UK's top share index falls

Britain's top share index fell 1.2 percent on Friday after mortgage lender Northern Rock became a casualty of the global credit squeeze, weighing on banks and property-related stocks. The FTSE 100 closed down 74.6 points at 6,289.3, but well off its day's low of 6,209.1 as index heavyweight commodity shares pared losses in afternoon trade.
The UK benchmark index gained 1.6 percent this week. European stocks also finished lower on Friday. Northern Rock issued a profit warning and was offered an emergency loan from the Bank of England, the first time the central bank had acted as lender of last resort in this way since becoming independent on interest rate policy in 1997.
Shares in the mortgage lender, which raises most of its funds in the wholesale credit market, plunged more than 31 percent - its biggest one-day fall and taking its losses so far this year to over 62 percent.
Ratings agencies Standard & Poor's and Fitch cut their credit ratings on Newcastle-based Northern Rock, while people queued outside its branches and its Web site creaked as customers scrambled to withdraw cash.
"People probably have time to reflect on the Northern Rock situation and reflect on the bigger picture. People probably feel, maybe, being a bit of over-reaction this morning. I guess it's not surprising in the circumstances," said Darren Winder, equity strategist at Cazenove.
"It has been quite a meaningful recovery through the afternoon session ... helped by a bit of stability in the US markets," he said, adding that the market would remain volatile in the next few days with the US Federal Reserve's meeting on Tuesday and US banks reporting next week.
Banks were the worst performing sector, shaving 20 points off the index. Northern Rock's fellow mortgage lenders Paragon, Alliance & Leicester, Bradford & Bingley, HBOS and Lloyds TSB also slipped.
Barclays, which is locked in a take-over battle for ABN Amro with a consortium led by Royal Bank of Scotland, shed 3.1 percent. The third-biggest bank in UK said it would abandon its proposed 58 billion euro take-over of ABN if it cannot get the right terms. RBS was down 0.7 percent.
Asia-focused Standard Chartered slipped 1.4 percent, but global banking group HSBC gained 0.2 percent. Northern Rock's funding issue also weighed on house builders and property companies, which were hurt by a Rightmove survey showing asking prices for homes in England and Wales fell last month for the first time this year. Taylor Wimpey sank 5.7 percent, Persimmon fell 6.6 percent and Barratt Developments lost 4.7 percent, while British Land dipped 3.6 percent and Land Securities slipped 3.8 percent.
Oil shares trimmed earlier losses, as crude prices edged back to $80 a barrel. BP eased 0.2 percent and Royal Dutch Shell dipped 0.3 percent after earlier being down as much as 1.4-1.5 percent.
Firmer metal prices also help the mining sector to retrace earlier steep losses, with Antofagasta ending up 0.2 percent. Reed Elsevier rose 1.1 percent after Merrill upgraded the stock to "buy" on the back of the agreed sale of its education arm Harcourt to rival Houghton Mifflin.