US Markets - Stocks snapped a three-day losing streak Friday, allowing investors to recoup some of the losses incurred during a week in which concerns about interest rates roiled Wall Street. The Dow Jones industrial average showed a triple-digit gain Friday, and the Standard & Poor's 500 index crossed back above the 1,500 mark.

After briefly dipping into negative territory in late morning, stocks gained steam in the afternoon as yields on the 10-year Treasury note backed off five-year highs of 5.25%. As stocks closed Friday, yields on the benchmark note hovered around 5.11%.

Yields, which move in the opposite direction as bond prices, rose during the week as investors grew less optimistic that the Federal Reserve would lower short-term interest rates. A move above the 5% level Thursday in the 10-year bond yield sent stock market investors rushing to bonds.

According to preliminary calculations, the Dow industrials rose 157.66, or 1.19%, to 13,424.39.

Broader stock indicators rose. The Standard & Poor's 500 index increased 16.95, or 1.14%, to 1,507.67, and the Nasdaq composite index rose 32.16, or 1.27%, to 2,573.54.

The S&P 500 declined 1.9% this week and the Dow average dropped 1.8%. The Nasdaq fell 1.5%. All three indexes posted their steepest weekly losses since the end of February, when a global rout wiped more than $3.3 trillion from the market value of equities worldwide.

National Semiconductor jumped $3.79, or 15%, to $29.58. The company, whose chips manage power in electronic devices, reported fourth-quarter net income fell less than analysts estimated and said sales rose from the preceding three months, a sign that an industry glut may be abating.

Technology Shares Rally

Technology shares climbed 1.5% as a group and contributed the most to the S&P 500's advance.

Texas Instruments Inc., the world's largest maker of mobile-phone chips, rose $1.58 to $35.97. Intel Corp., the world's biggest chipmaker, added 52 cents to $21.83.

US Steel jumped $9.25, or 8%, to $125.05 for the second-best gain in the S&P 500. ThysseNKrupp AG is interested in buying either US Steel or Russia's OAO Severstal to expand, Interfax said, citing an unidentified banker. US Steel is the more likely target, the news agency said.

Spokesmen from ThysseNKrupp, US Steel and Severstal declined to comment.

Nucor Corp., the second-largest US steel producer, added $1.81 to $66.61.

Citigroup Inc., the biggest US bank, and Goldman Sachs Group Inc., the world's largest securities firm by market value, today led a rally among companies that are the most dependent on debt financing. Citigroup climbed 81 cents to $53.33. Goldman added $5.01 to $225.06.

Citigroup's debt equaled 88% of total capital at the end of last year. The ratio is more than twice the 34% average for members of the S&P 500, according to data compiled by Bloomberg. Goldman's debt amounted to 93% of total capital. Lower bond yields reduce companies' borrowing costs.

A gauge of homebuilders in S&P indexes rallied 2.3% as lower interest rates may boost demand for mortgage loans.

Lennar Corp., the largest US builder by sales, jumped 74 cents to $43.16. D.R. Horton Inc., the second biggest, climbed 43 cents to $21.96.

In economic reports today, the US trade deficit fell 6.2% to $58.5 billion in April, the steepest drop in six months, the Commerce Department said. The gap declined even as the shortfall with China widened.

Exports rose 0.2% to a record $129.5 billion as sales of foods, plastics and consumer goods such as jewelry improved. Imports slipped 1.9%.

Non-US sales accounted for 48.6% of total revenue for S&P 500 companies last year, based on estimates compiled by S&P.

McDonald's Corp. gained $1.20 to $51.41 after the world's largest restaurant chain said sales at US stores open at least 13 months increased 7.4% in May, helped by a ``Shrek the Third'' movie promotion and chicken salads and sandwiches. The growth topped an estimate of 5% from RBC Capital Markets Corp. analyst Larry Miller.

Tyco International Ltd. climbed $1.17 to $33.80. The manufacturer said it will spin off its health-care and electronics units to shareholders at the end of the month after winning approval from its board and the US Securities and Exchange Commission.

Utilities in the S&P 500 rebounded 1% as a group, snapping a five-day slide that was the steepest since February 2003. The stocks declined this week as rising bond yields made their dividends less attractive. Collectively, the shares have a dividend yield of 3.1%, the highest among 10 industries.

Exelon Corp., owner of the largest US fleet of nuclear power plants, added 74 cents to $70.66. Southern Co., the biggest electricity generator, gained 29 cents to $34.60.

Nike Inc. lost $1.14 to $52.96. The world's biggest athletic-shoe maker was downgraded to ``neutral'' from ``buy'' at Banc of America Securities, which cited a slowdown in the US athletic shoe market.

European Markets - Gainers were rare among Europe’s leading stocks this week as rises in global bond yields put investors on the defensive.

The FTSE Eurofirst 300 index slumped 3.6% over the week to 1567.64, bringing the market back to mid-May levels.

Utilities, an interest-rate sensitive sector, was hardest hit, dropping 6.2% as the attractiveness of dividend pay-outs was diminished by rising bond yields.

But as the European Central Bank raised its benchmark interest rate to a six-year high of 4%, cyclical sectors exposed to swings in consumer demand were not far behind. Travel and leisure dropped 5.11% and construction and materials eased 4.88%.

In contrast, defensive sectors just about held their ground with tobacco easing just 1.1% while oil and gas fell 1.2%.

So let's go country-specific now in Europe and start with Germany where in Frankfurt German shares closed lower in generally quiet trading with Siemens and insurers leading decliners.

The DAX was ended down 28.11 points, or 0.37%, at 7,590.50, after trading between 7499.43 and 7644.96.

The MDAX lost 9.35 points, or 0.09%, to 10,656.30, while the TecDAX was up 4.56 points, or 0.52%, to 886.58. DAX futures were up 58.00 points or 0.77% at 7,614.00.

Siemens was the worst performer, down 1.67 Eur or 1.74% at 94.18.

Insurers as a sector were the biggest loser as they may be confronted with an Atlantic hurricane season that could be worse than usual.

Munich Re was down 2.20 or 1.63% at 132.45 while Allianz was off 2.63 or 1.59% at 163.10.

Other financial issues were also easier, with Hypo Real Estate down 0.76 Eur at 48.20, Deutsche Postbank, off 0.69 at 63.66, Deutsche Bank off 0.73 at 106.46 while Commerzbank was down 0.21 at 35.24.

E.ON, up 1.75 Eur or 1.54% at 115.09, was the best performer after Goldman Sachs included E.ON in its 'Conviction Buy List' with a price target of 130 Eur a share. The broker said it sees the utility offering some of the most attractive value.

SAP added 0.37 at 36.25 after comments from chief executive Henning Kagermann suggested there is no solid basis for peer Oracle to take SAP to court over allegations of stealing software code.

Bayer improved 0.06 at 51.91 after Morgan Stanley lifted its price target by 19% to 64 Eur a share and reiterated its 'overweight' stance on the stock, reflecting its increased forecasts and belief market consensus underestimates the stock's growth potential.

