By Rebekah Curtis
LONDON, March 17 (Reuters) - Britain's leading share index
skidded 2.6 percent by midday on Monday as financials were
lashed by fears the fire sale of U.S. bank Bear Stearns <BSC.N>
signalled the credit market crisis would claim more victims.
Alliance & Leicester <ALLL.L> and HBOS <HBOS.L> both slid
more than 10 percent, while Royal Bank of Scotland <RBS.L> and
Barclays <BARC.L> both lost nearly 8 percent.
Investors shunned the sector after JPMorgan <JPM.N>
announced a takeover of Bear Stearns at a rock-bottom price, and
ahead of a set of key investment bank results due this week.
By 1139 GMT the FTSE 100 <> was down 146 points at
5,485.7, hitting its lowest level since the end of January as
Europe tracked steep falls in Asia and U.S. stock futures
tumbled.
The index has shed 15 percent so far this year on investor
fears of a possible U.S. recession and further credit-related
writedowns.
In a shock move on Sunday, the U.S. Federal Reserve (Fed)
cut its discount rate by a further quarter point to 3.25 percent
and launched a new facility that would allow U.S. primary
dealers, mainly investment banks, to tap the discount window in
a tool not used since the Great Depression.
"The Fed's in a new phase now of making pretty unusual
policy steps... It's bringing home to people just how serious
the situation is," said Chris Iggo, a strategist at Axa
Investments.
"The U.S. banking system's in a pretty precarious position
at the moment," he said.
"In the short term, the situation remains very dangerous."
The dollar plunged across the board, and U.S. short-term
interest rate futures pointed to a near certainty the Fed would
cut rates by 1 percentage point at or before Tuesday's policy
meeting.
The Bank of England's exceptional offer of 5 billion pounds
worth of 3-day loans to calm money markets on Monday was nearly
five times oversubscribed.
Bucking the trend, however, UK nuclear power company British
Energy Group <BGY.L> rose about 10 percent after saying it was
in talks which could lead to a business combination or an offer
for the company. []
GlaxoSmithKline <GSK.L> shares, the only other FTSE 100
gainers, added 2.4 percent following incremental good news on
drugs and appreciation of its strong dividend, analysts said.
WOLSELEY HIT
Building materials group Wolseley <WOS.L> lost 5.4 percent
after it reported a 23 percent fall in first-half trading profit
and warned that business conditions in its major markets, which
includes the United States, would become more challenging.
Among energy stocks, BP <BP.L>, BG Group <BG.L> and Tullow
Oil <TLW.L> all fell with the wider market, shrugging off rising
U.S. crude oil prices.
Royal Dutch Shell <RDSa.L> reversed earlier gains to trade
flat. It said earlier that its oil and gas reserves held stable
in 2007 despite expectations of a drop, but added its growing
focus on unconventional projects would limit growth until after
2010.
Miners all fell as copper prices dropped on global growth
concerns. Kazakhmys <KAZ.L> shed 7.5 percent, Vedanta <VED.L>
fell 5.1 percent and Antofagasta <ANTO.L> dropped 6.9 percent.
Mitchells & Butlers <MAB.L> dropped 8.5 percent after
Panmure cut the stock to "sell" from "hold" and cut its price
target to 350 pence from 500 pence.
The Sunday Times cited people close to the company as saying
the pub operator, up for sale, will consider selling a minority
stake to private equity firms in return for cash in the hope of
giving it enough cash to stay independent.
(Editing by Rory Channing)
