U.S. shares little changed as Europe rallies

By Herbert Lash

NEW YORK (Reuters) - Favourable results by top U.S. bank Citigroup caused European shares to rally but U.S. equities were little changed on Friday as credit concerns still loomed and oil's slight rise stalled economic optimism after its slide this week.

Crude oil briefly touched a six-week low as speculation grew of a more conciliatory tone ahead of talks on Saturday between Iran and Western diplomats on Tehran's nuclear ambitions.

Crude prices fell $15 over the previous three days, sparking hopes that inflation pressures might ease and economic growth wouldn't suffer after had shot toward $150 a barrel.

The dollar rose against major currencies after Citigroup's less-than-expected quarterly loss eased the grim outlook that some investors held for the health of the U.S. financial sector.

U.S. and euro zone government debt prices fell as Citigroup's results caused investors to unwind their recent flight to safety. The yield on the 10-year Bund surged to a two-week high of 4.58 percent in the biggest single-day climb in about four months.

Results at Citigroup, the largest U.S. bank by assets, followed surprisingly strong earnings from Wells Fargo. and JP Morgan Chase. earlier this week that also lifted equity markets.

But even as Citigroup's results buoyed investors, disappointing quarterly results from both Google Inc and Microsoft Corp drove a technology sell-off, helping to send the Nasdaq down more than 1 percent.

Before 1 p.m., the Dow Jones industrial average was up 2.36 points, or 0.02 percent, at 11,449.02. The Standard & Poor's 500 Index was down 4.30 points, or 0.34 percent, at 1,256.02. The Nasdaq Composite Index was down 34.86 points, or 1.51 percent, at 2,277.44.