On the MDAX, Heidelberger Druck led losers, falling 1.05 Eur or 2.79% at 26.60 while Kloeckner & Co added 2.15 or 4.38% at 51.25.

Tele Atlas, down 0.39 or 2.37% at 16.07 was the biggest loser while AT&S gained 1.10 or 6.83% at 17.20.

Into France now where Paris Share prices closed slightly lower, with an early rise on Wall Street combined with fresh takeover rumours, notably Societe Generale's reported interest in French peer BNP Paribas, slowing the heavy selling of the past three days.

The CAC-40 index finished down 7.20 points, or 0.12%, at 5,883.29. Volume for the day was 8.0  billion Eur.Among CAC-40 stocks, 16 closed higher and 23 closed lower.

On the Matif, June CAC-40 futures were trading down 10.0, or 0.17%, at 5,899.5.

On the broader indices, the SBF-80 index closed down 33.41, or 0.47%, at 7,129.59, and the SBF-120 ended 7.47 or 0.17% lower at 4,295.94.

Over the week, the CAC-40 has retreated 284.86 points or 4.62% after reaching a fresh six-and-a-half-year high of 6,168.15 last Friday.

Like other bourses, Paris was rattled by signs of interest rate rises ahead on both sides of the Atlantic, on top of this week's decision by the ECB to raise its key rate to 4.00% from 3.75%.

BNPP led bluechip gains, closing up 1.30 Eur or 1.51% at 87.16, while SocGen added 0.75 or 0.54% to 140.25.

Les Echos reported this morning that SocGen is working with two investment banks on a bid for BNPP and that a hostile approach has not been ruled out.

Other merger and acquisitions talk centred on IT services firms Capgemini and Atos Origin.

La Lettre de l'Expansion reported, without citing sources, that Capgemini has mandated BNP Paribas to launch an offer for Atos, to be financed by Societe Generale.

Still in negative territory, Vallourec was the biggest bluechip faller -- down 3.69 or 1.62% at 223.99 -- as it continued to come off recent highs that were fuelled by rumours of takeover interest in the steel tube maker.

In the auto sector, Renault gave up 1.50 or 1.37% to 107.64 after its surge of late on the back of high expectations for its new products. Rival car maker Peugeot was up 0.19 or 0.33% at 57.05, helped by the news it will sign this weekend an agreement with the Russian government to develop car production in Russia.

Other bluechip fallers included Suez -- down 0.24 or 0.60% at 39.47 -- and Gaz de France -- off 0.38 or 1.10% at 34.32 -- , amid growing doubts that their planned merger will go ahead.

French prime minister Francois Fillon reiterated in a press interview published today that 'there are other options' to a GDF-Suez deal.

Axa, meanwhile, dropped 0.42 or 1.34% to 31.00, in line with fellow insurer CNP Assurances, which slipped 1.70 or 1.79% to 93.25 following a downgrade by Exane BNP to 'underperform' from 'neutral'. The broker said it expects a slowdown in the French life insurance market.

Danone fell 0.21 or 0.37% to 55.97. The food manufacturer remains affected by uncertainty over the outcome of a dispute with the former chairman of its Chinese joint venture, although analysts agreed that the departure of Zong Qing Hou, announced yesterday, was broadly positive in the long term.

Outside the CAC-40, GFI Informatique inched down 0.04 or 0.43% to 9.32 as the stock remained unsettled.

Back in positive territory, Alcatel-Lucent rose 0.10 or 1.02% to 9.87, recovering slightly from a sharp drop this week.

After announcing yesterday a further contract with Brazilian mobile phone operator Vivo, Alcatel-Lucent said today it has been selected by Telecom New Zealand, a unit of Telecom Group, as its technology partner for the deployment of a new third-generation (3G) mobile network.

Another bluechip riser was STMicroelectronics, up 0.15 or 1.08% at 14.10. The company has suffered in recent sessions from a general downturn for semiconductors, as well as the fact last month's deal to merge its flash-memory activities with Intel has removed a key catalyst for the shares.

Other stocks to reclaim some of the ground lost this week included advertising group Havas, up 0.10 or 2.37% at 4.32.

Rhodia, meanwhile, rose 0.04 or 1.45% to 2.79, but this was only a small part of the 6.46% lost yesterday amid various rumours surrounding the chemicals company, including worries about the impact of measures to reduce carbon dioxide emissions.

Neighbours The Netherlands saw Shares in Amsterdam close marginally lower with Ahold falling amid profit taking following Thursday's strong gains.

The AEX ended 0.36 points or 0.07% lower at 534.69, after trading in a range of 530.80-535.99.

Ahold led decliners, shedding 3.91% to 9.35 Eur amid profit taking following yesterday's strong gains in late trading, while Rodamco Europe shed 1.52% to 100.32 and TNT lost 1.32% to 31.50 Eur.

Vedior lost 0.95% to 20.80 Eur and Hagemeyer lost 0.85% to 3.48.

Financials were also lower. Fortis lost 0.46% to 30.20 Eur, ING also dropped 0.46%, to 32.45 Eur, and Aegon ended 0.34% lighter at 14.70 Eur while ABN Amro lost 0.34% to 35.23 Eur.

Heineken shed 0.21% to 42.44 Eur after a downgrade at Lehman Brothers and SBM Offshore ended 0.19% lower at 26.36 Eur.

One of the few gainers was Philips, which added 1.57% to 31.01 Eur amid unconfirmed reports that the company may sell a 14% stake in joint venture LG Philips LCD to Toshiba.

Among midcap shares, Tele Atlas dopped 3.03% to 16 Eur, Vopak lost 1.06% to 44.69 and USG lost 1.03% to 32.65 Eur.

SNS Reaal added 0.88% to 17.29 Eur, Heijmans gained 0.97% to 44.75, Van der Moolen added 1.78% to 4.01 and Crucell led gainers, adding 1.89% to 16.72 Eur

Across in Belgium , Brussels Shares closed marginally weaker than Thursday's level, the lowest the index has reached in two months as low volumes reflected subdued Friday trade.

The Bel 20 closed 3.49 points or 0.08% lower at 4,507.90.

Discount supermarket Colruyt was off 2.91 Eur or 1.75% at 163.67, whilst healthcare group Omega Pharma dropped 0.97 Eur or 1.62% to 58.93.

Real estate group Cofinimmo lost 1.47 Eur, or 1.04%, to 139.52.

For the heavyweight financials, Dexia was flat at 22.98 while Fortis lost 0.15 Eur, or 0.49%, to 30.20.

Peer heavyweight financial KBC edged up 0.11 Eur, or 0.11% to 98.00.

Delhaize bucked the trend and rose 0.02 Eur, or 0.03%, to 71.86 after the supermarket group was upgraded to 'outperform' from 'neutral' at Exane BNP Paribas on a positive view of its US operations.

Inbev reversed earlier losses to rise 0.24 Eur, or 0.41%, to 58.64.

Lehman Brothers said it was raising its target price on the brewer to account for the strengthening of the US and Canadian Dollars and the Belgian and Dutch pubs business potential.

Holding company Ackermans & van Haaren (AvH) was 1.00 Eur, or 1.36% higher at 74.75.

