Market report: HBOS a big winner as rivals come under fire

Investors in the beleaguered banking sector breathed a small sigh of relief today as HBOS enjoyed a rare day in the sun. The Halifax owner was the biggest winner among blue-chips, reversing yesterday's mega-losses to trade up 41p at 135p a rise of over 40% on the day as traders reacted to the Government's moves to bolster the banking system, and speculated that its merger with Lloyds TSB was now looking more likely to go ahead.

The gains came despite persistent talk in the City that now the banking deal has been done, barring a further recovery in HBOS's share price, Lloyds, 12½p cheaper at 212½p, will try to renegotiate its deal to merge with its rival.

Royal Bank of Scotland, which plummeted 39% yesterday on fears shareholders' investments would be wiped out, also clawed its way back above the £1 threshold to trade 11.4p higher at 101.4p. It was the top traded stock a position normally reserved for mobile phones giant Vodafone with more than 350 million shares changing hands.

But the banking sector was a curate's egg as rivals continued to suffer. Barclays dived 23p to 262p while Asia-focused Standard Chartered, which said it has no plans to take Government capital to boost its reserves, sank 107p to 1204p. HSBC also came under the hammer, down 18¾p at 882¼p.

Traders said the contrasting fates reflected the panic surrounding the sector, and the wild fluctuations seen were caused by the pocketing of gains at any opportunity.

After Monday's meltdown and yesterday's roller-coaster ride, the FTSE was in for another mad day. The index was initially down almost 7%, with only HBOS managing to stay in the black, but the emergency rate cut briefly sent shares soaring. The fillip proved short-lived, however, and the Footsie sank back, falling 158.68 points to 4446.54.

Traders expressed their worries over how short-lived the boost was but said bringing forward by 24 hours a rate cut that had already been largely priced into the markets couldn't be expected to leave much of an impression. In New York, early gains were pared back, and the Dow lost 53.05 points to 9394.06.

The Icelandic banking crisis may be a nightmare for the island nation, but it could be good news for your local boozer. That was the verdict of Numis Securities after Iranian property tycoon Robert Tchenguiz was forced to exit pubs group Mitchells & Butlers.

After the close of play yesterday, more than 100 million shares in the company changed hands as the All Bar One owner's biggest shareholder sold his 25% stake. It comes as a bitter blow for Tchenguiz, who is thought to have bought the shares at around 500p a pop, leaving him with a hole in his pocket just shy of £400 million.

The buyer was Joe Lewis, the East London-born billionaire who controls Tottenham Hotspur. The Bahamas-dwelling tax exile will be hoping his gamble on British drinkers' thirst not being quenched by the credit crunch pays off rather better than his bet on US investment banks. He was one of the biggest losers from Bear Stearns' collapse. But the positive broker reception to the news and the rate-cut boost wasn't enough to stop investors calling time on M&B's shares, which have halved in value since February and fell another 10p to 153½p.

But amid all the economic turmoil, brokers are still convinced there are buys to be had. Citigroup has upped its price target for pharmaceuticals giant AstraZeneca from 2582p to 2700p and increased its earnings per share estimates for this year and next.

Despite expectations that its asthma drug Pulmicort will start to lose ground in the US to generic rivals from 2009, the City big-hitter says the traditionally defensive stock should provide a relatively safe haven for investors. But traders shrugged off the optimism, and its shares sank 125p to 2337p.