* U.S., European shares dip with payroll report awaited
* Euro, pound, claw back versus dollar; ECB, BOE hold rates
* Copper tumbles in biggest one-day drop since November
NEW YORK, Jan 9 (Reuters) - Stock markets around the world fell on Thursday as investors took profits following recent steep gains and were reluctant to buy ahead of the closely watched U.S. payrolls report on Friday.
While recent data has indicated improving economic conditions, this is the first payrolls report since the Federal Reserve announced a slowing of its stimulus program last month. This may raise some expectations for the data to justify the market's recent rally. Strong economic indicators on Thursday, including an index on European sentiment and U.S. jobless claims, were not enough to drive optimism.
U.S. initial jobless claims fell more than expected in the latest week, while a euro-zone sentiment index jumped to a 29-month high in December.
"The numbers continue to be good, and that should eventually push the market higher, but there's a lot of exhaustion after the strong push we had in December," said Bruce McCain, chief investment strategist of Key Private Bank in Cleveland. "We're waiting for the payroll report to assess where we go from here."
The European Central Bank and the Bank of England both kept their respective 0.25 percent and 0.5 percent interest rates unchanged on Thursday, but markets were on alert for any signs of future ECB monetary stimulus moves or shifts in the economic outlook.
ECB President Mario Draghi has been at pains to stress in recent months that the bank is prepared to ease its record low interest rates below 0.25 percent and test out other more unconventional policy options if necessary.
The Dow Jones industrial average was down 12.24 points, or 0.07 percent, at 16,450.50. The Standard & Poor's 500 Index was down 0.56 of a point, or 0.03 percent, at 1,836.93. The Nasdaq Composite Index was down 7.71 points, or 0.19 percent, at 4,157.90.
U.S. investors were also looking ahead to the coming earnings season, with Dow component Alcoa Inc reporting after the market closes on Thursday.
"This is the 'show me' year in terms of earnings," said Bill O'Neill, head of wealth management research at UBS. "You have to see an improvement."
The FTSEurofirst-300 index of European shares fell 0.4 percent while the MSCI International ACWI Price Index slipped 0.3 percent, pressured by Asia. Tokyo's Nikkei 225 index slid 1.5 percent.
A sharper-than-expected slowdown in China's annual consumer inflation in December also caused some anxiety in Asia, with China's Shanghai Composite Index down 0.8 percent.
The pound was at $1.6456 while the euro was up 0.1 percent at $1.3588. The U.S. dollar index was flat against a basket of currencies.
Among commodities, gold was 0.1 percent higher following a two-day decline.
Copper, highly sensitive to the cooling economic outlook for top consumer China, tumbled 1.6 percent in its biggest one-day drop since November.
"I'm a bear on copper prices - I think $7,000 is a more sustainable level," said Helen Lau, a senior commodities analyst with UOB Kay Hian.
"The dollar will continue to strengthen because of U.S tapering (stimulus withdrawal), and China's economic growth is slowing down."
U.S. crude futures fell 0.6 percent to $91.77 a barrel while Brent crude slipped 0.3 percent to $106.87 per barrel.