French restaurant group Groupe Flo, in which AvH as well as Albert Frere's investment vehicle Compagnie Nationale a Portefeuille (CNP) have a controlling stake, has acquired Brussels restaurant Aux Armes de Bruxelles, financial daily De Tijd reports.

Other gainers included specialty materials group Umicore, which gained 3.21 Eur, or 2.15% to 152.72, as UBS upped its target price on the specialty materials group to 185 Eur from 165.

Into Switzerland now where in Zurich Share prices closed little changed, pulled off intra-day lows by opening gains on Wall Street with heavyweights closing mixed and financials hit by interest rate concerns.

The Swiss Market Index closed 1.39 points lower at 9,150.69, and the Swiss Performance Index was down 2.72 points at 7,450.48.

The Euro was higher against the Swiss franc, at 1.6491 SFr, as was the Dollar, at 1.2244 SFr.

Financials were a weak spot, with Credit Suisse the lead decliner, down 1.35 SFr or 1.5% at 88.2 SFr. It was followed by Baloise, down 1.0 SFr at 122.1, and Lonza, down 0.9 SFr at 113.9, extending recent losses.

Heavyweight Swiss Re shed 0.8 SFr at 113.6 SFr while Zurich Financial ended down 1.5 SFr at 365 SFr.

UBS closed flat at 75.3 while peer Julius Baer outperformed, adding 1.60 SFr or 1.8% at 89.15 SFr. Nobel Biocare was another notable gainer, up 5 SFr or 1.2% at 403 SFr.

Pharmaceuticals were little changed, with Novartis adding 0.2 SFr at 67.9 SFr and Roche also closing 0.2 SFr higher, at 217.4 SFr.

Nestle swung back into positive territory, adding 0.25 SFr at 467.5 SFr. Earlier today, the group's chief financial officer Paul Polman said he can 'live well' with analysts' estimates for the food company's EBIT margin to rise by 30 basis points this year.

Outside the SMI, shares in Oerlikon gained 9 SFr or 1.4% at 619 SFr after the technology group said it has secured a 2.5  billion SFr syndicated credit facility via Citigroup Global Markets Ltd.

The facility will be used to pay off debts and 'for general corporate purposes', it said.

Up into Scandinavia now and starting in Sweden where in Stockholm shares closed slightly higher underpinned by bargain hunting among engineers following a positive start on Wall Street, but with many investors remaining on the sidelines amid caution after Thursday's sharp sell-off.

The OMX Stockholm index closed up 0.53% at 406.51 points, while the OMX Stockholm 30 closed up 0.50% at 1,238.91. Turnover amounted to 36.959  billion SKr.

The engineering sector saw broad gains after many stocks fell by almost 5% yesterday.

Sandvik closed up 0.79% at 127.00 SKr bid, SKF B up 0.89% at 141.00, and Atlas Copco A up 0.93% at 108.25.

Ericsson B closed up 0.39% at 25.78. Ericsson said it has signed an agreement to acquire Sweden's Drutt Corporation (with 85 employees), a provider of Service Delivery Platform (SDP) products and services, for an undisclosed sum.

Among telecom operators, TeliaSonera closed up 0.40% at 49.70 and Tele2 B up 0.43% at 117.25.

Tele2 AB said the Swedish Court of Appeal has ruled in its favour in two cases involving disputes with TeliaSonera AB over the latter's claim against it for termination charges.

Tele2 said the rulings will not have any impact on it's profits, however it does overturn a previous 1  billion SKr charge against the company.

MTG B closed up 1.81% at 422.50. Among some of the new financial targets MTG announced at its capital markets day, was for sales of 20  billion SKr in 2011, with more than 10% organic annual sales growth, and a 30% return on equity (ROE) for the 2007-2011 period.

Skanska B closed up 1.32% at 154. Carnegie said it has removed Skanska from its 'Mover-list' on valuation grounds although it maintained its 'outperform' rating on the stock.

Carnegie said said Skanska has risen 28% since being included on the list, adding: 'Still a good long term story, but in the short term (3-6 months) we see better potential elsewhere'.

Rival construction company NCC B closed up 2.16% at 189.50. The stock has had a rocky ride this year with a high of 236 SKr followed a month later by a low as 180 SKr. It started the year at around 190 SKr.

OMX closed up 3.01% at 222.50. Handelsbanken said a requirement for it to accept NASDAQ's bid for OMX, is that Swedish laws continue to govern OMX-owned Stockholmboersen even after a takeover, the newspaper Dagens Nyheter reported. Handelsbanken owns 2.8% of OMX.

Among other leading shares traded, Scania B finished up 3.12% at 165.50, SEB A up 0.23% at 220.50, Hennes & Mauritz B up 0.73% at 413, and Electrolux B up 0.88% at 171.50, and Boliden up 0.18% at 140.

Into Norway now where in Oslo Share prices closed lower in step with a European selloff on US interest rate conerns and an easing in oil prices, led down by oil majors Statoil and Norsk Hydro.

The OSEBX Benchmark index closed 0.5% lower at 483.08 points and the OSEAX All Share index shed 2.59 points to 551.44 points.

Total turnover amounted to 15.4  billion NKr.

Crude oil's influence in oil-producing Norway saw stocks close lower as London Brent crude prices fell on concerns that high interest rates could undermine global economic growth.

Shares of Norwegian oil majors were down. Statoil slipped 0.3% to 165.50 NKr while Norsk Hydro moved down 0.5% to 214 NKr.

Oil services companies fared little better. Seadrill was off 0.65% to 115.25 NKr, Awilco Offshore nudged down 0.1% to 74.50, BW Offshore closed off 2.3% to 25.10, Eastern Drilling came off 1.1% to 127.50 NKr while Fred Olsen Energy slipped 1% to 296 NKr.

Not helping sentiment was further evidence of Norway's declining oil production as its mature fields draw to the end of their lives, while replacing the depleted oil continues to be a problem.

Preliminary oil production on the Norwegian continental shelf averaged 2.199  million barrels per day in May, falling from an upwardly revised 2.374  million in April, the Norwegian Petroleum Directorate said.

Industrial conglomerate Orkla was also infected by the overall weakness, slipping 0.7% to close at 100.25 NKr - despite bullish news that it and US group Alcoa Inc have signed an agreement merging their two soft alloy aluminium operations into a joint venture - Sapa AB - which would be a world leader in its sector, and which they say will be listed within 18 months.

Among shipping stocks Frontline fell 0.6% to 256 after SEB Enskilda reiterated its 'sell' recommendation following the shipping group's sale of its entire stake in spin-off Sea Production Ltd.

Shares in Frontline finished down more than 10% in the last week on concerns about the prospects of the shipping market and excess overall vessel capacity and the resultant impact on charter rates.

SEB, in a note to investors this morning, said the sale of Frontline's 2.5  million shares in Sea Production did not provide any reason to change its bearish stance on the stock.

Solar power technology company Renewable Energy Corporation dropped 1.6% to 187 NKr after the stock was hit by growing concerns about the prospects for the firm's key German market.

