London shares open lower; financials down on ongoing liquidity rumours

At 8.57 am the FTSE 100 index was down 22.1 points at 5,582.7 falling back from a high of 5,653.6 after closing up 191.4 points at 5,605.8 yesterday, while the FTSE 250 index was down 108.5 points at 9,493.

"Initially the FTSE started off making some gains after the stellar performance on Wall Street last night. Some good news from two top brokerages and an aggressive expected rate cut prompted a positive start. We are seeing some selling come in now as rumours have just started circulating that a UK bank could be having liquidity problems," said Paul Chesterton, senior sales trader at CMC Markets.

In the US yesterday, Wall Street surged as the Federal Reserve's cut interest rates by three-quarters of a percentage point and forecast-beating results for US investment banks eased worries about the worsening global credit crisis.

The Dow Jones industrial average closed up 420.41 points at 12,392.66. Separately, the Standard & Poor's 500 index rose 54.14 points to 1,330.74, and the Nasdaq composite index gained 91.25 points to 2,268.26. Asia also rallied, with the Nikkei 225 index ending 296.28 points higher at 12,260.44, while the Hang Seng index ended the morning up 584.58 points at 21,969.19.

Elsewhere, oil prices in Asian trade fell by more than 1 usd, with more volatility expected as investors cast a wary eye on the global financial markets. New York's main contract, light sweet crude for April delivery, dropped 1.06 usd to 108.36 usd a barrel, down from 109.42 Tuesday at the close of US trades.

London's Brent North Sea crude for May delivery fell 1.14 usd to 104.42. Turning to the UK, investors are likely to eye the minutes to the Bank of England's March 6 interest rate decision is expected to show the Monetary Policy Committee voted 8-1 to keep interest rates on hold at 5.25 pct.

Looking at corporate news, banking stocks were lower with HBOS the top faller, off 11-1/2 at 468-3/4 after vague rumours the group was having liquidity problems. SG Securities also initiated the group with a 'hold' stance on price target of 485 pence and said it prefers Lloyds TSB which it initiated with a 'buy' stance and price target of 490 pence. SG Securities said it prefers the prudence of Lloyds TSB to the uncertainty of HBOS, with the former offering a 'steady and understated hand' while the latter looks to have 'vulnerability priced in'.