European stock markets closed mixed on Thursday as investors digested another inflation warning from the head of the European Central Bank while oil prices held near record levels.

They said that while the ECB left interest rates on hold, as expected, remarks from President Jean-Claude Trichet stressing the inflation danger once again undercut optimism about an early monetary easing in the eurozone.

The resulting firming in the euro against the dollar highlighted the risk of the single currency holding at high levels and so putting pressure on exports.

Meanwhile, the Bank of England's decision to keep its rates on hold, also largely expected, disappointed some who had thought recent weaker economic data justified a cut.

Dealers said the bet now was that June will see a reduction in British rates, with the ECB seen on hold until much later this year at the earliest.

In London, the FTSE 100 index came of its lows to finish up 0.16 percent at 6270.80 points. In Paris, the Cac 40 lost 0.39 percent to 5055.58 points and in Frankfurt the Dax slipped 0.06 percent to 7071.90 points.

The Euro Stoxx 50 index of leading eurozone shares fell 0.41 percent.

The European single currency stood at 1.5403 dollars.

In Asia, Japanese share prices fell back from a near four-month high as the Nikkei-225 index slumped 1.13 percent and Hong Kong's key Hang Seng Index shed 0.63 percent.

On Wall Street, the Dow Jones Industrial Average was up 0.41 percent at around 4.15pm GMT as sentiment got some help from positive retailer sales figures.

Dealers said that after heavy losses on Wednesday on concerns about record oil prices, US stocks picked up as retailers' monthly reports suggested economic activity was holding up better than expected.

"Things are looking up again"

"Today things are looking up again ... helped by a series of better than expected same-store sales reports from the retailers," said Patrick O'Hare at Briefing.com.

In London, the market finished well off its lows as gains in the miners offset more weakness in the banks after results from Italy's biggest lender, Unicredit, showed the continuing damage being inflicted by the credit squeeze.

Higher oil and commodity prices drove the miners up sharply, pushing the market into positive territory just ahead of the close, with BHP Billiton gaining 2.94 percent to 1997 pence.

Unilever jumped 5.42 percent to 1752 pence after the Anglo-Dutch consumer products announced strong first quarter results.

Among the banks, Barclays lost 2.53 percent to 462 pence.

In Paris, dealers said sentiment took a knock from record oil prices and the ECB's hardline stance on inflation while at the same time, investors were consolidating the recent recovery.

The question now is whether this rebound can be sustained or will it falter as the credit squeeze sparked by the US sub-prime home loan crisis begins to dampen business activity overall while inflation is driven by soaring oil and food prices, ING analysts asked in a note.

Among the banks, BNP Paribas lost 1.25 percent to 68.89 euros after Italy's largest bank Unicredit became the latest to report results badly hit by its exposure to the credit market problems.

In Frankfurt, it was a similar day, with the market coming off its lows in late trade.

Postbank rose 2.75 percent to 59.80 euros after better-than-expected first quarter results while Deutsche Telekom gained 2.0 percent to 11.75 euros.

Lufthansa was down 1.91 percent to 16.97 euros after hiking fuel surcharges again.

Elsewhere in Europe, the Bel-20 in Belgium shed 0.96 percent, Madrid's Ibex-35 was up 0.34 percent, Italy's Mib-30 lost 1.17 percent, the AEX in Amsterdam slipped 0.14 percent and the Swiss Market Index shed 0.69 percent.

AFP