wall Street losses came after a drop in technology stocks, sparking a reversal from earlier in the day, when stocks were higher on U.S. labor data that showed employers hired fewer workers than expected in November.
That supported a view that U.S. growth is moderating and the Federal Reserve may stop raising rates sooner than previously thought.
Nonfarm payrolls increased by 155,000 last month, but missed economists' expectation for a rise of 200,000.
"It is still consistent with the Fed raising short-term interest rates, said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. "But I think the main theme here is that investors are expecting the Fed to be even more gradual, a little bit more cautious, in raising interest rates in 2019."
Oil surged 4 percent after big Middle East producers in OPEC agreed to reduce output to drain global fuel inventories and support the market.
U.S. crude oil futures settled at $52.61 per barrel, up $1.12, or 2.18 percent. Brent crude settled at $61.67, up $1.61, or 2.68 percent.
MSCI's gauge of stocks across the globe shed 1.06 percent.
Stock markets around the world tumbled on Thursday after Canadian officials announced the Dec. 1 arrest of the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States. The arrest was seen as an added threat to the resolution of a trade war between the world's top two economies.
Also contributing to this week's sell-off were rising concerns about a U.S. economic slowdown signaled by a flattening Treasury yield curve.
The entire yield curve steepened on Friday, while the front half of the yield curve remained inverted after two-year and three-year yields rose above five-year yields for the first time in over a decade earlier this week. That inversion has stoked speculation on whether a U.S. recession is looming.
The U.S. dollar weakened against major currencies after the U.S. jobs data.
The dollar index, which tracks the greenback against a basket of six other currencies, fell 0.25 percent, with the euro up 0.35 percent to $1.1414.
Additional reporting by by Ritvik Carvalho and Julia Payne in London, Medha Singh, Swati Verma in Bengaluru, Richard Leong, Laila Kearney and Saqib Iqbal Ahmed in New York; Editing by Bernadette Baum and Jonathan Oatis