* FTSEurofirst 300 down 0.8 pct, FTSE 100 down 1.6 pct
* Stocks briefly pare losses after U.S. payrolls
* Europe's fear gauge up 70 pct in two weeks
* Massive volumes seen from algorithmic programmes
By Blaise Robinson
PARIS, Aug 5 (Reuters) - European stocks fell back toward session lows on Friday after a brief move into positive territory after better-than-expected U.S. monthly jobs data.
At 1418 GMT, the FTSEurofirst 300 index of top European shares was down 0.8 percent at 984.33 points, while UK's FTSE 100 index was down 1.6 percent and Germany's DAX index down 1.1 percent.
The FTSEurofirst 300 is on track to post a weekly loss of about 10 percent, its worst weekly performance since May 2010.
"The payrolls weren't that bad, and it prevented the VSTOXX from jumping over the threshold of 40 which would have sparked real panic selling," said David Thebault, head of quantitative sales trading, at French broker Global Equities.
"It might buy the market some time, until we realise that actually, big U.S. companies aren't hiring at all. That's when the market will really fall."
The Euro STOXX 50 volatility index , Europe's main barometer of anxiety known as the VSTOXX index, was up 12 percent at 38.9. It has surged about 80 percent over the past 2 weeks, but remains well bellow a peak of 54.6 hit in May 2010 during the first wave of the Greek crisis.
"Asset managers aren't on the market, nor institutionals, insurers or prop desks. Volumes going through intermediaries like us are relatively low. It means that the volume is coming from big algo programmes," Thebault said.
Oil shares, which had shown resilience over the past few
months while the broad market drifted lower, sank on Friday
afternoon, with Total down 2.3 percent and Royal Dutch
Shell
Stocks in the region's peripheral markets were getting a reprieve after a dismal week with a rebound triggered by short covering as well as speculation the European Central Bank was buying Spanish and Italian bonds, traders said.
"Hedge funds are cutting short positions here, while some bulls are bottom fishing, but who knows if this is the real bottom? It's looks like dead cat bounce to me," a Paris-based trader said.
The Thomson Reuters Peripheral Eurozone Banks index recovered to be up 2.4 percent, with recently-hammered UniCredit and Banco Santander up 3.9 percent and 1.9 percent respectively.
"It is a relief rally in Italian and Spanish banks from being oversold, but we think it is too early to go in," said James Barber, head of European equities at Russell Investment.
"There is a real risk of permanent capital impairment for banks if they have to raise more capital."
(Additional reporting by Joanne Frearson and Atul Prakash in London; graphics by Scott Barber in London)
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