Elsewhere among tech stocks web search technology group Fast Search & Transfer fell 2.5% to 13.65, even though it announced it won a deal with Tinhvan Group for the deployment of its Fast Enterprise Search Platform and its AdMomentum technology.

Going against the bearish tide was LNG shipping firm Golar which firmed 1.5% to 103.50 as brokers welcomed yesterday's special dividend announcement and described any share price weakness as a good buying opportunity given good market prospects.

In Denmark , Copenhagen saw Danish shares closed slightly lower amid continued caution following Thursday's sell-off and lingering fears of higher interest rates.

The OMXC20 index was down 2.55 points at 476.06 and the OMXCB Benchmark index shed 2.31 points to 460.09.

The OMXC All Share index closed down 2.36 points at 463.79 on turnover of 9.184  billion DKr.

Vestas Wind Systems was up 2.50 DKr at 369.00. The group said its Benelux division has received an order for 21 units of 3 MW wind turbines from Dutch consortium Growind.

AP Moller Maersk shed 800 DKr to 63,700. Danske Equities raised its sum-of-parts based fair value for the group to 65,000 DKr from 59,500 DKr as it sees higher container freight rates in the coming years, RB Boersen news agency said.

DS Torm was down 4.50 DKr at 206.00. The group said it expects the acquisition of US tanker group OMI to be finalized today, and added it will, as a consequence, defer its second quarter report to Aug 31.

Danske Bank added 1.50 DKr to 232.50. Shares in the group were upgraded to 'neutral' from 'reduce' at UBS.

Genmab gained 2.00 DKr to 376.00. Jyllandsposten said the generous stock option programmes offered to the group's management may be contrary to good management norms, but added the programmes have been approved at Genmab's shareholders meeting.

Among other shares, DSV added 2.00 DKr to 107.25, DS Norden was up 8.00 DKr at 349.50 and NEurosearch fell 9.50 DKr to 273.00.

Rounding out Scandinavia we go to Finland where in Helsinki shares closed slightly lower, with Nokia, which reversed earlier losses, lending some support and with Amer Sports rising sharply on speculation the sporting goods maker could be a takeover target after billionaire investor Mike Ashley's Sports Direct took a small stake.

The OMX Helsinki 25 ended 0.14% lower at 3,201.45 Eur and the OMX Helsinki all-share index closed up 0.18% at 11,240.96.

Volume was a healthy 1.883  billion Eur.

Amer Sports finished up 4.11% at 17.23 Eur, while the OMX Helsinki 25 was down 1.53% at 3,157.04, and

Nokia - up 1.01% at 20.91 Eur - rebounded from sharp losses earlier Friday.  The Finnish-German joint venture Nokia Siemens Networks said it has won a contract to enhance Sweden's Tele2 backbone network, but gave no financial details.

The rest of the leaderboard ended in the black, but forestries lost the most ground.

Stora Enso R fell 1.95% to 13.61 Eur and UPM-Kymmene gave up 2.02% to 18.47 Eur.

Elisa finished 1.31% higher at 20.94 Eur.

The telecoms group is to ask an extraordinary meeting scheduled for June 28 for authorisation to return up to 165  million Eur to shareholders via one or more extra dividends.

However, the firm said it would lose Matti Vikkula, the chief executive of its Saunalahti unit.

He is leaving the mobile operator and Internet service provider for Ruukki Group.

Industrials closed in positive territories, with Metso adding 0.81% to 41.29 Eur, Kone advancing 0.83% to 42.36 Eur and Wartsila B gaining 0.75% to 47.25 Eur.

Into warmer European climes now and starting in Greece where Athens Shares ended flat, recovering from mid session lows, as gains for Alpha Bank and Cosmote were offset by losses for Folli Follie.

The ASE general index closed flat at 4,850.8, and blue chips closed almost unchanged at 2,592.3. Mid caps closed 0.7% higher at 6,225.7, but small caps outperformed rising 1.3% to end at 1,111.2.

Advancers outnumbered decliners, 183 to 86, with 47 unchanged in solid volume of about 484  million Eur, skewed higher by block trades of Folli Follie.

Mobile operator Cosmote ended up 1.1% to 23.26 Eur after its AGM today approved a 0.73 per share dividend for fiscal 2006.

Alpha Bank closed up 3% to 23.44 Eur because brokers consider it has underperformed its peers.

Luxury goods retailer Folli Follie fell 5.1% to end at 32.44 Eur after the company confirmed its president and CEO placed a 7.6% stake at 32 Eur to foreign institutional investors.

Hellenic Telecomms (OTE) closed down 1.2% to 22.3 Eur and Bank of Piraeus finished down 1.1% to 27.84 Eur, both on the negative market sentiment.

Betting technology company Intralot ended down 0.7% to 23.46 Eur on market talk that its Polish operations may face legal problems.

Hellenic Exchanges, the company that controls the local spot and derivatives equity market, ended up 2.4% to 19.56 Eur because broker UBS upped its rating to buy on the markets positive prospects.

Into Spain now where Madrid Share prices closed higher amid bargain hunting after four straight days of losses, with NH Hoteles leading gains, while selected property issues also saw some recovery.

The IBEX-35 index closed up 90.6 points at 14,816.5 after trading in a range of 14,604-14,874 on turnover of around 6.5  billion Eur.

NH Hoteles led gainers, adding 0.87 Eur or 5.67% to 16.21, on a relief rally after the technical committee voted to keep the hotel chain in the blue chip index, contrary to speculation that the stock would be removed.

BME, to be introduced into the IBEX-35 in place of Metrovacesa, slipped 0.07 to 42.35, while Metrovacesa fell 0.25 to 80.55.

Real estate issues saw something of a rebound after heavy sell-offs this week amid interest rate concerns, with Colonial adding 0.14 or 3.49% to 4.15, new-comer Realia putting on 0.04 to 6.60 and Astroc rising 0.41 or 3.80% to 11.21.

Constructors were mixed, with Sacyr rising 0.36 to 37.99, FCC up 0.15 at 69.05 and ACS gaining 0.12 to 47.23, while Ferrovial was flat at 74.00 and Acciona was off 3.00 at 186.00.

Utilities were strong, amid continued sector consolidation hopes, with Gas Natural adding 1.00 or 2.45% to 41.82, Iberdrola rising 0.64 to 42.84 and Union Fenosa gaining 0.54 to 41.84, while Endesa rose just 0.03 to 39.92.

Abertis added 0.27 to 23.33 after reports in Italy that Atlantia is close to reaching an agreement with the government on its motorway concession and especially tariffs.

Leading blue chips were mixed, with Telefonica adding 0.08 to 16.39, SCH gaining 0.11 to 13.91 and Repsol YPF adding 0.09 to 26.39, while BBVA fell 0.03 to 17.98.

Small cap Service Point rose 0.24 or 6.59% to 3.88, on news former Recoletos chairman Jaime Castellanos has built a 5% stake in the company.

Bringing Europe to a close this week we go to Italy where in Milan Share prices closed lower for the third consecutive session, with BPVN leading the decliners on expectations that Banca Italease, in which it has a 30% stake, may launch a capital hike to address a deteriorating financial situation.

