Banking bosses may be telling the markets that business isn't too bad, but brokers do not believe the bounceback will last.

Morgan Stanley reckons the latest allegations about Barclays' extensive tax-avoidance schemes could be the least of the banking giant's worries.

The big-gun broker today slashed its target price for Barclays from 145p to 90p, warning it may need to raise cash again soon.

Analysts say a triple whammy of rising bad debts, further credit writedowns and a fall in banking revenues will eat into Barclays' capital buffer. They also predict the bank will lose a further £7 billion on its structured credit portfolios.

Although trade has picked up at its investment banking arm as companies seek cash call advice, analysts think this is unsustainable.

Morgan Stanley has kept its equalweight rating on the shares, however, which have rallied by over 60% in the past fortnight but today retreated 8.9p to 103.6p.

Barclays was not the only bank out of favour. A trader said the past fortnight's rally in the sector's stocks "looked like overkill" and the majority were being sold off.

The bearish Barclays note came as trading began in HSBC's nil-paid shares. Its £12.9 billion rights issue won the backing of 92.9% of investors yesterday. This will allow the bank to create five billion new shares, which will start trading on 8 April.

But short-sellers of HSBC were raking it in. In line with the wider banking-sector sell-off, the shares sank 85½p to 375¾p, a long way below their theoretical ex-rights price of around 393.2p. Meanwhile, its nil-paid shares, expected to start trading at about 139p, were changing hands for 111½p.

The banking sell-off was offset by further gains in the insurers, leaving Harry Hedge Fund and his mates hurting. Lansdowne Partners today said it was betting against Prudential, whose shares topped the winner's board with a 42½p jump to 327¾p.

Millennium Management meanwhile revealed a short position in Legal & General, which put on 5.4p to 43.5p.

Overall, the start of spring seemed eventually to inspire some optimism in the City. The FTSE 100 index yo-yoed between the red and the black, before settling up 19.5 points at 3836.43.

In New York, the Dow defied early predictions of another big sell-off to trade almost flat, 1.11 points higher at 7401.91. Trading was light as investors waited to hear what US Federal Reserve chairman Ben Bernanke had to say this evening.

Drugs titan GlaxoSmithKline rose 18p to 1021p after selling part of its stake in Quest Diagnostics.

It pocketed $256 million (£178 million) from the move, part of plans to cut its holding in the US diagnostics group. GSK is rumoured to be looking at independent skincare specialist Stiefel Laboratories. Johnson & Johnson and Novartis are also thought to be interested.

Keep an eye on Petroceltic, whose shares have more than doubled in the past month and today rose 0.82p to 7.4p. The gas explorer is about to start drilling in its Algerian fields, with results expected in May.

Spanish energy giant Iberdrola already owns around a fifth of its shares, which it bought last year at 13p a pop.

A thumping profits warning did for Lamprell.

The oil services group warned that while last year's results would be in line with market forecasts, business has slowed sharply. The shares plunged 18½p to 67p.