European Shares to Pause Ahead of US Jobs Report

European shares were set to pause after a brisk rally this week, tracking weakness on Wall Street, with investors reluctant to take large positions ahead of a U.S. job report that is expected to show further evidence of strength in the recovery of the world's largest economy.

Sharon Lorimer

Russian financial markets are closed for the Russian Orthodox Christmas holiday on Friday.

George Osborne, Chancellor of the Exchequer, said on Thursday Europe needed a new round of stress testsfor its banks, adding they must be aggressive. "I don't think the stress tests last year did enough to reassure the world that Europe's banks were properly capitalized," he said.

His comments came as yields on Portuguese debt soared above 7 percent amid persistent concerns over the country's finances.

Portugal's Secretary of state for the national budget Emanuel Augusto Santos said Thursday the country's deficit fell to 7.3 percent in 2010 from 9.3 percent — the fourth-highest in the eurozone — in 2009.

The government is aiming for a deficit of 4.6 percent this year.

Nobel prize-winning economist Joseph Stiglitz warned on Thursdaythe euro zone's strategy of slashing spending to reduce debt in the wake of the credit crisis was "clearly wrong". He told CNBC the measures taken so far would likely be counterproductive.

Spain releases December inflation data on Friday, while the UK is set to release car registration numbers for December.

The European Commission is due to release unemployment data for November as well as second-quarter GDP figures.