The Mibtel index ended down 0.58% at 32,584 and the S&P/Mib blue chip index fell 0.51% to 41,712, while volumes rose to 11.5  billion Eur, from 10.4  billion yesterday.

Decliners outnumbered gainers 237 to 106, while five shares ended unchanged.

BPVN fell 2.45% to 20.72 Eur, after Italease said exposure to clients with derivative positions rose 50% to 600  million Eur in only two weeks.

Italease shares ended down 25.19% at 19.84, taking its loss since early last month to over 55%.

BPVN merger partner Popolare Italiana fell 2.28% to 10.95, while BPM -- whose stake in Italease will rise to 8.6% after the planned merger with BPER -- lost 0.92% to 10.55.

Prysmian was down 0.18% at 17.63, after JP Morgan initiated its coverage with a 'neutral' recommendation and 19 Eur price target.

The US broker noted the cable and systems company's stock has risen 19.5%, outperforming the sector by 16%, since its listing.

Eni fell 0.46% to 26.21, reversing earlier gains which push the stock to a fresh all time high.

Enel fell 1.26% to 8.23 Eur after the rating agency Standards & Poor's cut its long-term credit rating on the group to 'A' from 'A+'.

Generali was down 0.97% at 29.46 and its unit Alleanza down 0.60% to 9.69 after Lehman Brothers repeated its 'underweight' rating on both insurers.

Parmalat recovered part of Thursday's fall with a a 1.41% rise to 3.16.

UK Market - HMV outperformed a flat London market on Friday with the troubled music retailer rising 4.5% to 110¼p on reports its Japanese business could be sold for £163m. The price could dramatically alter perceptions of HMV if achieved. Substantial short positions (about 30% of HMV’s outstanding stock) are open and the rise was partially driven by these being closed.

Rising bond yields and increased risk aversion ensured early pressure on equities yesterday but the FTSE 100 recovered to end unchanged at 6,505.10 while the FTSE 250 lost 42.7 points, or 0.4%, at 11,583.6.

Over the week the blue-chip benchmark lost 2.6% and the mid-cap index fell 5%.

The core UK equity market has not been caught up in the bubbles that have developed in other asset classes. There is a significant valuation gap between the largest FTSE companies and the mid-cap bid targets that the market has been chasing hard for two years.

The mega-caps (the FTSE’s top 14 companies, with a market capitalisation of more than £30bn) are trading on 11.3 times forward earnings while the rest of the FTSE 350 is on a multiple of 14.8 times 12 month-forward earnings. That gap should narrow considerably from here.

Rexam, down 2.8% to 511½p, was the FTSE’s biggest faller as the world’s leading can maker confirmed it was in talks to buy the plastics business of Owens Illinois, the US packaging producer. The deal will require a rights issue. One analyst said this could equate to 10% of its existing share capital and would require a discount.

Lloyds TSB ended 0.3% lower at 567½p in spite of a confident trading update that ABN Amro said would lead to consensus earnings forecasts being upgraded for the next two years. Lloyds said the outlook for bad debts was better than 12 months ago with little sign of rising interest rates having a negative effect. However, pressure was reported on margins for non-standard mortgages that traders said could be uncomfortable for Bradford & Bingley, up 1.1% at 401½p.

Royal Dutch Shell gained 1.1% at £19.93 after Merrill Lynch upgraded its recommendation from “neutral” to “buy” with a price target of £21.50. Merrill has increased its forecasts for global refining margins and also raised its long-term oil price forecast to $60 a barrel.

Merrill said Shell could match or exceed the growth potential of its peer group as new products came to fruition and its reserve replacement ratio improved.

Elsewhere in the sector, BP gained 0.2% to 563p while BG Group slipped 0.9% at 765p.

Northumbrian Water fell 3.3% to 313p after UBS downgraded its recommendation from “buy” to “neutral” and cut its price target from 365p to 340p after a strong run for the shares.

Smith & Nephew firmed up 0.9% at 604p amid increased hopes for a buy-out of the orthopaedics group after US peer Biomet accepted an improved private equity offer.

Traders said the same consortium could also bid for Smith & Nephew to create a competitor for market leaders Stryker and Zimmer. The Biomet take-out valuation if applied to S&N would suggest a take-out price of 692p.

Chris Donnellan of Dresdner Kleinwort said S&N had greater value as a stand-alone business as strong top line growth and margin expansion would lead to improved earnings growth. Mr Donnellan re-iterated his “buy” recommendation and 725p price target.

Blacks Leisure gained 5.3% at 274¼p amid renewed bid speculation. Blacks is seen as a target for Mike Ashley after Sports Direct, 1.4% higher at 119¾p, acquired a 4.9 stake in Amer Sports, which owns the Wilson brand.

Japan & Asia Pacific - Asian markets closed in negative terrain, tracking the Thursday overnight losses on the Wall Street and on concern that rising global interest rates would dampen consumer spending.

However, Shanghai stocks bucked the trend and ended in the green on renewed investor confidence and optimism that most companies will report stronger first-half results.

Wellington stocks dipped following the interest rate hike by the central bank and weakness in the US stocks. Sydney shares closed sharply lower, following the negative lead of Wall Street.

Tokyo shares fell on interest rate concerns and weaker-than-expected machinery data. Seoul stocks declined for the first time in nine sessions, on heavy selling by foreign investors following Wall Street losses on Thursday. Shares in Hong Kong closed sharply lower, tracking the overnight losses on Wall Street, as rate concerns dragged down property stocks.

Stocks in Indonesia, Malaysia, Taiwan and Singapore also closed lower.

Let's start this week the opposite way round, in New Zeala nd; Wellington shares continued to slide following interest rate hike by the central bank on Thursday and weakness in the US stocks driven by interest rate concerns.

The benchmark NZX 50 index ended at 4,180.73, down 53.89 pints or 1.29% and the broader NZX All capital index closed at 1,169.37, down 15.59 points or 1.37%.

Among market heavyweights, Telecom plunged 2.33% after it announced that it would spend NZ$300 million improving its mobile network, Contact Energy lost 1.03% and Fletcher Building tumbled 1.57%.

In the retail space, While Hellaby Holding dropped 1.04%, Pumpkin Patch plummeted 3.80% following a profit downgrade. The Warehouse Group cracked 7.63% after Commerce Commission blocked Woolworths and Foodstuffs from bidding for the company, and jeweler Michael Hill gave away 0.96%. However, Hallenstein Glasson advanced 1.22%.

Energy companies TrustPower and Vector shed 0.61% and 1.07% respectively. Export oriented stocks Fisher and Paykel appliances fell 1.05% and Fisher and Paykel healthcare slipped 0.59%. Among other notable stocks, Nuplex plunged 2.11%, Sky City lost 1.00% and Steel & Tube tumbled 3.56%.

Into Australia now where Sydney shares closed sharply lower also tracking the slump in the US stocks on Thursday. The benchmark index S&P/ASX 200 closed down 79.4 points or 1.26% at 6,231.7, off the day's low of 6,199.3.

