Trade was thin and the FTSE 100 closed a shortened Christmas Eve session down 41.6 points at 5867.2.

That was in sharp contrast to the Dow on Wednesday which finished just 1.8% shy of its all time closing high.

New York's rally surprised even the traders

Dealers said despite the gains from US shares yesterday, there was not enough activity in the Square Mile to get things moving in an upwards direction.

As a consequence, the FTSE succumbed to light profit-taking, with some of the year's star performers worst hit.

But Thursday's slide did not worry investors in Colt Telecom, which was the FTSE 100's top stock in 1998 with a 498% increase.

As the seasonal drinks start to flow, brewers were also seen in a favourable light.

The FTSE alcoholic beverages index outperformed the rest of the market, adding 1.7%. Diageo rose 13.5p to 701.5p.

But another set of weak sales figures from John Lewis unsettled the retailers, where Marks and Spencer gave back 10 to 408 and Next 5 to 480.

Overall trading was slow, with barely 100m shares changing hands by the close.

Corporate announcements were few and far between and there was little news on the international circuit.

Both Frankfurt and Paris were closed for business.

Wall Street buoyant

Wall Street's runaway performance yesterday was ignited by an rally in internet stocks.

It ended the day at 9,202, while the technology-dominated Nasdaq index rose 51 points, or 2.4%, to a record 2,172.

Traders attributed the rise to a "Santa Claus rally".

"There's a uniqueness to this time of year, because there is no tax-related selling plus the economy is really showing some resilience," said Dick Stein of Noble International Investments.

But there is still concern that underlying fears over disappointing earnings results and profits warnings will catch up with investors early in the New Year.

Tokyo falls back

Asian markets overnight offered no real direction.

Tokyo slipped back on disappointment with a Standard & Poor's downgrade of seven Japanese banks.

Continued worries that higher bond yields could hurt Japanese corporate activity also plagued the market.

The Nikkei average of 225 selected issues fell 72.72 points to 13,706.73.

"Until bond prices settle down, the stock market is going to remain unstable," said Sachio Ishikawa, manager at Chuo Securities.

Hong Kong moved ahead with the New York rally.