* Second quarter starts with a whimper
* Japanese manufacturing gloom sets the tone
* U.S. non-farm payrolls the big event Friday
By Jamie McGeever
LONDON, April 1 (Reuters) - Gloomy Japanese manufacturing data on Friday ensured a downbeat start to the second quarter, driving stocks lower and supporting safe-haven assets like gold and the yen as investors awaited a U.S. payrolls report later in the day.
Still bruised from a turbulent first quarter, investors took their cue from the Japanese data rather than more encouraging figures from China's manufacturers.
Europe's main indices fell as much as 2 percent, following a 3.5 percent slide in Japan's Nikkei, its steepest daily fall since mid-February. Shares fell across Asia, and U.S. stock futures signalled about a 0.5 percent decline when trading opens .
The dollar was on the back foot, with the euro trading above $1.14 - its highest since October, and oil was down 2 percent, below $40 a barrel.
"The focus appears to be on the negative. A too-strong euro is keeping the lid on any upside in European equities and the best performing sector in Q1 - the basic resource sector - is beginning to give up its gains," said Brenda Kelly, head analyst at London Capital Group.
The pan-European index of leading 300 shares fell 2 percent to a one-month low of 1,298 points, Germany's DAX and France's CAC 40 were also down 2 percent, while Britain's FTSE 100 was down 1.2 percent.
Insurance stocks were among the biggest decliners, led by a 10 percent fall in Zurich Insurance, as its shares traded without the attraction of its latest dividend payout.
Earlier, a profit-dampening rise in the yen and hedge fund selling for the new financial year hit Japanese stocks. But the real blow came from the Bank of Japan's survey of major manufacturers which found sentiment at its lowest in nearly three years.
The report crystallised concerns that the BOJ's shift to negative rates was not working. It also outweighed positive surveys from China that showed factory activity growing for the first time in nine months and a much needed pick-up in services .
MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.4 percent.
ROLL ON PAYROLLS
In the first quarter, stocks plunged on global growth fears then rebounded as major central banks took ever more aggressive stimulus steps.
The latest twist was this week's surprisingly dovish tone from Federal Reserve Chair Janet Yellen, which saw investors further scale back expectations for how far and fast U.S. interest rates would rise in future.
Fed fund futures currently have one quarter-point increase priced in by December. Yields on two-year Treasury paper were down at one-month lows around 0.73 percent before edging back up to 0.75 percent.