Prospects of an early move in Eurozone interest rates faded further yesterday when new data showed confidence across the eurozone dipped slightly at the end of last year but remained significantly higher than the long-term average.

The European Commission's latest monthly economic sentiment survey supported the European Central Bank's view that, despite mounting fears about the US and UK economies, eurozone growth has largely escaped any dramatic impact from the financial market turmoil.

The President of the ECB, Jean-Claude Trichet yesterday argued that global growth was "continuing at a pace which is quite robust even if there is a little bit of slowing down", which would continue to support eurozone exports as the US economy decelerated.

With eurozone inflation still high, that is likely to keep the ECB in hawkish mood on Thursday, when it holds its first meeting of 2008 to set interest rates. The eurozone slowdown was taking "more the form of an orderly retreat than of a dramatic run for cover", said Gilles Moec, economist at Bank of America.

The ECB's main policy rate is expected to remain unchanged at 4 per cent on Thursday. Mr Trichet last month revealed that some governing council members had spoken out in favour of higher interest rates. He might drop similar hints again this week - partly as a warning signal ahead of pay negotiations in Germany.

Speaking after a meeting with international counterparts in Basel, Switzerland, the ECB president struck a note of caution by stressing the "risks to the downside" posed by higher commodity prices and the impact of the global credit squeeze.

Negative global economic sentiment dragged the Dublin equity market down yesterday, with the Iseq index of Irish shares falling 1.68 per cent, wiping €1.5 billion off the value of Irish-listed companies.

Financial markets worldwide endured another nervous session yesterday as investors continued to fret about the outlook for the US economy.

The disappointing US employment and manufacturing reports have prompted widespread speculation that a recession could be looming, and that the Federal Reserve might cut interest rates aggressively.

Dealers on the Dublin market yesterday reported that the market had priced in a quarter-point cut by the Bank of England, with the ECB expected to leave rates alone. A reduction in eurozone borrowing costs in the second half of the year is being seen as increasingly likely. - (Additional reporting by Financial Times service)