Dublin proves the exception as shares decline elsewhere

The Dublin market stood out in Europe yesterday by closing positively while shares weakened elsewhere. Una McCaffrey reports.

The performance was far from being a repeat of Thursday's 4.24 per cent gain, however, with early moves in this direction stifled by nerves in international markets.

An early-morning uplift of 1.5 per cent was reduced to a 0.1 per cent gain by the end of the day, although the banks managed to close a touch higher than most other stocks.

Dealers reported relatively low volumes, as investors chose to concentrate on their weekend rather than on the markets.

Meanwhile US stocks fell after the latest warning from a Federal Reserve official that inflationary pressures may be building, giving investors more reason to think the Fed will keep raising interest rates.

Some investors were locking in gains after a two-day rally which saw the Dow gain more than 300 points, traders said.

Shares of Microsoft were the most heavily traded on Nasdaq and were little changed after the software maker said chairman Bill Gates will cut back his day-to-day role at the company.

William Poole, president of the Federal Reserve Bank of St Louis, said pressure from high energy prices could mean that US inflation is greater than what has appeared in data and that the Fed would respond to persistent inflation with policies that keep it from rising further.

"Everyone is still concerned with what the Fed's going to do and inflation continues to be the hot topic," said Edward Bretschger, principal of equity sales and trading at First Albany. "I think everybody is just locking in gains from yesterday.

"We had a nice rally and people finally have the opportunity to sell some things." The Dow Jones industrial average was down 8.73 points, or 0.08 per cent, at 11,006.46.

The Nasdaq Composite Index was down 16.17 points, or 0.75 per cent, at 2,127.98. Microsoft inched lower by 0.09 per cent to $22.05.

New measures by China to restrict credit and keep its economy from overheating caused fears among investors that US corporate earnings growth could slow.

Friday's drop caused the market to pull back after two sessions of strong gains following a month-long sell-off that shook the US stock market.

Traders said market volatility increased as the two-day quadruple witching period in which futures and options expire came to an end, causing investors to adjust their positions.

Apple Computer fell after sources familiar with the matter said Microsoft is developing a music and video device to compete with Apple's iPod and music service. Apple shares were off 2.6 per cent at $57.86.