A look at the day ahead in European and global markets from Ankur Banerjee

Markets hit the pause button after a selloff in equities since the start of the week but sentiment remained fragile, as worries re-emerged over the prospects for the U.S. economy and investors focused squarely on this week's job reports.

Labour data on Wednesday suggested the U.S. jobs market was losing steam, raising expectations the Federal Reserve may resort to large interest rate cuts, while additional reports including Friday's non-farm payrolls data are keeping sentiment on edge.

Futures indicated European bourses were set for a subdued open after Asian shares rose 0.4% on Thursday, clawing back some of the week's losses, although the MSCI's broadest index of Asia-Pacific shares outside Japan is still down 2.2% so far this week.

Risk sentiment remained frail, with the yen holding on to its gains for the week as traders seek safe assets while the dollar was steady in Asian hours after weakness overnight.

Hawkish rhetoric from the Bank of Japan also supported the yen after BOJ board member Hajime Takata hinted the central bank should stay on course to raise interest rates.

While the spotlight this week will be on Friday's U.S. non-farm payrolls report, in the meantime Thursday's U.S. jobless claims reading and euro zone retail sales data will keep investors busy.

The markets are keen for clues on whether data will dictate that the Fed cut interest rates by 25 basis points (bps) or 50 bps when it meets later this month. Traders added to wagers of a 50 bps cut following the job openings data and are now pricing in a 44% chance, up from 38% a day earlier.

Investors are also pricing in 110 bps of cuts from the remaining three Fed meetings this year, and when you factor in the Fed's focus on the labour market, it looks like economic data in the next few weeks will be put under the microscope by increasingly skittish investors.

Key developments that could influence markets on Thursday:

Economic events: Euro zone August retail sales; August construction PMI data for Germany, France and euro zone