The celebratory mood permeated across the Atlantic to Wall Street until profit-taking spoilt efforts to reach a new record high.

London failed to show the same degree of optimism, despite a reportedly smooth transition on currency markets.

Traders described the transition to the euro as smooth but tentative. The volume of shares traded was low, a reflection of both caution and the absence of investors because of school holidays in many countries on the continent.

This has not stopped investors bidding up the prices of leading shares. "There's a bit of 'euro-phoria' in the market after the new currency's confident debut on foreign exchange markets," said Joerg Pruessmeier, head of equity sales at Merrill Lynch.

Smooth start

European shares had a buoyant end to the first day of euro trading. Frankfurt's floor-traded Dax index ended the day 5% higher at 5252, while Paris' Cac 40 index jumped 5.2% to 4147.

Meanwhile, in New York the Dow Jones index of leading US shares ended the day just 2.84 poinbts higher 9184.27 after standing up 167 points earlier in the day - just 25 points short of its 23 November record high.

Shares in London failed to show the same exuberance, spending much of the morning in negative territory, before the prospect of a rally in New York boosted sentiment in afternoon trade.

By close, the FTSE 100 index had drifted back into the red, showing a loss of 3 points on the day at 5879..

Dealers said there was no particular reason for the lack of interest, but some blamed profit-taking after the Christmas rally.

London link-up

The first trading day of 1999 also marks the start of links between the London and Frankfurt stock exchanges with traders in each centre now able to buy and sell stocks on the electronic trading platforms of the other.

On the floor of Frankfurt's stock exchange, traders reported no technical difficulties relating to the Boerse-LSE information-sharing alliance or the introduction of the euro.

The increased turnover on each market this should bring is expected to create higher liquidity - where investors are able to find buyers and sellers more easily - but there was little sign of much early effect, traders said.

The Deutsche Boerse said it would provide details "within the next few weeks" of the next step in the alliance.

"Today is just the first step toward a pan-European stock exchange," Reto Francioni, a Deutsche Boerse executive board member said in an interview at Frankfurt's stock exchange.