LONDON (AP) â¿¿ Signs that the U.S. economy is struggling hit stocks and oil prices Thursday, while the euro dropped sharply after the European Central Bank's president declined to indicate that interest rates would rise again next month, as traders were expecting.

A run of weak U.S. economic data has weighed on markets in recent days ahead of Friday's closely watched U.S. payrolls data, which often set the stock market tone for a week or two. A surprise rise in weekly U.S. jobless claims added to the concern in the markets that the recovery in the world's largest economy was slowing down.

In Europe, the FTSE 100 index of leading British shares was down 1.1 percent at 5,919 while France's CAC-40 fell 1.5 percent at 3,984. Germany's DAX was 0.7 percent lower at 7,318.

U.S. stocks were poised for further declines at the open â¿¿ Dow futures were down 0.5 percent at 12,614 while the broader Standard & Poor's 500 futures fell 0.6 percent at 1,335.

Elsewhere, the euro was in focus after the European Central Bank's President Jean-Claude Trichet held back from indicating that an interest rate hike was likely next month.

Investors had been expecting Trichet to say the ECB was practicing "strong vigilance" over inflation, which in the past has been a key phrase to flag a rate increase the following month.

Instead, he told a press briefing Thursday after the bank held its main interest rate at 1.25 percent that the bank would "monitor very closely" the risk of higher inflation before deciding another increase. Traders interpret that formulation of words to mean no increase before July at the earliest.

With expectations of a June rate hike diminished, the euro slid nearly a cent, or 0.8 percent, to $1.4710.

"The Trichet comments have provided the all clear for the market to sell the euro," said Alan Ruskin, an analyst at Deutsche Bank.

Last month, the ECB raised rates for the first time in nearly three years and the markets are expecting more hikes over the coming months. The euro has gained strongly in recent months against the dollar as investors priced in the growing likelihood of interest rate increases from the ECB.

If the U.S. Federal Reserve were planning similar rate increases, then the impact in the euro/dollar exchange rate would not be as big. However, the Fed shows few signs yet of raising its super-low interest rates anytime soon.

Earlier in Asia, inflation worries remained a dominant theme in the region in a week that has already seen India's central bank lift interest rates and the People's Bank of China hint that it may do so again soon.

However, mainland Chinese shares edged higher as investors snapped up bargains following the Shanghai benchmark's biggest loss in more than 2 months the day before.

The benchmark Shanghai Composite Index gained 0.2 percent to 2,872.40, and the Shenzhen Composite Index gained 0.3 percent to 1,190.8.

Hong Kong's Hang Seng index dropped 0.2 percent to 23,261.61, but markets in South Korea and Japan were closed for holidays.

In the oil markets, benchmark crude was down $3.37 a barrel at $105.90. Oil prices have been on the retreat this week as investors have worried that slowing U.S. economic growth will undermine demand for crude.


Pamela Sampson in Bangkok contributed to this report.

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