Chart: WorldWide Markets Alpha Trader
* Fed tapering talk may gain momentum if payroll data strong
* Euro at 7-week low after surprise ECB rate cut, French downgrade
* European shares fall but stumble towards small weekly gain
By Marc Jones
LONDON, Nov 8 (Reuters) - The dollar was near a seven-week high on Friday as markets awaited their monthly serving of U.S. jobs data and reassessed the euro after the European Central Bank's surprise rate cut and S&P's rating downgrade for France.
The euro fell to $1.3410 following Standard & Poor's lowering late on Thursday of France's sovereign credit rating to AA from AA+. It was at its weakest level against sterling since January and hit multi-month lows against a crowd of other currencies.
Thursday's ECB rate cut came sooner than markets had anticipated and investors were bracing for further currency market volatility if U.S. non-farm payrolls come in strongly later in the day. A high reading for October could revive bets the Federal Reserve will start scaling back its stimulus this year, especially after Thursday's pacy growth data.
The U.S. economy expanded 2.8 percent in July-September, far more than the 2.0 percent economists had forecast. ID:nL2N0IS0VU]
Economists polled by Reuters expect 125,000 jobs to have been added in October, although last month's 16-day U.S. government shutdown may affect the figures.
"I don't think the non-farm payrolls are going to have a sustained market reaction," said Chris Turner, head of foreign exchange strategy at ING. "People understand there are going to be some distortions after the government shutdown."
"Were the dollar to sell off I don't think it would last too long. We are listening to the ECB with great respect now with regards to lower rates," he added.
Share markets in Asia had fallen after Wall Street suffered it worst day since August overnight and European bourses quickly went into reverse when they opened.
The pan-European FTSEurofirst 300 was down 0.6 percent in early trading as London's FTSE and Frankfurt's DAX fell 0.5 and 0.6 percent, and Paris's CAC 40 lost 0.8 percent as France's downgrade weighed.
French government bonds were also hit by S&P's one-notch downgrade, although the ECB's cut in interest rates helped German Bunds keep up their strong run this week.
"S&P's decision reflects the worries over French growth, and the sentiment that government action is not enough," said Philippe Waechter, head of economic research at Natixis Asset Management in Paris.
Data showing China's exports rose more than expected in October hardly eased investors' cautious mood, with the CSI300 of the leading Shanghai and Shenzhen A-share listings falling to two-month lows.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent and looked set for a loss of 1.7 percent on the week, while Japan's Nikkei average dropped 0.9 percent. Both indexes hit their lowest levels in about four weeks.
Still, the dollar strengthened on the U.S. data, with the dollar's index against a basket of major currencies hitting an eight-week high of 81.46 on Thursday. It last stood flat on the day at 80.85 .
The dollar's strength suppressed oil prices, with Brent crude hitting a four-month low of $103.22 a barrel. Plentiful crude supplies, progress in talks over Iran's disputed nuclear programme and fall in China's crude imports all weighed on the prices.
U.S. Treasuries maintained gains made after the ECB's rate cut, with the 10-year bond yield standing at 2.6091 percent , near this week's low.