LONDON - European shares fell on Thursday, while the dollar rose as traders took some heart from trade talks between the US and Japan, and gold hit a new record as Federal Reserve Chair Jerome Powell added a note of caution about the growth outlook.

With a long weekend ahead, investors were reluctant to double down too heavily on the broad-based decline in risk assets this week.

US President Donald Trump unexpectedly joined talks in Washington on Wednesday with a delegation from Japan, saying later that "big progress" had been made in the discussions with lead Japanese negotiator Ryosei Akazawa, but giving no details.

Adding to the cocktail of uncertainty was the European Central Bank's policy meeting later on Thursday. The ECB is widely expected to cut eurozone interest rates, but may not offer much clarity about the effects on growth and inflation from Trump's tariffs.

The STOXX 600 fell 0.4 percent, as construction and healthcare shares dropped, but still headed for a 4.2 percent gain this week, while the euro, which is not far off three-year highs against the dollar, eased 0.25 percent to $1.1372.

"As the dust is starting to settle, there are concerns regarding that stagflationary outlook that Powell warned about and I think there's potential for the ECB to warn about a stagflationary outlook for the euro zone as well," City Index strategist Fiona Cincotta said.

"Those comments from Powell are quite stark," she said.

Powell, who was speaking for the first time since Trump last week paused some of his barrage of tariffs, said the Fed would wait for more data on where the economy was headed before making any changes to interest rates.

But he also cautioned that Trump's tariff policies risked pushing inflation and employment further from the central bank's goals.

"Powell is between a rock and a hard place," said Tom Graff, chief investment officer at Facet Wealth. "The Fed can't act proactively to stem any potential economic weakness, given that tariffs are likely to also cause inflation."

US stock futures rose, suggesting a recovery after Wednesday's selloff that pushed the S&P 500 down 2.2 percent and the Nasdaq down more than 3 percent. Futures on the Nasdaq were up 1.2 percent, while those on the S&P were up 1 percent, as technology shares got a boost from forecast-busting earnings from Taiwan's TSMC.

Results from TSMC, the world's largest contract chipmaker, followed warnings from bellwethers Nvidia and ASML that rattled investors.

Dutch company ASML said tariffs were increasing uncertainty around its outlook for 2025 and 2026, while AI pioneer Nvidia warned of a $5.5-billion hit after Washington restricted exports of its AI processor tailored for China.

The dollar has been a major casualty from the uncertainty stemming from both the rollout of the tariffs and their impact on economic growth. Investors have ditched US stocks and bonds in the last couple of weeks.

Against a basket of six other currencies, the dollar has fallen to its lowest in three years this month. Treasuries have been relatively stable. The benchmark US 10-year Treasury yield was up 4 basis points at 4.32 percent.

The yen touched a seven-month high earlier in the session before reversing to trade 0.8 percent weaker at 142.945 per dollar after Akazawa said foreign exchange had not been discussed at the trade talks in Washington.

In commodities, gold racked up yet another record high, going as high as $3,357.40 per ounce as safe-haven flows and an exodus from the dollar gathered pace.

Oil prices rose on the prospect of tighter supply, leaving Brent crude futures up 0.7 percent at $66.33 a barrel.