The Iseq index of Irish shares closed down 36.39 at 9,408.12.

The Dow Jones Stoxx 600 Index declined 0.2% to 365.51. in London. The benchmark posted an 18% gain for the year.

The Stoxx 50 lost 0.3% on Friday and the Euro Stoxx 50, a measure for the 12 nations sharing the euro, slipped 0.1%.

Suez limited declines after Capitalmagazine reported French billionaire Francois Pinault will make a bid for the world's second largest water company. Grupo Ferrovial rose as it agreed to sell its property unit for 1.6bn.

The Stoxx 600 has climbed this year to its highest since December 2000 as a record wave of takeovers and profit growth outweighed concern the US economy is slowing.

"For 2007, we will not see the sort of gains as this year, " said Bob Parker, the London-based deputy chairman of Credit Suisse Asset Management, which oversees $502bn.

"Inevitably, we are going to get some increase in interest rates".

He said stocks could fall 5% to 10% in the first quarter.

US stocks slid on Friday for the first time in three days after stronger-than-expected data on consumer confidence and home sales damped optimism that interest rates will fall next year.

Asian stocks rose to their highest in more than seven months, capping a fourth consecutive year of gains.

National benchmarks fell in 10 of 17 western European markets.

Germany's DAX slid 0.2%, while the UK's FTSE 100 dropped 0.3%. France's CAC 40 added 0.2%.

Trading in Europe's three largest markets last week amounted to less than half the daily average over the past six months, based on data compiled by Bloomberg.

Amvescap rose on speculation that it is out of the running to buy mutual fund operations from American firm Marsh & McLennan.

Alitalia rallied after the Italian government said potential buyers will have a month to submit offers to acquire the company.

The UK Irish and German markets closed early for the New Year break. US markets plan to observe a national day of mourning on 2 January for former US president Gerald Ford, who died last week.

Shares of BP, Europe's secondlargest oil producer, lost 0.7% to 567.5p. Shell, the region's biggest oil company, dipped 0.7% to 1,790p. To t a l , Europe's thirdlargest oil company, slipped 0.3% to 54.55. Crude oil for February delivery fell as much as 54 cents to $59.99 a barrel in on milderthan-average US. temperatures.

Oil, which has retreated 22% from a record $78.40 a barrel reached on July 14, fell 4% last week as mild weather cut US heating-fuel consumption.

A measure of energy stocks has lagged the broader market this year, gaining 3.3% compared to an 18% advance by the Stoxx 600.

Suez climbed 3.1% to 39.43, set to close at a record. Pinault may make a hostile bid of 70bn to buy Suez as early as next week, Capital magazine reported on its website. "It's surprising and I don't know why he would do it, " said Michel Dumoulin, a fund manager at Banque Martinin Paris, which oversees $6bn including Suez stock. Still "for shareholders it would be positive, " he said. Gaz de France, which is trying to merge with Suez to create Europe's secondbiggest utility, added 2.3% to 34.68. Pinault would sell Suez's energy business to Gaz de France, according to Capital.

So far this year, $1.7 trillion worth of takeovers have been announced in Europe, up from $998bn in the same period a year ago, according to data compiled by Bloomberg.

(Bloomberg)