NEW YORK – Stocks ended an erratic day with a modest loss Thursday as investors tried to reconcile another batch of conflicting economic signals.

The Dow Jones industrial average closed down 30 points after falling as much as 110 and rising 87 during the course of the day. The other big market indexes also closed slightly lower.

Thursday’s trading fit with the market’s months-long pattern. Investors are torn between upbeat earnings news from companies and reports that point to an uncertain recovery. That indecision was clear as stocks rose on strong earnings at Southwest Airlines Co., ExxonMobil Corp. and other companies, then fell on disappointment over a slight drop in first-time claims for unemployment benefits.

Traders were also uneasy ahead of the first reading on U.S. gross domestic product for the April-June quarter, to be released Friday.

“This is a market that is trying to ascertain how deep the downturn is going to be and it is a market that’s future-looking,” said Quincy Krosby, a market strategist with Prudential Financial.

“It’s looking at numbers five to six months from now, trying to get a portrait of the economy and where earnings are going to be. Until it gets clarity on that it’s going to be a choppy market.”

There was little to help traders get that clarity Thursday. The Labor Department said initial claims for unemployment benefits dropped by a modest 11,000 to 457,000 last week. That’s slightly better than the 459,000 forecast by economists polled by Thomson Reuters, but investors were disappointed because the drop was so small.

“They saw it was more of the same,” said Bryan Jordan, director of financial markets analysis at Nationwide Investments. “This is an unusually stagnant labor market.”

The Dow fell 30.72, or 0.3 percent, to 10,467.16. Although the Dow has fallen 70 points over the past two days, it is up 7.1 percent for July with one trading day to go.

A big chunk of the July gain came in just four days that ended Tuesday, as the average rose 420 points in response to strong earnings. On Wednesday, however, the Federal Reserve’s assessment of the economy region by region reaffirmed for investors the fact that the recovery has slowed. Stocks fell and they continued their slide amid Thursday’s uncertainty.

The Standard & Poor’s 500 index fell 4.60, or 0.4 percent, to 1,101.53. The Nasdaq composite index fell 12.87, or 0.6 percent,to 2,251.69.

Rising stocks were narrowly ahead of losers on the New York Stock Exchange. Consolidated volume, which includes shares traded on other exchanges, was light at 4.7 billion shares, up from Wednesday’s 4.1 billion. Many investors sat out the day because of the market’s inability to settle on a direction.

Bond prices were mixed. The yield on the 10-year Treasury note, which moves opposite its price, was 2.99 percent, unchanged from late Wednesday. The 10-year yield helps set interest rates on mortgages and other consumer loans.

Traders will look next to Friday’s GDP report for a sense of how the recovery is doing. Economists surveyed by Thomson Reuters are forecasting that the GDP, the broadest measure of the economy, slowed in the second quarter to an annual rate of 2.5 percent as the government cut back on stimulus programs. That would be down from the first quarter’s 2.7 percent.

Southwest reported income that beat analyst forecasts. The company reported heavy traffic to start the summer travel season. ExxonMobil’s earnings rose as a result of higher oil prices.

Japanese electronics maker Sony also reported strong earnings because of a jump in sales of televisions and PlayStation 3 gaming consoles.

Sony shares trading in the U.S. jumped $2.34, or 7.9 percent, to $31.90. Southwest shares were unchanged at $12.01. ExxonMobil dipped 57 cents to $60.34 after rising earlier in the day.

Colgate-Palmolive’s earnings beat forecasts, but revenue fell short of expectations. It also said it would take a bigger charge than previously expected because of Venezuela’s devaluation of its currency. When currencies in other countries fall, overseas profits for U.S. companies also come in lower when they’re translated into dollars.

The consumer products maker’s stock fell $5.74, or 6.8 percent, to $78.12.

Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index fell 0.7 percent, and France’s CAC-40 dropped 0.5 percent. Japan’s Nikkei stock average fell 0.6 percent.

THE FED CONFIRMS INVESTORS’ VIEW: The Federal Reserve’s “beige book,” its report on the economy region by region, showed that the recovery is slowing in some parts of the country. That confirmed how investors see the economy, and that sent stocks falling.

MANUFACTURING GROWTH SLOWS: The Fed reported manufacturing slowed or leveled off in some parts. That followed a downbeat report earlier Wednesday on durable goods orders.

