BAGHDAD (Reuters) - Hours after U.S. troops handed over control of Iraq's cities to its domestic security forces, a car bomb in the northern city of Kirkuk killed at least 32 people and wounded more than 100 on Tuesday, police said.
The blast tore through a busy market in a largely Kurdish part of the city, which is regarded as a potential flashpoint between ethnic Kurds, Arabs and Turkmen.
The U.S. pullback to rural bases from towns and cities is the first step toward a full U.S. withdrawal by 2012 agreed under a bilateral security pact.
Some Iraqis fear it leaves them open to attack by insurgent groups but many Iraqis celebrated what the government named "National Sovereignty Day," more than six years after the U.S.-led invasion to topple Saddam Hussein.
Citizens and Iraqi soldiers drove around the streets of the capital in vehicles draped in flowers and Iraqi flags. Signs were draped on Baghdad's many concrete blast walls reading "Iraq: my nation, my glory, my honor."
"This day, which we consider a national celebration, is an achievement made by all Iraqis," Prime Minister Nuri al-Maliki said in a televised address.
"Our incomplete sovereignty and the presence of foreign troops is the most serious legacy we have inherited (from Saddam). Those who think that Iraqis are unable to defend their country are committing a fatal mistake."
The day's festivities included a parade in Baghdad's heavily fortified Green Zone government and diplomatic district, viewed by Iraqis as the ultimate symbol of the foreign military presence until local forces took control of it in January.
In a display of the military muscle Iraq will use to combat a stubborn insurgency, thousands of soldiers and police paraded on foot or in U.S.-donated Humvees, armored cars and tanks in a compound where Saddam's forces once staged elaborate displays.
U.S. and local officials said the pullback of U.S. troops showed how far the country had come since it was almost torn apart by tit-for-tat sectarian killing in 2006/2007.
But the Kirkuk bomb underscored the fragility of the security gains. Iraq is less violent that it has been for years, but militants still stage frequent attacks.
In Washington, U.S. President Barack Obama lauded the U.S. troop withdrawal as an important milestone but warned of "difficult days" ahead.
Frantic relatives of those who had been in the area dug through the rubble in Kirkuk, searching for missing loved ones.
"I went to the market to get some bread and there was a huge explosion," said Taseen Azad, 21, who was lightly wounded. "I saw people falling on the ground, shops burning and dead people. Then someone took me to the hospital."
The U.S. military said four U.S. soldiers based in Baghdad had died of combat-related injuries on Monday.
In another sign of what Maliki called the start of a new era, foreign oil executives attended an auction at a Green Zone hotel for eight oil and gas fields in the country's first major energy contracts for almost four decades.
Iraq needs the expertise of the oil majors to restore its oil infrastructure, hit hard by sanctions and war.
But its ambitions soon struck commercial realities as it found that there was a big gulf between what it was willing to pay for the 20-year service contracts and the fees the companies were willing to accept.
A consortium led by British-based BP accepted a deal to develop the biggest oilfield, the 17-billion barrel Rumaila in the south, but only after a group led by Exxon Mobil of the United States had rejected the government offer.
Awards to U.S. and British firms could anger opponents of the invasion, who have said the war was designed to give Western oil companies control over Iraqi oil reserves. U.S. and British officials deny the accusations.
The tight security at the auction, and the presence of bodyguards with earpieces escorting the international energy executives, was a reminder of Iraq's still uncertain stability.
The political situation also remains unsettled. Tensions have grown between Baghdad and the minority Kurds in Iraq's north, and all eyes are now on a parliamentary election in January that will test Maliki and Iraq's fledgling democracy.