Spanish yields jump as central banks disappoint

New steps by three major central banks to boost global growth failed to impress investors on Friday, sending Spanish borrowing costs back near unsustainable levels and hitting European stocks.

The euro was nursing heavy losses at $1.2382, near a five-week low of $1.2364, while Brent crude oil was down over a dollar a barrel at $99.46.

A U.S. payrolls report, due at 1230 GMT, will offer clues about the extent of damage the euro zone's debt crisis is inflicting on the U.S. economy and whether the Federal Reserve may consider more monetary stimulus.

"The U.S. jobs report will be the focal point today as a weak figure could signal additional stimulus by the Federal Reserve in their next meeting," said Nam Truong, a dealer at Capital Spreads in London.

Thursday's robust U.S. private employment data could have dampened such hopes, but a Reuters poll showed expectations were for non-farm payrolls to expand by just 90,000 jobs in June.

China, the euro zone and Britain loosened monetary policy on Thursday signalling growing alarm about the world economy.

Reflecting the impact of the European Central Bank's decision to cut lending rates to 0.75% and deposit rates to zero, German government bond yields were weaker with the yield on two-year debt briefly turning negative.

Ten-year Spanish government bonds yielded 6.90% in early trading, close to levels seen before euro zone leaders last week announced a raft of measures to try to step the region's debt crisis. Italian yields jumped to 6.03%.

The pan-European FTSEurofirst 300 index was down 0.3% at 1,041.09 points in early trade but was still up 2.3% for the week.

A weaker session in Asia, where Chinese growth worries are on the rise ahead of Q2 GDP data next week, the MSCI world equity index dipped 0.1% to 314 points but is on track for a gain of 0.6% this week.