THE DOW: The Dow Jones industrial average fell almost 40 points and ended a four-day win streak.

TOKYO – Most Asian markets retreated Thursday after fresh evidence of slower U.S. growth blunted appetite for riskier assets like stocks.

The latest sign of sluggishness in the world’s No. 1 economy came from the Federal Reserve’s regional survey, a report known as the “beige book.” The Fed said economic growth in the U.S. has been steady during the summer in some cities, but was slowing in others like Atlanta and Chicago.

The survey followed a U.S. Commerce Department report that showed durable goods orders fell 1 percent in June. Economists expected a 1 percent gain.

Japan’s Nikkei 225 stock average finished the morning session down 52.85 points, or 0.5 percent, to 9,700.42. Investors moved to lock in profits following a 2.7 percent jump the previous day.

Activity in the tech sector was dominated by reports that Panasonic Corp. plans to make Sanyo Electric Co. and Panasonic Electric Works Co. into full subsidiaries. Sanyo surged almost 27 percent. Shares of Panasonic tumbled 5.4 percent.

South Korea’s Kospi fell 0.2 percent to 1,771.32 and Hong Kong’s Hang Seng index lost 0.4 percent to 21,014.53. Australia’s S&P/ASX 200 was down 0.4 percent to 4,510.4 on weakness in banks.

Markets in Taiwan and Singapore also fell while benchmarks in China, Indonesia and New Zealand were higher.

In New York Wednesday, the Dow Jones industrial average finished down 0.4 percent at 10,497.88.The broader Standard & Poor’s 500 index fell 0.7 percent to 1,106.13, while the Nasdaq composite index fell 1 percent to 2,264.56.

In currencies, the dollar fell to 87.22 yen from 87.44 yen late Wednesday in New York. The euro rose slightly to $1.2999 from $1.2996.

Benchmark crude for September delivery was up 4 cents at $77.03 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped 51 cents to settle at $76.99 on Thursday.

NEW YORK – With earnings season in full swing, bulls and bears are combing through reports to arm themselves in what’s become the mother of all stock market debates: Does the recovery gain steam, sending shares aloft? Or does it remain sluggish, or even stall, and push them down further?

A third possibility: Maybe the economy doesn’t matter so much.

Larry Hatheway, an economist at UBS, says economic growth means companies selling more things. But he thinks that is not as important as it used to be to generating the profits needed to send stocks higher. That’s because U.S. firms have mastered the art of pulling more and more money from each dollar of sales.

One gauge of that success: Corporate margins, or profits per sale, are hovering near 12 percent now, by one measure — tantalizingly close to a half-century high.

“As long as we don’t fall into another recession, it’s a good time to make money,” says Hatheway, who’s bullish on stocks. “We’re able to squeeze more profits out of sales than we were twenty or thirty years ago.”

Though just a third of companies in the Standard & Poor’s 500 have reported quarterly earnings results so far, the picture is impressive. Profits are booming. Eight out of ten companies have beat earnings expectations, according to Thomson Reuters. The average jump in profits is 33 percent.

It’s an old story, really. Companies cut workers in a downturn, and squeeze more out of those remaining. And so profitability rises smartly — only to fall again in the recovery as sales and payrolls rise once more.

But Hatheway says margins will stay high for a while yet because the forces that pushed them there aren’t going away anytime soon.

He says high unemployment is likely to stick around longer than in typical recoveries. And while that’s bad for the economy, it’s good for margins. “Firms can pick good employees and dictate compensation,” he says.

U.S. companies also have learned to squeeze more from their equipment and factories, not just their workers, he says. They kept their spending on such things low even before the recession. They feared a repeat of the booming 1990s when they spent wildly on equipment like telecommunications gear — only to discover they didn’t need all of it.

Hatheway says globalization has helped, too. Companies outsource much work abroad and draw supplies from numerous sources now as trade has boomed, which helps keep costs down. Growth abroad has boosted exports, too. That makes the fate of U.S. profits, and margins, less tied to U.S. growth.

The result: Though profit margins will rise and fall as they always have done, the highs and the lows are higher, Hatheway says. He defines margins as total U.S. corporate profit divided by the country’s gross domestic product.

“I see lows now of maybe 9 percent,” he says, a point or two higher than margins during most of the 70s and 80s. He adds that falling margins are “far in the future” — perhaps four years away.

