London Briefing:From the collapse of the Qatari bid for Sainsbury's on Monday to the publication of the UK Competition Commission's long-awaited report on the supermarket sector a week ago, it has been a tumultuous time for Britain's £123 billion-a-year (€176.4 billion) food retail industry, writes Fiona Walsh

Across the Atlantic, UK market leader Tesco is taking on its biggest challenge yet as it makes its first move into the world's most competitive grocery market. The launch of Tesco's Fresh & Easy stores in southern California is the culmination of years of meticulous planning by the group. It is confident it can avoid the fate suffered by so many other UK retailers, including Marks & Spencer and Sainsbury's, for whom the American market has proved such a graveyard in recent decades.

While its smaller rivals have been busy restoring their domestic businesses to health, Tesco has been expanding rapidly outside the UK and now has sizeable operations in eastern Europe and Asia.

Nothing quite matches the lure of the US, however. In time, Tesco's fledgling American chain (one store is up and running and another five open their doors tomorrow) has the potential to match and eventually outstrip its core UK operation in scale.

The timing is crucial for Tesco, which remains under pressure at home over its increasing dominance of the supermarket scene. It has a 31 per cent share of the UK grocery market - almost double its nearest rival, Asda - and although last week's Competition Commission report cleared the group of driving smaller rivals out of business, it was derided as a whitewash by suppliers, smaller traders and environmental groups.

Tesco shares surged on the back of the findings, no doubt to the embarrassment of the competition watchdog, as the City judged the group to have got off lightly. Certainly, the commission's bald statement that Britain's leading retailer "is not in such a strong position that other retailers cannot compete" came as a surprise to most observers.

But the group could be forced to sell off chunks of its sizeable landbank (as could other retailers) if it is judged to be restricting competition in local areas. The commission said it has identified 200 locations across the UK where it regards competition between the rival retailers as insufficient. In some of those areas, Tesco commands more than 50 per cent of the market.

The somewhat questionable practice of selling land with restrictive covenants on its use - a ploy used by some supermarket groups to prevent rivals opening up - is also likely to be outlawed.

There are further potential pitfalls. A proposed shake-up of the planning system could see the removal of the so-called "needs test", under which food retailers are barred from building new stores unless they can prove they are really required.

The report instead suggests a "fascia test", which would allow rival retailers to enter areas where they have no representation.

This is likely to benefit Tesco's smaller rivals, although it has incurred the anger of environmentalists, who say the last thing the UK needs is more supermarkets.

While clearing Tesco of some of the more serious allegations that are routinely levelled at it, the commission did sound a warning note that chief executive Sir Terry Leahy and his team will not have missed.

The watchdog accepted that Tesco could pose a threat to competition if, as looks highly likely, its market share in the UK continues to grow. That raises the prospect of yet another investigation in the future - and makes the success of its American expansion even more vital.

Sentiment still rocky in banking

As the subprime mortgage crisis claimed the heads of two of the big beasts in the banking world - Charles "Chuck" Prince at Citigroup and Merrill Lynch's Stan O'Neal - the London market has been gripped by fears that another UK bank may be about to join Northern Rock in the Bank of England's emergency ward.

Rumours continue to sweep through the battered banking sector, sending share prices - and the City of London's fragile confidence - tumbling.

Barclays, Britain's third-largest bank, has been particularly hard hit, with its shares crashing to their lowest level in three years.

There have been hefty losses, too, among smaller banks such as Alliance & Leicester and Bradford & Bingley.

Bank bosses in the UK and the rest of Europe have insisted on a number of occasions since the subprime crisis exploded that there are no "black holes" in their balance sheets.

But the market is not in the mood to believe them - and the mounting cost of mortgage debt turned bad across the Atlantic only increases the fear of what horrors may yet emerge.

• Fiona Walshwrites for the Guardiannewspaper in London