1. Dissolve yeast and 1 teaspoon sugar in lukewarm water. Let stand until foamy, 5 to 10 minutes.

2. Place half of hazelnuts in food processor. Whirl until chopped; remove and reserve. Place remaining nuts in food processor along with the remaining sugar. Whirl until finely ground. Add flour, salt, and butter to processor. With machine running, add the egg and the yeast mixture. Whirl until mixture forms a ball; whirl 30 seconds more to knead.

3. Transfer dough to a large greased bowl; turn to coat. Cover with a damp cloth. Let rise in a warm place, away from drafts, until doubled in bulk, about 1 1/2 hours.

4. Punch down dough. On a lightly floured surface, knead in remaining nuts and the cherries or raisins.

5. Divide the dough in half. Roll each half into a 24-inch-long rope. Twist the ropes together. On a greased baking sheet, form the braided loaf into a candy-cane shape. Cover with a damp cloth. Let rise in a warm place, away from drafts, until doubled in bulk, about 1 hour.

6. Preheat oven to 350ø. Bake for 25 to 30 minutes until golden brown and hollow sounding when tapped. Cool on a wire rack.

7. To prepare icing; stir together 1 1/2 cups sugar and 1 to 2 tablespoons milk until blended and a good icing consistency. Divide icing in half. Tint half with red food coloring. Drizzle or pipe red and white icing in candy-cane stripes over bread.

* Note: To toast hazelnuts, spread nuts out on baking sheet. Bake in preheated 350 ° oven for 8 to 10 minutes. Rub nuts with a clean kitchen towel to remove the skins.

Nutrient Value Per Serving:

Calories.........327 Protein........6 g Fat...........12 g Carbohydrates...51 g Sodium......188 mg Cholesterol...29 mg