* Steady morning in Europe before U.S. payrolls
* Doubts over U.S. economic outlook still set to dominate
* Dollar inches up but on course for worst week in 6 years
* Oil ticks higher, bond markets more nervous before data
By Patrick Graham
LONDON, Feb 5 (Reuters) - The wait for U.S. monthly jobs numbers steadied stock markets on Friday and allowed the dollar to recover after what has so far been its weakest week in more than six years.
Oil prices were up by 0.5 to 1 percent, and the mixed performance in Asia spread to European stock markets: London and Paris both gained, while Frankfurt was marginally lower. Wall Street looked set to open flat.
January was the weakest start to a year for shares since the aftermath of the 2008 financial crisis, and doubts over the U.S. economy - recently one of the few bright spots globally - have grown this week.
Short-term U.S. bond yields were roughly stable on Friday but have fallen by about a third in the past month and by 10 basis points this week alone, driving the dollar to its weakest performance since late 2009.
A solid non-farm payrolls report, due at 1330 GMT might restore some optimism. The consensus forecast of economists polled by Reuters was that 190,000 new jobs were created last month.
“There is a general scepticism towards a proper rate hike cycle by the Fed - that’s been driving down the dollar (but)there’s probably not that much room left for dollar weakness,” said Commerzbank currency strategist Thulan Nguyen in Frankfurt. “A better labour market report could bring back some confidence in the rate cycle.”
The dollar was flat on the day at 116.805 yen and 0.1 percent stronger against the euro at $1.1199. Against a basket of currencies, it is down 1.3 percent on the week.
After a weak service-sector business sentiment report on Wednesday and dovish comments from New York Federal Reserve chief William Dudley, U.S money markets now predict no rise in official interest rates this year. Earlier, the Federal Reserve’s own forecasting called for four increases.
That reflects growing concern the world is heading back into recession. But it also bolsters expectations for more support for global asset prices from stimulus measures by the world’s central banks.
Hong Kong’s Hang Seng rose 0.6 percent and Malaysian and Singapore stocks also gained. Tokyo, Shanghai and various commodity prices all fell.
Strategists said European bond markets looked to be pricing in a softer read from the U.S. payrolls report.
“We doubt that even a strong non-farm payrolls number will have the potential to alter the course,” said RBC’s chief European macro strategist, Peter Schaffrik.
“More importantly even, particularly for the fixed income market: The Fed seemingly is reacting to the equity market weakness, fearing the feed through into the real economy through a tightening in financial conditions.” (Additional reporting by John Geddie and Jemima Kelly; Editing by Hugh Lawson)