Not everyone is convinced.

Legendary investor Jeremy Grantham, the Boston money manager who called the housing bust years ago, has been telling investors for months now that profit margins will fall from their perch, sending stocks tumbling. Andrew Smithers of London researcher Smithers & Co. wrote a report warning of the same. John Hussman of the Hussman Funds wrote this month that investors buying stocks on the belief that fat margins will last are destined to “walk themselves over a cliff.”

“The dark side of margins is that they’re going to have to come down,” says Claus Vistesen, an economist at the University of Hull in England. He adds, ominously, “And the market hasn’t fully priced this.”

Hatheway, for his part, isn’t backing down.

“If you give me slow growth and high unemployment, I can give you high earnings,” he says. “The stock market is not the economy.”

LONDON – European stock markets rose Thursday after encouraging economic news more than offset any concerns generated by a downbeat U.S. economic assessment from Federal Reserve chairman Ben Bernanke.

The FTSE 100 index of leading British shares was up 33.33 points, or 0.6 percent, at 5,247.97 while Germany’s DAX rose 69.11 points, or 1.2 percent, to 6,059.49. The CAC-40 in France was 40.66 points, or 1.2 percent, higher at 3,534.58.

The advance in Europe came as something of a surprise following sizable falls on Wall Street on Wednesday, when Bernanke said that the U.S. economic outlook was “unusually uncertain.”

However, U.S. stocks were poised to recover most of Wednesday’s losses — Dow futures were up 91 points, or 0.9 percent, at 10,149 while the broader Standard & Poor’s 500 futures rose 10.80 points, or 1 percent, to 1,074.70.

Alongside the relief engendered by the expected rebound in the U.S., European stocks have been supported by surveys indicating that fears of a double-dip recession have been vastly overplayed.

Monthly purchasing managers indices into the eurozone’s manufacturing and services sectors — closely watched gauges of business activity — showed the recovery gaining traction.

The July composite index, which incorporates the manufacturing and services figures, rose to 56.6 in July from 55.6 in June. Anything above 50 indicates expansion and the higher the figure the greater the growth.

“July’s rise suggests that, for now at least, the region is (perhaps surprisingly) evading the threat of a double-dip apparently facing the U.S.,” said Ben May, European economist at Capital Economics.

In fact, the composite index would indicate that the eurozone, supposedly mired in a government debt crisis, may be growing at a quarterly rate of 0.8 percent, way above the average since the euro was established in 1999, May said.

Elsewhere, there was some evidence that the British economy’s prospects may not be as bleak as many in the markets have been suggesting — a monthly 0.7 percent increase in retail sales in June was a lot more than anticipated.

In Europe, in particular, attention is quickly turning towards the results of the stress tests into a large chunk of the EU’s banks. The results are due after Europe’s markets close on Friday and a number of investors remain skeptical about whether they are a credible exercise.

“We should all be bracing ourselves for relief to flow through European financial markets, but somehow this does not feel like an environment that will welcome such a result,” said Mitul Kotecha, an analyst at Credit Agricole. “More likely questions will be asked about why did so few banks fail and why the tests were not rigorous enough.”

The stress tests are becoming a key focal point in the currency markets.

By late-morning London time, the euro was up 0.6 percent on the day at $1.2825. The single currency has been undermined over the last couple of days by its failure to sustain a break above $1.30 and amid concerns about the stress tests.

Meanwhile, the dollar fell 0.2 percent to 86.76 yen.

Earlier in Asia, stocks recovered ground as Wall Street futures turned higher.

Japan’s Nikkei 225 stock average slipped 0.6 percent to 9,220.82 while South Korea’s Kospi fell 0.8 percent to 1,735.53. Australia dropped 0.9 percent to 4,374.70 and markets in Thailand, Indonesia and Malaysia were also lower.

China’s Shanghai benchmark index rose 1 percent to 2,562.41 on bargain hunting after several days of losses. Hong Kong’s Hang Seng index gained 0.5 percent to 20,589.70.

Benchmark crude for September delivery was up 33 cents to $76.89 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.02 to settle at $76.56 on Wednesday.

____

Associated Press Writer Alex Kennedy in Singapore contributed to this report.

