The dollar was weaker against the yen and the mark after Bundesbank President Hans Tietmeyer warned against excessive interest rate cuts, while sterling dropped as gloomy news on the services sector heightened expectations of lower rates in the UK. ``Tietmeyer is basically saying it's the domestic conditions that matter the most. And Germany's economy doesn't warrant a rate cut, so it supports the idea that there will be no rate cuts in Germany,'' said Julian Jessop, chief European economist at Nikko Europe. Shares extendedWednesday's rally in early trade, ignoring a 0.6 per cent fall on the Tokyo bourse and a soft finish on Wall Street, but then slipped ahead of the start of New York trading. Mobile phone operators and manufacturers clung on to impressive gains, though there appeared to be no fresh news behind the rise.

In London, network operator Orange rose 5.3 per cent, leading the FTSE 100 index to a 0.3 per cent gain. ``The favoured stocks in rising markets have been the mobile phone stocks and they have a long way to go to catch up with their recent highs,'' said one market-maker in London. Finnish handset maker Nokia rose 5.2 per cent ahead of its third-quarter report next week, boosting the FOX index of leading shares 4.1 per cent, while Sweden's Ericsson rose 3.2 per cent.

Philips Electronics in Amsterdam gained 5.7 per cent. But France Telecom fell 5.7 per cent as dealers decided that diminishing market volatility made it more likely the government would bring forward a postponed share placement. The fall weighedon the Paris CAC 40 index, which dropped 0.4 per cent. The index was also hurt by falls of 5.3 per cent and 3.8 per cent respectively in oil shares Elf-Aquitaine and Total. Salomon Smith Barney on Thursday cut its investment weighting on the European oil sector to underweight and downgraded its ratings on a series of companies in the sector, dealers said.

Banking stocks were strong after Salomon urged investors to become more aggressive on the sector and upgraded its ratings on several shares. Societe Generale jumped 5.8 per cent in Paris, with analysts saying a company statement warning of flat nine-month gross operating income comforted investors by suggesting there was no more bad news to come. In Germany, Dresdner Bank rose 3.6 per cent and Hypovereinsbank rose 4.3 per cent. The Xetra DAX index of electronically traded shares fell 0.4 per cent as power company shares again fell on reports the new government will ban nuclear energy. Shares in Anglo-Dutch publishing group Reed Elsevier fell on marketspeculation it was poised to issue a profit warning. Reed dropped 6.8 per cent in London and Elsevier fell 7.6 per cent in Amsterdam. Government debt futures firmed on the back of stronger US Treasuries, which gained on Wednesday after weaker-than-expected September retail sales stirred hopes of another US interest rate cut. But, Treasuries cut early gains after news of an unexpectedly strong 0.3 per cent rise in producer prices.

The dollar dropped against the mark and yen, with the mark buoyed by a scaling back of expectations that Germany would cut interest rates. Tietmeyer said easing monetary policy to an extent inconsistent with domestic stability `is beneficial to nobody,' adding that such moves would do harm in the long run. The dollar was at 1.6296 marks against 1.6423 in late trade on Wednesday. Against the yen, the dollar fell to 117.65 from 119.05 on Wednesday. Sterling dropped to a one-week low against the mark after Bank of England governor Eddie George said recent falls in the pound were astep in the right direction for some sectors that have been suffering from lost competitiveness. Sterling dropped to 2.7675 marks from 2.8025 late on Wednesday, and to $1.6973 from $1.7062. The pound had begun to slide even before George's comments as a weak British Chamber of Commerce survey on the service sector fanned gloom about the economy.

Bangkok shares gain 3.5%

Thai shares gained 3.5 per cent on Thursday with heavy trade in the finance and banking sectors despite ongoing concerns over third-quarter results due out this month, analysts said. The Stock Exchange of Thailand (SET) broad-based index gained 10.07 points to close at 295.19, while the select SET 50 was up 0.83 points to finish the day at 21.14 points.