Market falls on more credit fears

Seeing its biggest one-day loss since 16 August, the FTSE ended down 3% or 196 points to 6,364, with banks among the biggest fallers.

The fall came despite central banks saying on Wednesday they would move again to ease credit availability.

HBOS was a big faller after it revealed a £180m hit from the credit squeeze.

The bank's write-down is a result of the higher cost and reduced availability of funds all banks need to borrow.

'Not clear'

Northern Rock, the most high-profile casualty of the downturn in the credit market, was the biggest banking faller on Thursday, its shares falling 13%.

"When you scrutinize what the central banks are suggesting, it's not immediately clear"
Tim Hughes, IG Index.

The decline came as it confirmed that former chief executive Adam Applegarth had now left the company.

Meanwhile, Barclays fell 6%, Royal Bank of Scotland dropped 6.25%, Lloyds TSB slipped 5.4%, and HSBC fell 2.6%.

Banking stocks also fell in France and Germany, with Paris's main share index, the Cac 40, dropping 2.7%, and Frankfurt's Dax losing 1.8%.

However, US shares ended mixed on Thursday, as a big rise in wholesale prices was offset by stronger than expected consumer spending.

While US factory prices rose at their highest rate in 34 years last month, Retail sales rose 1.2%, twice as much as market forecasts.

The main Dow Jones index closed up 52 points to 13,526, while the Nasdaq lost 2.7 points to 2,668.

Analysts said that Wednesday's announcement that the Bank of England and other central banks would release further billions of money into the financial system raised more questions than it answered.

"The problem comes in actually trying to make any sense of it," said Tim Hughes, head of sales trading at IG Index.

"When you scrutinize what they're [the central banks] suggesting, it's not immediately clear," he said.

"[But] by acknowledging it, they're saying: 'This is really bad.'"

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