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Banking shares fall worldwide despite Fed rate cut

19/03/2008

Wall Street's main share indexes have fallen after crude oil fell by $5 a barrel, as worries over the outlook for the US economy continues.

By 17:45 GMT the Dow Joes industrial average was down 103.96 points at 12,288.70.

Earlier, the FTSE 100 opened at 5,605.80 and quickly dropped, reaching a low point of 5,524.80 at 11:00.

By the end of the day, the FTSE 100 had rallied slightly but was still down 60.20 points on the previous night's trading, or 1.07 per cent, to 5,545.60 points.

HBOS shares dived in value by 7.08 per cent to 446.25p. Bradford & Binglay was down 5.86 per cent and Alliance & Leicester dropped 2.72 per cent to 501.5p

Britain's biggest mortgage lender, HBOS, was hit particularly hard by market rumours that it has turned to the Bank of England for emergency funding.

"This is complete and utter nonsense," HBOS general manager of group communications Shane O'Riodain told Thomson Financial News.

"HBOS is one of the world's strongest financial institutions, with one of the world's strongest balance sheets," he added.

The index had soared in the previous session, on hopes the US Federal Reserve would cut interest rates, which would ease the cost of lending.

Better-than-expected results from two Wall Street banks, Goldman Sachs and Lehman Brothers, also helped boost share prices last night.

In Asian markets, the US interest rate cut of 75 basis points to 2.25 per cent helped raise share prices for manufacturers.

Japan's Nikkei share average rose 2.5 per cent, while Hong Kong stocks gained more than two per cent.