SINGAPORE – Asian stock markets were mixed Thursday as traders mulled comments by U.S. Federal Reserve Chairman Ben Bernanke that suggested the world’s largest economy faces a slow recovery.

Bernanke told a congressional committee that the economic outlook is “unusually uncertain” and the economy is fragile. He did not forecast that it would fall back into recession.

Some analysts worry that slowing economic growth in developed countries in the second half will undermine demand for Asian exports and hurt company earnings.

“We’re bearish for the rest of the year,” said Tey Tze Ming, a trader at Saxo Capital Markets in Singapore. “We have a bleak economic outlook on the U.S. and Europe and it’s hard to see Asian stocks doing well in that context.”

Japan led decliners, with its benchmark Nikkei 225 stock average slipping 0.5 percent to 9,229.42 while South Korea’s Kospi fell 0.7 percent to 1,736.72. Hong Kong’s Hang Seng dropped 0.2 percent to 20,449.94. Markets in India and Malaysia were also lower.

China’s Shanghai benchmark index rose 0.6 percent to 2,551.71 while Thailand, Singapore and Indonesia all gained less than 1 percent.

Bernanke’s comments sent the Dow Jones industrial average down 1.1 percent to 10,120.53 on Wednesday, while the broader Standard & Poor’s 500 index fell 1.3 percent to 1,069.59. Interest rates dropped in the Treasuries market as investors sought a safer haven.

In currencies, the dollar slipped to 86.52 yen from 86.93 yen in New York late Wednesday. The euro rose to $1.2776 from $1.2763.

Benchmark crude for September delivery was off 29 cents to $76.27 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.02 to settle at $76.56 on Wednesday.

TOKYO – Asian stock markets were lower Thursday, hit by sharp falls on Wall Street after U.S. Federal Reserve Chairman Ben Bernanke confirmed fears that the world’s largest economy has weakened.

The comments didn’t include any outright surprises, but still sent investors scurrying out of stocks. Bernanke told a congressional committee that the economic outlook is “unusually uncertain.” He said the economy is fragile, but he did not forecast that it would fall back into recession.

Japan’s benchmark Nikkei 225 stock average slipped 0.7 percent to 9,215.30 and South Korea’s Kospi fell 0.4 percent to 1,742.69. Hong Kong’s Hang Seng dropped 0.3 percent to 20,434.93.

Markets in Taiwan, Indonesia and Australia were also lower. Shares in Singapore bucked the trend with its benchmark up 0.2 percent to 2,930.78.

The Dow Jones industrial average Wednesday fell 1.1 percent to 10,120.53, while the broader Standard & Poor’s 500 index fell 1.3 percent to 1,069.59. Interest rates dropped in the Treasury market as investors sought a safer haven.

In currencies, the dollar slipped to 86.46 yen from 86.93 yen in New York late Wednesday. The euro rose to $1.2771 from $1.2763.

Benchmark crude for September delivery was off 7 cents at $74.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.02 to settle at $76.56 on Wednesday.

NEW YORK (Reuters) – Federal Reserve Chairman Ben Bernanke’s dour assessment of the U.S. recovery hit stocks on Wednesday, as his comment that the economy faced “unusually uncertain” prospects rattled investors.

Stocks tumbled after Bernanke acknowledged the labor market’s continued weakness while offering few specific options to stimulate lending and investment.

“The market sold off because unfortunately there is no remedy provided in Bernanke’s commentary to the rising threat of deflation, the excess capacity in the economy and the malfunctioning of the credit system,” said Joe Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

“We are now giving up on the notion of a standard recovery in the U.S. economy.”

The Dow Jones industrial average (.DJI) lost 109.51 points, or 1.07 percent, to 10,120.45. The Standard & Poor’s 500 (.SPX) fell 13.91 points, or 1.28 percent, to 1,069.57. The Nasdaq Composite (.IXIC) dropped 35.16 points, or 1.58 percent, to 2,187.33.

Bernanke spoke to the Senate Banking Committee in the first of two days of his semiannual testimony to Congress.

His downbeat remarks sapped most of the buying interest even after a spate of strong earnings reports prior to the market’s open. Morgan Stanley (MS.N) was one of the day’s few big winners after it reported stronger-than-expected profit, lifted by new business. Its stock shot up 6.3 percent to $26.80.