Out of the total 202 index members, 19 advanced, 174 declined and 9 closed unchanged. The broader All Ordinaries index lost 79.8 points or 1.26% to close at 6,258.4.

On the economic front, the Australian Bureau of Statistics said that April housing finance increased 2.2% from the previous month in terms of volume.

Among miners, BHP Billiton slipped 0.27%, Rio Tinto fell 1.82%, Alumina dropped 1.78%, Zinifex gave away about a%age and Iluka Resources lost 0.52%. Losers among gold miners included Newcrest Mining 0.92%, Lihir Gold 2.49% and Oxiana 2.92%. In the oil space, Woodside Petroleum plunged 2.14%, Oil Search plummeted 2.26% and Santos fell 1.55%.

Banking sector was weak with National Australian Bank falling 1.34%, ANZ giving away 1.29%, Commonwealth Bank shedding 0.77%, Westpac Banking losing 0.66% and Actuary Bank plunging 2.08%. Among insurers, AMP lost 0.59%, IAG dropped 0.83%, Henderson Group tumbled 2.84% and AXA Asia Pacific fell 1.97%. QBE edged up 0.06%.

In the retail sector, Woolworths moved up 0.07%. Woolworths is weighing up its options after its takeover proposal for New Zealand retailer, The Warehouse Group Ltd, was knocked back by the commerce commission. Coles Group edged up 0.18%. Harvey Norman Holding plummeted 1.73% and David Jones plunged 1.52%. In the media space, losers included Fairfax Media 1.68%, Publishing & Broadcasting 2.16% and Seven Network o.53%.

Australian share markets are closed on Monday for the Queens Birthday holiday.

Back into Japan now where Tokyo shares fell as interest rate concerns triggered selling across the board. Weaker-than-expected machinery order data also impacted.

The benchmark Nikkei 225 index plunged 274.29 points or 1.52% to end at 17,779.09. Out of the 225 index stocks, 28 advanced, 192 declined and 5 closed unchanged. The broader Topix index of all the Tokyo Stock Exchange First Section issues fell 23.56 points or 1.3% to 1756.16.

Among economic data released Friday, core machinery orders for April increased 2.2% on month, money supply increased 1.4% in May on year beating forecast and bank lending in May rose 0.9% year-over-year.

Higher crude prices weighed down oil issues. Nippon Oil dropped 1.44%, Nippon Mining Holdings lost 1.75% and Showa Shell Sekiyu KK shed 0.32%. In the finance sector, gainers included Mizuho Financial Group 1.70%, Resona Holdings and Mitsui Sumitomo Insurance 3.27% each, Millea Holdings 4.26%, Sompo Japan Insurance 0.62% and T&D Holdings 4.82%. While Mitsubishi UFJ Financial Group lost 1.42%, Sumitomo Mitsui Financial Group closed unchanged.

Auto stocks lost ground with Honda giving away 2.80%, Suzuki dropping 2.32%, Toyota losing 1.97%, Nissan shedding 2.84% and Mazda falling 2.58%. In the tech space, losers included Advantest 1.90%, Tokyo Electron 2.97%, Kyocera 0.08%, Fanuc plunged 1.64% after cabinet office reported weaker than expected increase in machinery orders in April, Matsushita Electric Industrial 0.79%, Sony 2.95%, Minebea 2.60% and NEC 0.82%. However, Oki Electric Industry added 0.44% and Fujitsu surged 2.93%.

Into China now where Shanghai shares closed higher on renewed investor confidence and optimism that most companies will report stronger first-half results.

The benchmark Shanghai Composite Index, covering both A and B shares, listed on the Shanghai Stock Exchange, closed up 22.33 points or 0.57% at 3,913.14. The index moved between a low of 3,852.05 and a high of 3,935.79. Turnover increased to 179.39 billion Yuan from 177.77 billion Yuan on Thursday.

Metal and pharmaceutical stocks benefited from rotational buying. Shandong Gold-Mining and Baotou Aluminum rose to their 10% limit. Yunnan Chihong Zinc & Germanium advanced 8.62%. Tsinghua Unisplendour Guhan Biology Pharmacy and Hubei Guangji Pharmaceutical climbed to their 10% daily limit. Guangzhou Pharmaceutical jumped 7.92%.

Shandong Haihua touched its 10% daily limit after parent Shandong Haihua Group agreed to set up a joint venture with Carlyle Group. Datang International Power Generation moved up 4.16% after it issued 3 billion Yuan in 365-day debt on the interbank bond market on Thursday.

Following a China Business News report that Founder Technology is looking at listing on South Korea's stock exchange, the stock rose 4.12%. ZTE edged up 0.71% after it said it has signed a strategic cooperation agreement with Polkomtel SA, a Polish telephony operator.

Banks were under pressure from profit-taking and worries about interest rate hikes in the near future. Shanghai Pudong Development Bank fell 3.45% and Huaxia Bank lost 1.16%. China Merchants Bank dropped 2.03% and Industrial and Commercial Bank of China lost 0.99%. China Life Insurance declined 0.58% after the official Shanghai Securities News reported that the insurer has obtained a license from the State Administration of Foreign Exchange to issue life insurance policies in foreign currencies.

South Korean stocks fell for the first time in nine sessions on heavy selling by foreign investors following Wall Street losses on Thursday. The benchmark Korea Composite Stock Price Index or KOSPI plunged 25.76 points or 1.47% to 1,727.28. About 498.0 million shares worth 7.8 trillion won or US$ 8.4 billion were traded. Losers outpaced gainers 491 to 280.

Among oil issues S-Oil fell 0.13%, but SK advanced 1.30%. In the tech space, Samsung Electronics, market heavyweight, added 0.53%, L.G.Philips LCD surged 2.82%, LG Electronics gained 0.41% and Hynix Semiconductor jumped 2.10%. Top lender KookMin Bank plummeted 3.66% and Woori Finance tumbled 1.79%.

While steel major POSCO dropped 1.30% and energy company KEPCO lost 0.74%, auto maker Hyundai Motor rose 1.41%. In the telecom space, KT shed 1.60% and SK Telecom slipped 0.25%.

Hong Kong shares closed sharply lower, tracking the overnight losses on Wall Street, as rate concerns dragged down property stocks. Local investors were selling stocks on worries that the US Federal reserve might raise US interest rates to bring down inflation. The benchmark Hang Seng Index dropped 291.01 points or 1.40% to 20,509.15.

The property sector sub-index fell 518.45 points or 2.06% to 24,704.95. Henderson Land slid 3.40%, Cheung Kong slipped 1.16% and Sun Hung Kai dropped 1.60%. In the banking space, Bank of East Asia lost 0.98%, HSBC Holdings dropped 0.56% and Hang Seng Bank gave away 1.02%. Conglomerate Wharf Holdings slid 4.35%.

In the telecom sector, China Telecom dropped 2.63%, China Mobile dipped 0.89%, China Netcom lost 1% and China Unicom declined 3.83%. The telecom stocks are keenly awaiting the issue of 3G licenses in China, which is likely to be announced soon.

