European share markets, already weakened by profit-take, have been hit by a sharp sell-off in New York. Wall Street's slide below 8,000 points, provoked by disappointment over earnings from hi-tech companies, sent ripples into the foreign exchange markets where dealers vented their frustrations by pushing the dollar lower and led to late falls in most European markets.
London stocks managed a quick spurt to within a whisker of the 5,000point barrier in early trade. But the FTSE-100 index soon fell back and joined the continental markets, where investors cashed in on a string of record highs this week.
In Dublin shares priced closed broadly unchanged, although they fell back late in the day as Wall Street fell. The main financial stocks, which had hit record highs this week, fell back in late trading.
The Dow Jones Industrial Average gave the sting in the tail of the trading week. Disappointment with earnings from Microsoft triggered a reaction to the bull run which took the Dow over 8,000 points this week for the first time.
As London dealers went home, the Dow was down 125.9 points at 7,894.41 and still falling. US stocks closed last night at 7,890.46, a fall of 130.31. Paris was the chief casualty among the leading European stock markets as investors fretted over possible company tax rises aimed at fixing the French budget for European monetary union.
The Finance Minister, Mr Dominique Strauss-Kahn is expected to announce on Monday a package aimed at cutting the public deficit, which is threatening to hit 3.6 per cent of gross domestic product - far above the 3 per cent target for joining the single European currency.
Most of this year's measures are expected to be on the revenue side, with a "euro surcharge" on corporate tax expected to raise about 12 billion francs (£1.3 billion), officials said.
The thought of higher company taxes chilled the Paris bourse, which opened lower and fell most of the day. The CAC-40 index closed down 81.90 points (2.77 per cent) at 2,876.69.
London managed a strong morning performance and the FTSE 100 index hit a record intra-day high of 4,998.1. But for the third time this week the FTSE failed to break the 5,000 barrier and the buying, dictated largely by technical factors, faded away.
Wall Street accelerated the fall and the FTSE closed down 71.8 points or 1.45 per cent at 4,877.2.
"The market has had a bout of the jitters . . . but a lot of fund managers have been on the wrong foot this year and will probably love the chance to buy in at lower levels," said one dealer. "But 5,000 seems to be a bit of a barrier and this sort of volatility is a bit frightening."
German shares, which closed at a record high on Thursday, also suffered from profit-taking. The DAX index of blue chips closed down 30.78 points or 0.73 per cent at 4,196.53. The IBIS index, which measures post-bourse electronic trade, closed down 1.71 per cent at 4,131.94.
In the US, much of the decline was attributed to weakness in the technology sector. Microsoft's stock took a beating - a day after the software giant reported an 88 per cent jump in its quarterly profit.
A number of other computer-related stocks also tumbled as the technology ladened Nasdaq market reversed a string of record closings. But International Business Machines bucked the trend. The Nasdaq composite index fell 28.43 points to 1,540.42 in midmorning trading.
Microsoft's stock lost $9 to $140.50 on Nasdaq, where it was the second most-heavily traded issue. Intel, , the most actively traded Nasdaq stock, gave up $2.56 to $85.25 and Sun Microsystems, , the third most active, dropped $2.25 to $43.31.
Like Microsoft, Sun Microsystems shares got battered even after it reported that its net income nearly doubled in its fiscal fourth quarter.
Microsoft, the world's biggest software company, reported on Thursday that it earned $1.05 billion, or 80 cents a share, in its fiscal fourth quarter, compared with $559 million, or 43 cents a share, a year earlier. Revenues surged 41 per cent to $3.18 billion from $2.26 billion.
