The euro was flat against the dollar on Friday, shedding early gains posted on ECB concerns about inflation as China again raised banks' reserve requirements to cool growth rates.

The tightening hit copper prices and speculation about such a move earlier sent Chinese stocks 1.3 percent lower, while world stocks measured by the MSCI All-Country World Index extended losses, falling 0.2 percent.

Futures on the U.S. S&P 500 and the Dow Jones industrial average were flat to slightly lower ahead of quarterly results from lender JPMorgan.

Thursday's comments by European Central Bank President Jean-Claude Trichet warning of a short-term inflationary threat added fuel to a short-covering rally in the euro.

The remarks surprised markets, which had expected a more dovish tone and sparked speculation the ECB may raise interest rates earlier than previously thought.

A lot of banks are busy reassessing their view on when the ECB will raise interest rates, which is supporting the euro and adding to the squeezing of short euro positions, said Niels Christensen, currency strategist at Nordea in Copenhagen.

Well received bond sales from highly indebted euro zone members Portugal and Spain this week and speculation that European policymakers will boost their war chest against attacks on euro zone sovereign debt also contributed to the currency's better tone.

But the euro, which earlier rose to one month highs against both the dollar and the Swiss franc, shed those gains after China tightened reserve requirements by a further 50 basis points. It was flat against the dollar at $1.3364 and versus the Swiss franc it traded at 1.2873.

The dollar index, which tracks the greenback's performance against a basket of major currencies, reversed earlier losses to rise marginally to 79.219.

STOCKS TICK LOWER

The pan-European FTSEurofirst 300 dropped 0.7 percent, pressured by miners as copper prices fell 0.7 percent. Oil was lower for the second day in a row, down 1 percent.

However, European tech stocks offered some support after U.S. heavyweight Intel posted better than expected quarterly earnings overnight. Intel shares in Frankfurt rose 2.7 percent, and futures on the tech-heavy Nasdaq were flat.

Intel's good comments on server sales, coupled with positive SAP statement late yesterday, indicate that corporations investment activity has been good in the fourth quarter, Pohjola analyst Hannu Rauhala says.

MSCI All-Country World Index drifted 0.2 percent lower, after hitting a fresh 28-month high in the previous session.

Japan's Nikkei average fell 0.9 percent after a surprisingly weak settlement of options for January and a stronger yen against the dollar trigger profit-taking.

(Additional reporting by Jessica Mortimer and Emelia Sithole in London, Tarmo Virki in Helsinki and Ian Chua in Sydney; Editing by John Stonestreet)

Portugal Japan China