Indian stocks fell on concerns that rising global interest rates will curb investment in riskier assets. The Sensex declined 122.37 points (0.9%) to 14,063.81 while the Nifty Index fell 34.50 points (0.8%) to 4,145. Reliance Industries fell 0.5%.

The BSE Bankex dropped 70.84 points to 7441.25 with Fed Bank and Oriental Bank of Commerce amongst the top losers. Fed Bank fell 2.59% while ICICI Bank shares fell 0.6% to INR 903.60.

In Kuala Lumpur Share prices on Bursa Malaysia closed broadly lower in quiet trading. Kuala Lumpur Composite Index (KLCI) dropped 12.02 points to 1,352.39. It had opened 6.78 points lower at 1,357.63.

The Second Board Index went up 1.01 points to 106.10 but the Mesdaq Index declined 0.94 of a point to 133.39. The Industrial Index fell 18.41 points to 2,609.21.

Losers outnumbered gainers by 510 to 360 while 244 counters were unchanged, 284 untraded and 37 suspended. Turnover dropped to 1.094 billion shares valued at RM1.808 billion from 1.193 billion shares worth RM1.860 billion Thursday.

Thailand 's share prices closed 0.90% lower on Friday in line with Asian markets. The Stock Exchange of Thailand (SET) composite index fell 6.83 points to 752.00, while the blue-chip SET 50 index declined 5.81 points to 532.16.

Taiwan shares fell Friday after overnight weakness on Wall Street.

The Weighted Price Index of the Taiwan Stock Exchange dropped 54.55 points, or 0.7%, to close at 8300.71 points in moderate volume.

In Friday's trading, big name high-tech stocks led the declines.

Mediatek fell 1.3% to 518 New Taiwan Dollars. Hon Hai Precision slipped 1.6% to NT$254. Acer dropped 1.1% to NT$61.70.

In Indonesia , for the week to June 8 the Jakarta Stock Exchange index dropped 29.87 points or 1.4% to 2,054.450. Daily average volume was 8.85 billion shares worth 5.83 trillion rupiah (641.36 million Dollars).

Philippine shares fell slightly Friday as gains in the Philippine Long Distance Telephone Co. (PLDT) trimmed the market's weakness.

The 30-company Philippine Stock Exchange Index fell 2.1 points, or 0.06%, to 3,526.73. The index has dropped 2.66% since hitting Monday's record high close of 3,622.94.

PLDT climbed 1.6% to P2,600 on bargain-hunting. Property developer Megaworld Corp. slid 3.8% at P3.85. Jollibee Foods Corp. was off 3.6% at P53.

Advancers led decliners 57 to 56, and 55 stocks were unchanged.

Philippine markets will be closed Monday for a public holiday.

Sri Lanka stocks inched up Friday at the Colombo Bourse as investors purchased shares across the board as the country engulfed in furor over forced evictions of Tamils from Colombo on security reasons.

Main Colombo All Share Price Index rose 5.77 points or 0.23% to close at 2,555.51 while the highly capitalized Milanka Price Index lost 0.34 points or 0.01% to close at 3,617.60. The turnover ended low at 83.7 million rupees while the trading volume closed at 5.7 million shares.

Finally in Asia, to Singapore where Singapore shares fell 1.5%, down 54.74 points to close at 3,491.59.

Commodities - Supply disruptions, geopolitical concerns and signals that the Organisation of the Petroleum Exporting Countries was not prepared to lift output kept crude oil prices underpinned this week.

But with equity markets slumping and bond yields spiking during the week, commodity prices eased back on Friday as speculators trimmed their exposure to risk.

Although the price of Brent crude fell by more than a Dollar a barrel on Friday, the July contract was up by 1.1% over the week to $69.73 a barrel.

Likewise, Nymex West Texas Intermediate was down more than a Dollar yesterday, but up 1.4% to $65.77 a barrel over the week.

Prices had been boosted by planned strikes in Nigeria, the world’s eighth largest oil producer, a cyclone in the Persian Gulf and worries over North Korean missile testing and Turkish raids on Kurds in Iraq.

Calls for Opec to lift production to help ease prices were met with the response that oil supplies were sufficient.

The cartel added that problems with the US refining system were largely to blame for higher prices. This was underlined by US inventory data on Wednesday. Although gasoline stocks rose by more than expected at the beginning of the US driving season, refinery utilisation fell to 89.6% – the lowest rate for early June for 15 years.

Nymex RBOB gasoline for July delivery fell 4.2% over the week to $2.1447 a gallon.

The fall in base metals this week was led by nickel. The metal, used in the manufacture of stainless steel, fell 4.6% on Thursday after the London Metal Exchange intervened in the market amid suspicions of collusion in nickel trading.

Over the week, three-month LME nickel fell 10.8% to $42,300 a tonne.

The fall in other base metals was less dramatic, but indicative of the increased aversion to risk that had been driving sell-offs in the equity markets. Fears that higher global interest rates could cool demand for industrial metals intensified this week as the European Central Bank raised its main rate on Wednesday, followed later by rate increases in South Africa and New Zealand.

Three-month copper on the LME fell 4% over the week to $7,140 a tonne, hit also by concern over a possible strike in Mexico.

Aluminium shed 3.5% to $2,690 a tonne, while lead lost 4.3% to $2,270 a tonne. Three-month zinc fell 3.5% to $3,630 a tonne.

Strength in the Dollar also undermined metals prices, particularly precious metals, and gold fell 3.6% over the week to $646.70 an ounce while silver dropped 4.8% to $13.02.

Currencies - The Dollar hit two-month highs against the Euro and Sterling this week and emerging market currencies took a hit as soaring bond yields sent global equities tumbling.

Analysts said that in recent bouts of risk-aversion the Dollar has tended to do well, as US investors who have been active in investing abroad either stopped or reversed some of those outflows.

That trend seemed to be continuing this week as the Dollar rose 0.7% to $1.3350 against the Euro, 0.8% to $1.9670 against the Pound and advanced more aggressively against emerging market currencies, rising 2.5% to TL1.3450 against the Turkish Lira.

The increased asset market volatility triggered a significant position adjustment among higher-risk emerging market currencies. 

Though the initial market reaction is likely to be Dollar-positive after position unwinding, it will ultimately be Dollar-negative because an under-lying weak asset market environment will leave current account deficit currencies, including the Dollar, vulnerable

The Dollar lost ground against the Yen, however, easing 0.3% to Y121.70 over the week, as rising risk-aversion led investors to trim carry trades, in which long positions in high-yielding assets are funded by selling low-yielding currencies such as the Japanese unit.

The South African Rand firmed versus the Dollar on Friday after choppy trade that saw the Rand dip to a 10-week low.  The Rand was trading at R7.2625/$, 0.3% stronger than its previous New York close, after recovering sharply from a 2-1/2 month low of R7.3645.

The Australian and New Zealand Dollars, where yields have risen most dramatically, both advanced against the Yen on the week, rising 1% to Y102.50 and 0.8% to Y91.55 respectively.

The New Zealand Dollar was boosted by a surprise interest rate rise of 25 basis points to 8% from the Reserve Bank of New Zealand on Thursday. The move helped the kiwi hit a 22-year high against the Dollar, sending it 1.2% higher to $0.7526 over the week.

