Retail shares fell after Tesco, the UK's largest supermarket operator, predicted a "tougher year" because of rising interest rates and growing competition. Air France-KLM and British Airways, among the most sensitive to changes in the price of oil, led travel and leisure stocks to the lowest in more than two months.

"Interest rates matter, they are increasing and that hurts, " said Boris Boehm, a fund manager at Nordinvest in Hamburg, which oversees about 5bn. "Oil prices also weighed on sentiment for stocks this week."

An advance in US bond yields revived concern interest rates will increase further in the world's biggest economy. The benchmark 10-year note yield, which in"uences rates on mortgages and corporate loans, climbed to as much as 5.2% today after declining to 5.0% 19 June. Rising bond yields earlier this month pushed the Dow Jones Stoxx 600 Index down from its highest since September 2000.

The pan-European Stoxx 600 Index dropped 1.7% this week. The Stoxx 50 also slid 1.7%, and the Euro Stoxx 50, a measure for the 13 countries using the euro, fell 1.6%.

Minutes of the Bank of England's last policy meeting published 20 June unexpectedly showed Governor Mervyn King and three other committee members voted for an increase. Swedish policy makers lifted rates for the eighth time in 18 months and said they'll need to raise them further.

Taylor Woodrow, the UK homebuilder that's merging with George Wimpey, had the worst weekly slump in more than seven years on concern borrowing costs might rise. Land Securities Group, the region's largest real-estate investment trust, dropped to the lowest in more than a year, pacing a decline in property stocks.

National benchmarks retreated in all 18 western European markets, except Iceland and Portugal.

Germany's DAX decreased 1%, and France's CAC 40 slipped 1.3%. The UK's FTSE 100 tumbled 2.5%.

Regional benchmarks extended losses last week on concern hedgefund losses at Bear Stearnsmay signal wider problems in credit markets. The second-biggest US underwriter of mortgage bonds con"rmed today it plans to take on $3.2 bn of loans to forestall creditors from seizing assets.

Tesco dropped 6.4%. Britain's biggest retailer said sales advanced at the slowest pace in 12 months.

First-quarter revenue at UK stores open at least a year rose 4.7%, excluding gasoline. The growth for the 13 weeks ended May 26 was less than the 5% median estimate in a Bloomberg survey of nine analysts.

Sales growth of products from clothes to compact discs slowed as consumers pared their shopping back to essentials after four increases in UK rates, the company said. Shares of Marks & Spencer the UK's largest clothing retailer, retreated 8.2%.

AirFrance-KLM, Europe's biggest airline, lost 6.7%. British Airways, the region's third-largest carrier, dropped 3.9%. The Dow Jones Europe Stoxx Travel & Leisure Index fell 4.2% to the lowest since 19 March.

Fuel expenses make up about 30% of total costs for airlines, according to calculations by Credit Suisse Group.

Shares of Imperial Chemical Industries, the UK maker of Dulux and Glidden paints, jumped 14% after the company rejected a 10.5bn bid from Akzo Nobel NV of the Netherlands as too low, fueling speculation that Akzo will boost its offer.

Shares of Tullow Oil, an explorer for hydrocarbons on three continents, soared 17%, for the best performance in the Stoxx 600. The company said 18 June that it discovered oil at its Mahogany-1 exploration well off the coast of Ghana.

Analysts at Citigroup and Merrill Lynch & Co raised their price estimates on the shares following Tullow's announcement.

Milestones Numbers The IPO for private equity giant Blackstone may have been the biggest in the US for five years, but it didn't blow the doors off on Wall Street. The firm raised $4.13bn in the sale Friday as its share price rose modestly from a $31 open to nearly $36 in late afternoon trade. No fireworks, but co-founder Pete Peterson (above) still pocketed $1.8bn alone.

.DUBLIN ISEQ 9,395.83 Down 2.73% on week
.EUROPE DJ Stoxx 50 3,922.84 Down 1.73% on week
.LONDON FTSE 6567.40 Down 2.45% on week
.NEW YORK DOW 13,360.26 Down 2.05%
Nasdaq 2,588.96 Down 1.44%

Equity movers

IRISH SHARES

GAINERS
Company % closing Dragon Oil 10.94 2.94 Minmet 8.75 .17 Norkom Group 7.07 2.12 Glencar Mining 6.67 .16 Providence Resources 6.58 .081 Newcourt Group 6.45 1.65 Siteserv 6.25 AGI Therapeutics 4.65 1.80 Irish Contl Grp 4.60 22.49

