FTSE down

Mortgage banks and retailers dragged the FTSE 100 Index back into negative territory today, bringing yesterday’s last minute rally to a close.

A downbeat broker note on the mortgage market’s prospects amid soaring wholesale lending costs saw Alliance & Leicester and Northern Rock tumble in morning trading.

A poor performance from retailers after the latest Nationwide consumer confidence figures also hit the Footsie, down 16.3 points at 6360.5.

Mortgage bank Northern Rock was top of the fallers board after Lehman Brothers downgraded the group, citing fears that the whole sector will be impacted by increases in interbank lending rates, which have hit near 10-year highs.

Shares were off 2%, or 19p, at 713p.

Alliance & Leicester was also downgraded in the note, seeing shares fall 24p at 1034p, despite moves by A&L yesterday to reassure over its exposure to the credit crunch and US sub-prime mortgage crisis.

Supermarkets were also under pressure after Nationwide’s data revealed consumer confidence and spending declined in August after recent interest rate hikes.

Morrisons led the pack, off 5.5p at 285.75p, followed by Tesco down 6p at 431p and Sainsbury’s, down 7p at 548.5p.

Other retailers were feeling the pinch too, with shares in Argos-owner Home Retail Group declining by 7.75p to 421.75p and fashion group Next dropping 23p to 1950p.

On the risers board, property group Land Securities was up 33p at 1860p after revealing it was considering a break-up of the group.

Miners were also faring well, with Vedanta Resources and Lonmin top of the risers, up 78p at 1870p and 90p at 3305p respectively.

In the FTSE 250, construction and support services group Carillion fell 5.75p to 427.25p as shares eased back from their recent strong run, despite positive interim results.

UK Coal’s strong interim results – showing an almost trebling of pre-tax profits – also failed to lift shares, off 8.5p at 555p after having seen advances prior to the figures.