Apple Inc (AAPL.O) rose 0.9 percent to $254.24 after it posted robust quarterly results, but the company’s conservative margin forecast limited gains.

Another financial stock showing strength was Wells Fargo & Co (WFC.N), which rose 0.6 percent to $26.06 after rising loan demand helped lift its earnings more than analysts had expected.

After the closing bell, cellphone chip supplier Qualcomm Inc (QCOM.O) rose 4 percent to $37.59 on news its quarterly earnings and revenue beat Wall Street’s estimates on strong smartphone demand.

Online marketplace eBay Inc (EBAY.O) added 4.1 percent to $20.99 in extended-hours trading as it beat Wall Street’s quarterly profit estimates, helped by a record performance at its PayPal service.

The benchmark S&P 500 found support during the regular session at its 14-day moving average and held above 1,060, a critical level according to some technical analysts.

Investors have been reluctant to make big commitments in equities due to growing worry about the economic outlook, sparked by disappointing economic data.

“Considering everything the (Fed has) done already, it will be alarming when the time comes that they feel they need to do more,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Weighing on the Nasdaq were shares of Internet company Yahoo (YHOO.O), down 8.5 percent to $13.91 a day after it posted revenue that missed Wall Street’s estimates.

About 8.68 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s estimated daily average of 9.65 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 2 to 1, while for every stock that rose on the Nasdaq, about three fell.

(Reporting by Rodrigo Campos, additional reporting by Angela Moon; Editing by Kenneth Barry)

NEW YORK – Stocks fell sharply Wednesday after Federal Reserve Chairman Ben Bernanke confirmed investors’ fears that the economy has weakened. Interest rates dropped in the Treasury market as investors sought safer places for their money.

Bernanke told a congressional committee that the economy is “unusually uncertain.” He said the economy is fragile, but he did not forecast that it would fall back into recession.

The Dow Jones industrial average, which was modestly higher before Bernanke’s prepared remarks, fell 109 points as investors absorbed his assessment of the economy, and his statement that the Fed is ready to take action if the economy worsens.

Bernanke’s comments, part of his semiannual report to Congress, weren’t surprising given the disappointing economic reports and corporate earnings numbers released in recent weeks. But they were enough to upset investors who have grown increasingly nervous about the state of the recovery. Some investors may have been hoping for a more upbeat reading from the Fed chairman.

The Fed is still expecting the economy to expand this year, but the central bank has lowered its forecast for growth.

Oliver Pursche, executive vice president at Gary Goldberg Financial Services, said investors took Bernanke’s comments as “not exactly a ra-ra USA type of endorsement.”

Craig Peckham, market strategist at Jefferies & Co., said stocks fell not because of anything Bernanke said, but what he didn’t say about any plans to stimulate the economy. Although Bernanke said the Fed was “prepared to take further policy actions as needed,” he also said, “we are not prepared to take any specific steps in the near term” because the Fed is still evaluating the economy.

Peckham said, “The market expected that we’d see more sign of monetary easing in the testimony. But that didn’t happen.” Monetary easing would include steps to make credit more available or encourage banks to lend more.

The market fluctuated for much of the day on another mixed batch of earnings reports. John Merrill, chief investment officer of Tanglewood Wealth Management in Houston said the day was like many others recently: Very little news but lots of professional traders reacting to it.

“Bernanke said he wants to collect more data before doing anything, and that’s just fine. But traders are impatient. They got a ‘buy’ button and a ’sell’ button and they’re going to do do one or the other,” Merrill said.

The Dow fell 109.43, or 1.1 percent, to 10,120.53. The broader Standard & Poor’s 500 index fell 13.89, or 1.3 percent, to 1,069.59. The Nasdaq composite index lost 35.16, or 1.6 percent, and fell to 2,187.33.

Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 4.8 billion shares, up from Tuesday’s 4.7 billion.

Treasury prices surged and their yields fell as investors sought out the safety of government debt after Bernanke’s testimony. The yield on the benchmark 10-year Treasury note, which helps set rates on mortgages and other kinds of loans, fell to 2.88 percent from 2.96 percent late Tuesday.

Investors have been selling stocks since late April on a combination of weak economic indicators and disappointing earnings reports. The Dow, which reached a 2010 high of 11,205.03 on April 26, has fallen 10 percent as investors have seized on any piece of bad news and shrugged off more positive signs about the economy.

