By Luke Baker and Khaled Yacoub Oweis
BAGHDAD (Reuters) - U.S. troops on Thursday promised an "overwhelming" response to brutal killings in the Iraqi town of Falluja and vowed to hunt down those who shot, burned and mutilated four American contractors.
Marines took positions on the outskirts of the restive town west of Baghdad where the contractors were ambushed by insurgents on Wednesday and then set on by a crowd.
"Coalition forces will respond," the U.S. army's deputy director of operations Brigadier General Mark Kimmitt told a news conference. "They are coming back and they are going to hunt down the people responsible for this bestial act.
"It will be at a time and a place of our choosing. It will be methodical, it will be precise and it will be overwhelming."
Television footage of jubilant Iraqis mutilating the bodies recalled events in Mogadishu in 1993, when a crowd dragged the bodies of American soldiers through the streets, hastening the departure of U.S. forces from Somalia.
A leaflet distributed in Falluja on Thursday claimed that the previously unknown "group of Sheikh Ahmad Yassin" had killed the Americans in response to the Israeli assassination of Hamas spiritual leader Yassin last month. It was not immediately possible to verify the claim.
Falluja was relatively quiet on Thursday, but residents said more bloody killings should be expected.
"The Americans may think it is unusual but this is what they should expect. They show up in places and shoot civilians so why can't they be killed?" Falluja shop worker Amir said.
U.S. troops fired on demonstrators in Falluja last April, killing at least 15 people. Other residents have been killed since then and locals accuse U.S. troops of firing randomly and using excessive violence during raids. They always vow revenge.
An Iraqi Governing Council member stressed that those responsible represented just a small minority of Iraqis but also encouraged U.S. troops to think carefully about how to respond.
"In 1958, July 14th, some members of the royal family were killed and mutilated. Iraqis were ashamed for decades at this barbaric event," Samir Sumaidi said. "Now after this I feel that again Iraqis will hang their heads in shame."
TRADE FAIR CANCELED
Guerrillas near Falluja detonated a roadside bomb as a U.S. convoy passed by on Thursday, wounding three soldiers. One Humvee left behind by American soldiers near the site of the attack was later set ablaze and looted by a crowd of Iraqis.
A roadside bomb killed five U.S. soldiers on Wednesday in the same area, a hotspot for resistance to the occupation.
The U.S governor of Iraq Paul Bremer vowed to hunt down those responsible for ambushing the contractors, and those who then torched the corpses and dragged them through the streets before hanging them from a bridge.
"The acts we have seen were despicable and inexcusable," he said. "They violate the tenets of all religions, Islam included, as well as the foundations of civilized society. Their deaths will not go unpunished."
As the violence sparked renewed concern among foreign organizations working in Iraq, a high-profile U.S.-sponsored trade fair for companies rebuilding Iraq was postponed.
Organizers of the Baghdad Expo, a major trade fair that had been due to start on Monday, said it was postponed -- a blow to U.S. efforts to draw investment to Iraq and project an image of a stable country conducive to doing business.
No new date was set for the event.
Washington hopes economic growth in Iraq will help undermine the guerrilla insurgency, but so far, the lack of stability and security in some parts of Iraq has hampered reconstruction.
In Baquba, 40 miles north of Baghdad, police said insurgents killed two policemen and seriously wounded three in a drive-by shooting on Thursday.
Those fighting the U.S.-led occupation have increasingly targeted members of Iraq's fledgling security forces, seeing them as working too closely with the occupiers.
More Iraqi security officials have been killed since the U.S. invaded than U.S. soldiers.
In Basra, a mainly Shi'ite city 340 miles south of Baghdad, at least one Iraqi was killed in clashes between Iraqi police and around 100 protesters demanding salaries. The protesters threw stones and set tyres on fire.
The U.S. military death toll last month was the second highest of any month since President Bush declared major combat over on May 1 last year.
At least 50 American troops died in Iraq in March, according to Pentagon figures. The deadliest month for U.S. forces was November, when 82 U.S. troops died.
At least 407 American troops have been killed in action in Iraq since U.S.-led forces invaded on March 20 last year to topple Saddam Hussein.
Guerrilla attacks in March also killed at least 16 foreign civilians, including the four who died in Falluja on Wednesday. (Additional reporting by Michael Georgy, Atef Hassan, Fiona O'Brien)