The ECB has kept rates at a record low 1.00 percent since mid-2008 to help get the economy through the global financial crisis but inflation now well above its 2.0 percent target requires action. In London, the FTSE 100 index of leading shares closed down 0.67 percent at 5,908.76 points. In Paris, the CAC 40 fell 0.88 percent at 3,989.18 points and in Frankfurt the DAX dropped 0.23 percent to 7,041.31 points. Other European markets showed a similar range of losses.
"The re-emergence of the eurozone debt crisis got us off to a shaky start," said Simon Denham at Capital Spreads. The first three months of 2011 was a quarter many traders "would rather forget," he said, noting Middle East unrest driving oil prices sharply higher just before the disastrous Japan earthquake triggered a "frantic sell-off" at the beginning of March.
"So far, 2011 has hardly been short of events that have affected the financial markets and you get the feeling that there's more to come around the corner," he added. In New York, stocks were trading in a narrow range, supported by a fall in new jobless claims which provided encouragement ahead of Friday's key government unemployment report. At the same time, investors were keeping an eye on developments in Europe, focussing on Ireland and the new problems in Spain and Portugal.
"The US equity markets are under some pressure in early action as European stocks are being bogged down ahead of results from Ireland's banking sector stress tests," Charles Schwab analysts said in a note. The blue-chip Dow Jones Industrial Average was down 0.09 percent and the tech-heavy Nasdaq Composite dropped 0.14 percent at around 1645 GMT. In Asian trade earlier Thursday, markets were mostly firmer, building on overnight gains on Wall Street despite lingering caution over Japan's ongoing nuclear crisis. Tokyo gained 0.48 percent as exporters continued to benefit from a weaker yen, Hong Kong added 0.32 percent but Shanghai fell 0.94 percent. Sydney rose 0.33 percent.