LOSERS
Company % closing Paddy Power -4.43 21.80 Ryanair Hldgs -4.46 4.93 Iona Tech -5.00 3.80 Datalex -5.56 .83 Bank Ireland -5.57 15.28 Anglo Irish Bank -6.15 15.24 C&C Group -6.46 11.15 Calyx Group -10.34 1.25 Blackrock -12.28 INTERNATIONAL GAINERS Company % closing China Mobile 12.57 84.65 Google 3.33 Ericsson 3.27 27.16 Allianz 2.95 Liberty Global 2.37 40.22 Apple 2.20 General Electric 1.76 3 8.69 Ceva Inc 1.56 8.47 Babcock & Brown 1.32 3 3.78 LOSERS Company % closing BT Group -3.65 317 Reed Elsevier -3.86 635 Aviva plc -3.93 759 Barclays plc -3.94 719.50 Vodafone Group -4.41 156.00 Amgen -4.74 Merrill Lynch -5.53 84.82 Marathon Oil -6.09 62.08

The week ahead

MONDAY
US Food and Drug Administration conference on drug trial management US existing home sales Results: Agile Software, Walgreen FBD trading update, Centrica trading update Kenmare AGM, Westbury Hotel
TUESDAY
United Nations conference on trade begins, Dublin Castle Dail considers stamp duty legislation US consumer confidence Results: Datalogic, Nike, Oracle, Steelcase, Alfred McAlpine
WEDNESDAY
US mortgages, durable goods orders Results: Waterford Wedgwood, George Wimpey, Bed, Bath & Beyond, Paychex, Red Hat
THURSDAY
US Federal Reserve interest rates decision US GDP, home sales, jobless claims Results: 3Com, Accenture, General Mills, Humatech, Monsanto, Palm
FRIDAY
Tesco AGM (CEO Terry Leahy right) UK consumer credit Andor Technology makes IEX debut Independent News & Media, Kingspan trading update June euro zone inflation, June euro zone business and consumer sentiment Results: Berkeley Group, Forrester Research, Timberland

The week that was

SHIPS IN THE NIGHT

THE battle for ownership of Irish Continental Group entered a more personal phase as chief executive Eamon Rothwell showed that he is prepared to fight on for ultimate control of the shipping company despite the consensus that the earlier 22 per share bid from rival Moonduster was a knockout punch.

Rothwell confounded market observers last Wednesday by buying 1.75m shares at the 22 level, bringing the stake owned by his management buyout team beyond the 20% share necessary to block Moonduster's bid. The stalemate will be broken only if someone increases their bid, a move analysts say wouldn't be supported on valuation grounds.

Even the 22 Moonduster bid was seen as high, since the Philip Lynch-led One51/Doyle consortium had acquired the last of its blocking stake at 20.75.

Valuation focused shareholders . . . the hedge funds Centaurus Capital and Fursa Alternative Strategies . . .got out at that level on 13 April after building up a combined 8% holding, which they had acquired at around the 18.50 level at which Rothwell originally bid. The fact that they haven't taken a sniff since suggests the fundamentals don't support a higher price and we're in for a Rothwell-Lynch face-off.

ARE YOU NOW OR HAVE YOU EVER BEEN A MEMBER OF THE FINANCIAL REGULATOR?

ANGLO IRISH chairman Sean Fitzpatrick struck a blow for the oppressed entrepreneurial class in Ireland last week when he bravely decried the country's regulatory regime as a form of "corporate McCarthyism".

Self-evidently, the compliance jackboot hasn't left any deep footprints on the extraordinarily successful Mr Fitzpatrick, but some of his colleagues in the banking sector are grumbling nonetheless. Just as the Financial Regulator's Consumer Protection Code is set to come into force on 1 July, a number of senior financial services have complained to the Sunday Tribune of resourcesapping implementation demands coming from the regulator. One claimed that since the advent of Ifsra in 2003, 50% of board time was being spent on regulatory matters . . . at the expense of product innovation.

Comrade Fitzpatrick hardly has the patience for that kind of carry on.

CARRY ON BUYING

FORTUNATELY Denis O'Brien, who has expressed concerns that Ireland's regulatory burden is more Communist than Commie-hunting, is still around to buy some shares with his spare cash. Not content with his shopping spree in the newspaper business or expansion on the airwaves, his buying took wing yet again as he returned to the market to increase his stake in Aer Lingus in a surprise move.

LIVE MIKE FORMER

RTE radio DJ Mike Murphy (left) is planning to don the headphones once more, but this time as part of a 8m consortium bidding for the Broadcasting Commission of Ireland's new multi-city radio licence. Murphy is part of the Radio 3 group bidding for a chance to address the over-45 market in Dublin, Cork, Galway, Limerick and County Clare.

Murphy is a co-investors with the Wilton Group comprised of Dan Healy, Deborah Fagan and Kealan Lennon of Boundary Radio.

YOUR CARD HAS BEEN DECLINED

THE European arm of credit card giant Visa will not be included in a planned IPO according to a filing deposited in the US Securities and Exchange Commission. The world's largest credit card association is combining its Visa Canada, Visa International and Visa USA operations into a single private stock company. Visa Europe will remain a membership association and will become a licensee of, and own a minority interest in, Visa Inc.

Rival Mastercard went public in May with an initial offering of $39 per share.