NEW YORK (Reuters) - The troubled U.S. labor market and investor jitters over big banks provided fresh concern about the U.S. economy on Thursday, while economic gloom spread deeper into cash-strapped eastern Europe.

Bank of Japan Governor Masaaki Shirakawa speaks during a news conference at the bank in Tokyo February 19, 2009. Shirakawa said that the outlook for Japan's economy was highly uncertain and that GDP was likely to stay bleak in the first half of this year. REUTERS/Michael Caronna

In the United States, the Dow Jones industrial average closed at the lowest level since October 2002 on worries about a new jobs report and investor fears of government control of U.S. banks that could wipe out shareholders.

In China, a central bank official said that cutting interest rates further would be risky and might not help the economy.

Barack Obama, in his first international trip as U.S. president, met with Canadian Prime Minister Stephen Harper in an effort to quell Canadian concerns about U.S. protectionism and talk about energy cooperation.

The latest financial scandal spread through the Americas and Europe, with Venezuela and Ecuador seizing entities tied to billionaire Allen Stanford and his far-flung empire.

Britain’s Serious Fraud Office was monitoring a possible UK link after reports that Stanford’s books were audited there.

Stanford was found by the FBI in Virginia on Thursday, two days after U.S. regulators accused him and his companies of selling $8 billion in certificates of deposit with high interest rates from his Antiguan affiliate. He was served with a complaint from the Securities and Exchange Commission but not arrested. No criminal charges have been filed against him.

In eastern Europe, evidence mounted of governments having trouble finding sources of financing, as global economic woes have reduced the available cash to fund budget deficits, investment and domestic lending.

Romania is expected to decide later this month whether it needs to seek financing help from the European Union or the International Monetary fund. Similar difficulties finding cash swept through Hungary, where bond yields jumped as buyers demanded a premium to invest in the region’s wobbly economies.

German Chancellor Angela Merkel said that her country stood ready to help eastern European countries in financial trouble, primarily through the IMF.

European Commission President Jose Manuel Barroso said the commission was “contemplating all scenarios” and had 15 billion euros available after previously providing a total of 9.6 billion euros to Hungary and Latvia.

The Dow fell 1.2 percent to 7,465.95. The S&P 500 also lost 1.2 percent.

U.S. government data showed both a record number of continuing unemployment claims, nearly 5 million, and a surprisingly sharp drop in manufacturing in the mid-Atlantic states.

Russia’s government also released a report showing a struggling jobs market. About 300,000 people lost their jobs in January, the government said, taking the total number of unemployed to 6.1 million, close to rates not seen since the socially unstable 1990s.

An index of top European shares closed slightly higher, snapping three days of losses, but well below the day’s highs as investors faced further evidence of U.S. economic turmoil.

“U.S. data continues to get worse and worse, and is even coming in below expectations,” said Georgina Taylor, equity strategist at Legal & General Investment Management. “The last few days have highlighted that the volatility is going to continue.”

The U.S. dollar fell against the euro, amid the relatively steady world stock markets.

U.S. crude oil futures surged 14 percent to more than $39 a barrel after U.S. government data showed an unexpected fall in crude inventories last week amid lower imports and higher demand.

In Britain, lower tax receipts in January drove the budget deficit to the highest level since records began in 1993.

Policymakers at the Bank of England are grappling with how close interest rates can get to zero, Bank of England Deputy Governor John Gieve said. He said Britain also faced a risk of entering a Japanese-style depression and that was why the bank’s Monetary Policy Committee had cut interest rates to a record low of 1 percent this month.

In Germany, a survey showed business expectations at their lowest in 32 years.

In Asia, Japan’s benchmark Nikkei average closed up slightly higher, a day after closing at its lowest point in nearly four months. The Bank of Japan kept its key interest rate unchanged at 0.1 percent, but extended a program to buy commercial paper to improve corporate funding and pledged to boost low cost funding.

South Korea moved to calm fears its banks might fall under the weight of foreign debts but the won weakened for the eight straight session as investors were unconvinced.