In the past few days, companies’ revenue figures have become a culprit. Although companies including IBM Corp. and General Electric Co. have beat analysts’ second-quarter earnings estimates, their revenue has not met expectations and investors have been selling. The belief in the market is that companies aren’t getting the strong sales needed to fuel the economic recovery.

“The numbers aren’t bleak but there’s no top-line growth, and that’s scaring people. There’s a realization that the economy is stuck in slow growth for a year or two,” said Brian Wenzinger, a portfolio manager at Aronson-Johnson-Ortiz in Philadelphia.

Stocks fell across the market Wednesday. Of the few stocks in the S&P 500 that rose, most were companies that had upbeat earnings news Wednesday or late Tuesday.

Morgan Stanley rose $1.58, or 6.3 percent, to $26.80, after its second-earnings were better than expected. The investment bank weather the stock market’s difficult quarter better than some of its competitors. Another banker, Wells Fargo & Co., rose 15 cents, or 0.6 percent, to $26.06, after also surpassing expectations.

Coca-Cola Co. rose 84 cents, or 1.6 percent, to $54.08 after saying its North American soft drink sales stopped falling during the April-June period.

Thursday’s earnings reports include some from companies seen as measures of how the overall economy is faring: United Parcel Service Inc., Microsoft Corp. and Caterpillar Inc.

LONDON (Reuters) – World stocks eased on Friday on a worsening outlook for the U.S. economy that also pushed the dollar to 7-month low against the yen and near a 2-month trough versus the euro.

The FTSEurofirst 300 index (.FTEU3) surrendered early gains to shed 0.1 percent after Asian stocks fell, with the Nikkei average (.N225) down nearly 3 percent for its worst one-day percentage loss in more than a month (.T).

That came after Wall Street ended flat, led by a sudden turnaround in Goldman Sachs and BP, after spending much of Thursday in negative territory on an unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation.

Shares in Goldman Sachs gained after the firm agreed to pay $550 million to settle civil fraud charges while BP’s stock rose after it said it had capped an oil spill that started in April.

BP rose a further 3 percent in European trade, putting a floor under European losses.

The MSCI world equity index (.MIWD00000PUS) was flat at 285.78. The Thomson Reuters global stock index (.TRXFLDGLPU) fell 0.2 percent.

Concerns about the U.S. outlook overshadowed a strong start to the U.S. earnings season. JPMorgan Chase & Co (JPM.N) beat expectations on Thursday.

Bank of America Corp, Citigroup (C.N) and General Electric (GE.N) are among those scheduled to release results later on Friday.

Q2 SLOWDOWN

“The earnings season is off to a very good start, but the big question remains: how bad will be the slowdown in the second half? Until we get a clear answer, the market will be prone to big swings like the ones we’ve seen over the past 20 days,” said Philippe Gijsels, senior equity strategist at Fortis Bank in Brussels.

The dollar fell within a whisker of the July 1 low of 86.96 yen, its lowest since early December, as concerns mounted over the world’s largest economy. Stop-loss sales were seen below 86.95 yen while bids were cited at 86.50 yen ahead of option barriers.

Growth-linked currencies such as the Australian and New Zealand dollars also fared poorly, falling 0.6 percent and 1.4 percent against the U.S. dollar, respectively.

The euro held near a two-month high of $1.2955 hit on trading platform EBS on Thursday, when it jumped 1.6 percent against the greenback.

Receding concerns about euro zone sovereign debt problems also buoyed the euro after smooth absorption of euro zone peripheral bond auctions earlier this week.

Lower U.S. Treasury yields, with the two-year yield falling to a record low of 0.58 percent on Thursday, also undermined the greenback.

Some said the dollar’s declines could be limited.

“The dollar’s adjustment can be justified as the Fed may have to do more easing, but in the longer term it could start to benefit from safe-haven flows,” said Jane Foley, research director at Forex.com.

Market players will keep an eye on U.S. inflation data is due out at 1230 GMT. Economists forecast June consumer price index to be flat on the month after falling 0.2 percent in May.

Bund futures were slightly lower at 128.62.

Oil slid for a third day on Friday toward $76 a barrel while gold held steady.

(Additional reporting by Blaise Robinson in Paris and Neal Armstrong in London; editing by John Stonestreet)