* FTSEurofirst 300 down 1.9 percent
* Banks and insurers among top losers
* Swiss luxury firms fall as HSBC cuts targets
* Charts paint bearish technical picture
By Brian Gorman
LONDON, Sept 2 (Reuters) - European equities fell heavily on Friday as traders took risk off the table ahead of a key report on the U.S. labour market that may indicate whether the world's biggest economy is headed for a recession.
Sagging consumer confidence likely discouraged already skittish U.S. businesses from stepping up hiring in August, economist shave forecast, which would keep pressure on the U.S. Federal Reserve to provide more stimulus to aid the economy.
The non-farm payroll likely increased by 75,000 jobs, according to a Reuters survey, after rising 117,000 in July. The Labor Department will release the report at 1230 GMT.
However, more recent estimates indicated a lower reading.
"Were it to be a very small number, that would confirm the picture of a sharp slowdown in the U.S. economy," said Andy Lynch, fund manager at Schroders, which manages 197 billion pounds.
"If it's 110,000 or zero then it has significance. If it is a few thousand away from forecasts, that is random noise."
European stocks fell across the board, snapping a four-day rally that had seen a key index rise 5.9 percent.
The heavyweight financial sector came under renewed pressure, with Greek banks down 5.1 percent after the country said on Thursday it would miss its budget deficit target.
Talks between Greece and inspectors from the European Union, International Monetary Fund and European Central Bank on whether it has met conditions for a new aid tranche have been put on hold, a Greek official said.
The STOXX Europe 600 banking index fell 2.8 percent, weighed by a New York Times report a lawsuit was being prepared to be filed against big U.S. banks such as Bank of America and Goldman Sachs .
The report said investors fear that if banks were forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.
Deutsche Bank
At 1101 GMT, the FTSEurofirst 300 index of top European shares was down 1.9 percent at 955.01 points. The index fell 10.6 percent in August and is down 14 percent this year, with recent economic data raising fears about a recession.
Volumes were low, at less than 29 percent of the index's 90-day average. Giles Watts, Head of Equities at City Index said investors were looking to minimise risk ahead of the payroll figures.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said: "Despite the fact we recently got some better than expected economic releases, recession fears are dominating the markets. The U.S. jobs report, the mother of all economic releases, will be quite important. A weak figure may bring QE3 a step closer," he said.
INSURERS, LUXURY FIRMS FALL
Insurers were also weak. British group Aviva fell 3.5 percent, after it was downgraded by Collins Stewart.
"While little appears settled in the euro zone, we think that a period of prolonged low long bond yields is a more likely threat to the composite insurance sector than a government debt default," Collins Stewart said.
Others to fall included Axa , down 3.9 percent.
Shares in Swiss-based luxury goods companies Richemont and Swatch fell 4.1 percent and 3.9 percent respectively, after HSBC cut target prices in the sector, citing concern about the economic backdrop.
Technical analysts said the Euro STOXX 50 , the euro zone's blue-chip index, could fall back towards the 2,170 area where it had trendline support connecting the recent lows. The index was down 2.8 percent at 2,240.75 points.
"It looks like the damage done in July and August will likely resonate for many months to come. Although it is going sideways at the moment, it is going sideways at lower levels and ultimately that does not bode well for the index," said Phil Roberts, chief European technical strategist at Barclays Capital. (Additional reporting by Atul Prakash; Graphics by Vincent Flasseur; Editing by Dan Lalor)
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