Halifax FTSE's biggest faller

Banking stocks were under pressure today after Halifax Bank of Scotland sparked concerns over difficult trading in its mortgages arm.

The company was the London market’s biggest faller as the City focused on the bank’s share of net home lending, which is expected to be below 10% in the first half of the year, despite a robust overall trading update.

HBOS shares were more than 4% lower, down 43p at 1026p as the FTSE 100 Index stood 10.5 points lower at 6557 by lunchtime.

At the top of the fallers board, HBOS was joined by Northern Rock as sentiment among lenders weakened after the trading update. Northern fell 30p to 996p while Bradford & Bingley was off 9.25p at 397p and Royal Bank of Scotland slipped 10p to 649.5p.

One of the best performances of the session came from the housebuilding sector after sentiment benefited from a lower-than-expected inflation figure of 2.5%.

With the figure raising hopes of a reprieve from higher interest rates, Persimmon topped the Footsie risers board – up 35p at 1264p – as the firm managed to recoup recent losses.

In the FTSE 250 Index, Bovis Homes gained 28p to 975p, George Wimpey added 8p to 570p and Redrow lifted 16.5p to 549p.

Back in the top flight swirling bid rumours and broker upgrades helped drive a number of stocks on. ICI ahead 12p to 530.25p amid talk that Akzo Nobel could be preparing its long-awaited bid for the Dulux paint maker.

Cable & Wireless also rose 3.5p to 204.5p as it became the subject of speculation regarding a potential bid from France Telecom. Elsewhere in the telecoms sector, Vodafone lifted 0.8p to 158.7p and BT added 1.25p to 324p.

Meanwhile a upgrade from Merrill Lynch helped lift chemicals-to-catalysts firm Johnson Matthey as the broker noted strong prospects for US growth amid prospects of new emissions targets. The stock was ahead 56p – more than 3% – at 1721p.

And more positive sentiment over engineering giant Rolls-Royce put the company among the day’s top performers. Man Group said it expected upbeat news from the firm ahead of its participation in the Paris Air Show next week and lifted its target price. Rolls-Royce cheered 14p to 523p.

Debenhams was the top riser in the second tier, gaining 4%, or 5.5p to 146.75p, after it emerged that retail group Baugur had taken a stake in the firm.