The timing of an unexpected statement from Granada only 24 hours before today's announcement of full-year figures from United News & Media, another potential bidder for Yorkshire, added a further twist to what one analyst described as "an elaborate poker game". Yorkshire's shares tumbled 117.5p to pounds 11.62p, having dipped as low as pounds 11.05p at one stage, as the long expected bid, an open secret in television circles, seemed to have been at least put on hold. Granada threw its "phoney bid" for control of ITV neighbour Yorkshire Tyne-Tees into confusion yesterday after it apparently ruled itself out of launching a takeover offer for at least three months. Even though it was upbeat about the short- term inflation outlook, most regions reported that businesses found it difficult to recruit new staff.Recent Congressional testimony by Fed chairman Alan Greenspan started to prepare the financial markets for what would be the first increase in official interest rates since February 1995.

But the balance of evidence has tipped towards expecting a quarter-point increase.Yesterday's retail sales figures followed further evidence last week that the American economy is creating jobs at an extraordinary pace. "If we continue like this from February, we will see the best sustained retail spending in about 10 years," said Jonathan Basile, an analyst at HSBC Markets in New York.Separate figures showed a decline in new unemployment claims last week, with a drop of 5,000 taking the average for the past four weeks to its lowest since 1989.As always, analysts hold mixed views about whether or not the Federal Reserve will raise interest rates at the next meeting of its Open Markets Committee on 25 March. The Dow Jones index fell below the 7,000 barrier, to close 160.5 points down at 6878.9. Retail sales rose by 0.8 per cent last month, while January's increase was revised to 1.5 per cent, more than twice the first estimate. Treasury bonds were also sharply lower because of fears that US interest rates will rise later this month. The Dow Jones Industrial Average, in its fifth steepest fall, plunged 160 points yesterday after figures showing US shoppers set a cracking pace for retail sales in the first two months of 1997. To make these losses more difficult to detect, the value of options was transferred between books.In no cases will customers of NatWest have suffered losses by buying the options since the mis-pricing relates to the value that was attached to them in the bank's own books.The five employees so far suspended by NatWest Markets form a chain of command and supervision within its interest rate options area starting with Mr Papouis.Martin Owen, chief executive of NatWest Markets, stressed yesterday that the suspensions were not intended to imply guilt or wrongdoing on the part of anyone but were designed to enable the individuals to co-operate fully with the ongoing investigation.But senior NatWest sources doubt that Mr Papouis could have mis-priced the options he was trading in so systematically over such a long period on his own.Investigators also believe that the transfer of value between books points to a deliberate attempt to avoid detection as the net closed in.Michael Harrison. But in addition, there would have been a small amount of proprietary trading using the bank's own capital.What the independent investigators brought in by NatWest from accountants Coopers & Lybrand and lawyers Linklaters and Paines discovered was regular mis-pricing to obscure losses in certain option books.

But some will have been more complex options involving a much higher degree of volatility, thus making the pricing of them more subjective.In the main he would have been trading options with clients - generally other banks or large corporate customers needing to hedge their interest rate exposure. At its simplest it is like switching to a fixed-rate mortgage.However, clients of NatWest Markets would be more likely to buy the options to trade their liabilities by, for instance, swapping their exposure to dollar interest rates in five years' time for deutschmark interest rates in three years' time.Some of the options dealt in by Mr Papouis and the small team of options traders he worked with will have been of a fairly conventional nature, heavily traded on the capital markets. The division employs about 70 people in London and a further 80 overseas. And yet it is a key part of the bank's overall derivatives business, holding some very large positions out of the notional pounds 260bn on options held on NatWest's books.In essence an option is the right to buy or sell a property at a pre- determined price in the future The buyer pays a premium for that right. The pounds 8m docked yesterday from the bonus payments of a handful of high-flyers in NatWest's global debt derivatives business shows the scale of the rewards on offer.Traders regularly start work at seven in the morning, not finishing before six in the evening and sometimes much later if the trades they are executing involve Far East or US markets.NatWest Markets' interest rate options division occupies only a small part of the investment bank's headquarters in London's Bishopsgate - home to one of the biggest trading floors in Europe.