The banks faced another harrowing sell-off session following weekend moves by the Government to start hiving off bits and pieces of Lloyds Banking Group, Northern Rock and Royal Bank of Scotland in order to appease the EU regulators.

Lloyds, which has also been given the go-ahead to proceed with a £25 billion fund raising, fell 2p to 84.9p. while Royal Bank of Scotland (RBS) dropped a hefty 3.3p to a near four-month low of 38.6p, making it the biggest casualty among the top 100 companies. The Government's stake in RBS will grow from 70% to 84% when it joins the asset protection scheme.

Barclays touched a three-month low of 314¾p before rallying hard to trade 3¼p better at 325¼p. That compares with the 360p a share at which the Qatari sovereign wealth fund cashed in part of its holding last month worth an estimated £1.3 billion. The Qataris made a cash injection in Barclays earlier this year which enabled the bank to avoid the Government's asset protection scheme.

It emerges that hedge fund manager Crispin Odey, who made a fortune from predicting events during the banking collapse, has also sold part of his holding in Barclays. He emerged with a 1.5% stake in Barclays shortly after its shares struck a record low of 51p back in March. Now he has chosen to cash in by offloading most of his holding, having seen the shares grow sevenfold since their low point.

Elsewhere, investors pulled themselves up by their bootstraps in an attempt to claw back some of last week's losses among leading shares. The FTSE 100 Index rose 23.24 to 5067.79, led by the miners. They were marked higher in thin trading, reflecting slightly firmer raw material prices. Sentiment was also flavoured by whispers that BHP Billiton, 28½p better at 1672p, may renew its bid for rival Rio Tinto, up 100½p at 2793½p. It has been a year since BHP threw in the towel after the state-owned Chinalco bought a stake in Rio for way above the current market price.

Other miners to go better included Eurasian Natural Resources, up 42½p at 876p, Randgold Resources 189p ahead at 4149p and Kazakhmys, 46p to the good at 1135p. Investec has raised its target for Randgold from 4074p to 4195p.

British Airways shed a further 1.9p to 180p after threats of a court challenge by the Unite union to block changes proposed by the national airline to alter the working patterns for up to 14,000 cabin crew.

Cadbury firmed 10½p to 781p ahead of results from bidder Kraft. Both Kraft and Cadbury are said to have been talking to Cadbury's shareholders during the past couple of weeks to establish what terms they would accept from Kraft. A number of shareholders have already indicated they would be willing to accept an offer of around 820p a share, although others are understood to be reluctant to accept Kraft shares as part of a deal.

Irish-based explorer Dragon Oil rose 37¼p to 447¾p after its 52% shareholder ENOC made a recommended 455p-a-share cash offer. Rival Soco International marked time at 1293p despite Citigroup dropping its rating on the shares from hold to sell.

SkyePharma climbed 18¾p to 101½p after successfully completing a final phase 3 clinical study of its asthma inhaler Flutiform, with the higher-dose strength study for the European development programme along with its partner Mundipharma International. This will enable the regulatory filing with the European authorities to take place sometime in the first quarter of next year as planned.