Robust economic data, including above-forecast first-quarter growth figures and a sharp drop in unemployment, fuelled expectations for further Australian monetary tightening and pushed the Aussie 1.3% higher over the week to a 17-year peak of $0.8426 against the Dollar.

In contrast, the Yen advanced strongly against the Euro and the Pound, rising 0.9% to Y162.50 and 1% to Y239.30 over the week.

The Pound suffered as the Bank of England left interest rates at 5.5% after its monthly monetary policy committee meeting on Thursday. Analysts said the decision implied inflation was broadly in line with the central bank’s forecasts and so rates would remain on hold until August.

The Euro failed to derive support from a well-flagged 25bp rise in Eurozone interest rates to 4% on Wednesday as Jean-Claude Trichet, president of the European Central Bank, gave no clues as to the timing of further monetary tightening.

The Euro edged 0.1% higher to £0.6790 against the Pound.

Here in Asia, the South Korean Won dropped against the US Dollar. The US Dollar closed at 931.0 Won, up from Thursday's close of 926.8 Won.

The Indonesian Rupiah ended the week trading weaker at 9,080/9,090 to the Dollar compared to 8,830/8,840 at the end of last week

The Philippine peso fell to a three-week low against the greenback as banks stocked up on Dollars for the long weekend. The Dollar ended at P46.57, up from P46.01 on Thursday.

And finishing currencies here in China, the RMB finished at 7.6550 to the Dollar on the over-the-counter (OTC) market, down from 7.6487 Thursday.

China - China insisted Thursday it has no plan to impose a capital gains tax on stocks, the latest attempt to calm nervous investors after a surprise hike in duties last week sparked a massive sell-off.

"There is no plan at all to impose a capital gains tax (on stocks)," a front page article in the official Shanghai Securities News quoted an authoritative source as saying.

"It is completely baseless, and to suggest that a capital gains tax could be levied at any time, just like the adjustment of the stamp duty, means to have no understanding of the law."

Even if a capital gains tax was to be imposed, it would be subject to a long and arduous legislative process, taking years before it could win approval by the country's lawmakers, the source said in the report.

China's central bank vice governor Wu Xiaoling weighed in with similar comments on the issue at an industry conference in Tianjin, berating the handling of last week's announcement of the tripling of stamp duty.

The news of a hike in stamp duty to 0.3% hit sentiment badly on May 30, when the main Shanghai benchmark index lost some 6.5%, with investors outraged after an official said that there would be no tax increase.

"China's government has never gone back on its word. This is a violation of discipline of some bureaucrats and definitely does not represent the government," Wu was quoted as saying by the Oriental Morning Post.

Analysts said such remarks were clearly aimed at easing recent investor anxieties that regulators might take even more action to cool a market that last year climbed 130% and continued to boom this year.

"The comments by Wu Xiaoling did ease the nerves among investors," said Ning Dongli, analyst with Oriental Securities based in Shanghai.

"I think the sharp drops this time changed investors' expectation that the market won't always go up and the government policy does impact the market," she said.

Trade has been very volatile since last Wednesday's stamp duty announcement, prompting a series of declines that included a sell-off on Monday of 8.26%, the biggest one-day fall in over three months.

In February China's markets tumbled nearly nine% on talk about a possible capital gains tax, sparking turmoil in world equity markets.

Commenting on recent ups and downs in the market, Wu said it was par for the course, arguing that volatility is hard to avoid.

"The continuation of long term volatility is just not a problem -- the crux of the matter is the fundamental trend, and the development of the Chinese economy is fundamentally very good," she said.

That has not appeased an angry investing public, as widespread online comments have called into question the government's credibility after the stamp duty was increased despite the official's denial.

Thursday's reports helped buoy battered market confidence.

At the close Thursday, the benchmark Shanghai Composite Index, which covers both A- and B-shares, closed up 114.49 points or 3.03% at 3,890.80 on turnover of 177.77 billion Yuan (US$23 billion).

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Madame Zheng, a 44-year-old accountant at a state-owned company, put 100,000 Yuan, about a year's salary, into China's stock market in the hope of making enough money to move into a better Shanghai apartment.

But two days after buying oil refiner Sinopec, she sold it at a loss of 15%. And she's desperately holding on to other shares on which she faces losses of up to 40%, hoping they'll recover enough for her to get out.

She doesn't fully understand why the market plunged 13% over five days, after a bull run that nearly quadrupled the main index over 18 months. But she says she's learned her lesson.

"I'm not going to buy any more shares for the foreseeable future. If you don't put money in, you won't be disappointed," she said on Tuesday.

China, which triggered the stock market reversal with a hike in a share trading tax, is finding that the road to building a nation of small shareholders does not run smooth, as are Madame Zheng and hundreds of thousands of investors like her.

Millions of people have poured into the market this year, lured by the listings of the country's top companies and other government policies. Over 28 million stock investment accounts have been opened this year, after 3.08 million in all of 2006.

The rise in share ownership seemed one of China's biggest economic policy successes. The booming stock market promised to help companies restructure, wean them off excessive reliance on bank loans, and share the country's wealth more widely.

But many of the new investors who gambled on quick, easy returns, have concluded the bull run is over for now, and are fleeing the market almost as fast as they entered it, leaving the government struggling to prevent a crash.

"This is one of the sternest lessons that both investors and regulators have learned," said economist Gene Ma at CITIC Securities.

"When the index jumped from 3,000 to over 4,300 in late May, investors mainly bought rubbish stocks, while blue chips gained little. This betrays a stock culture that focuses on short-term speculation instead of long-term investment."

Shanghai's main stock index rebounded 2.63% on Tuesday, but that only recouped a small fraction of a slide that has pushed the index down as much as 21% and wiped out $490 billion of value at one point.

The slide began after the Ministry of Finance hiked the stock trading tax last Wednesday, a move that made little difference to most investors' costs and was designed to cool the speculation that had pushed valuations to over twice the levels of many overseas markets.

But individual Chinese investors, who have come to account for up to 80% of daily market turnover, immediately began selling, and this snowballed into a panic.

Even institutional investors such as mutual funds, which tend to commit to stocks for the longer term, were pushed into selling to cut their losses.

"I'm leaving the market with nothing," said Miss Liu, a Shanghai university student who was visiting a Shanghai Securities branch in the city's financial district on Tuesday to sell her shares.

"The government does not care about the market, and nobody is doing anything. When the index is high, they talked a lot, but when it is declining, they remain silent."

Privately, some government officials concede they did not expect such a dramatic reaction to the tax hike.

"This is very much beyond the government's expectations. The market is really a mess," said one junior official who watches the market at an economic ministry in Beijing.

Attempts by authorities to revive confidence at the start of this week -- positive editorials in state-run newspapers about the market's trend, and regulators' approval of four new equity investment funds -- failed.

Many analysts now expect authorities to take stronger steps. They could approve more local and foreign mutual funds, quietly suspend a probe into illicit financing of stock investment, and perhaps encourage buying by state-controlled investment firms.