Britain's top share index fell on Wednesday, as below-forecast results from HBOS and US data in the previous session reminded investors the fallout from the credit crisis is far from over.
At 1148 GMT, the FTSE 100 index was down 0.8 percent at 6,040.0 points, having rallied 1.5 percent the previous day when forecast-beating results from Standard Chartered provided some relief to a recently battered financial sector.
HBOS tumbled more than 10 percent, making it the index's biggest loser, after Britain's biggest mortgage lender posted a below-forecast 3 percent rise in annual profit and said it expected market conditions in 2008 to remain tough. The bank said it would take a 227 million pound hit from the value of risky assets tarnished by financial market turmoil.
Elsewhere in the financial sector, Alliance & Leicester fell 2.7 percent, Barclays lost 2.6 percent Lloyds TSB shed 2.4 percent and Royal Bank of Scotland lost 2.9 percent as concern resurfaced over the availability of credit after last year's liquidity squeeze.
The decline in Royal Bank came even after a block trade of 50 million shares, which prompted speculation of Qatari interest. The bank declined to comment. Concern about banks has driven the FTSE down by 6.4 percent this year and analysts said against the current backdrop, any rallies were likely to be short-lived.
"We've had a couple of strong days on a little bit of optimism about the monolines being refinanced, some better than expected results and I think it's not the sort of market where everything is just going to keep on going up on a straight line," said Andrew Bell, strategist at Rensburg Sheppards.
Among losers, insurer Old Mutual fell 4.6 percent after posting a 5 percent drop in 2007 profit on a European embedded value basis and missing forecasts, despite saying it expected to post a resilient performance in 2008.
The head of Britain's Financial Services authority warned on Wednesday the age of cheap credit may be over. In an interview on BBC radio, Hector Sants, chief executive of the regulatory body said he did not think financial markets would return to where they were before the global credit crunch, which caused turmoil across world markets in recent months.
Drugmaker AstraZeneca also fell 1.9 percent after saying it was stopping a clinical trial of Recentin as a treatment for lung cancer after a mid-stage study failed to meet its main goal.
BP eked out a 0.8 percent gain and Royal Dutch Shell dipped 0.2 percent, while oil rose to new records above $101 a barrel. Some analysts felt the extent of Wednesday's sell-off in financials was unjustified, especially as HBOS itself proposed a 2007 dividend of 48.9 pence a share, up 18 percent and ahead of analysts' forecasts for 47.4 pence.
Investors will also look for fresh insight into the state of the US economy from durable goods numbers at 1330 GMT and Federal Reserve Chairman Ben Bernanke's testimony at 1500 GMT.
Homebuilders also featured among gainers, as British housebuilder Barratt Developments reported a 14.3 percent rise in six-month underlying profit and said housing market conditions had since improved. Its shares rose 2.6 percent while peer Persimmon gained 1.3 percent. Companies going ex-dividend this session include Reckitt Benckiser and BHP Billiton.
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