Northern Rock sends FTSE into turmoil

Banking and housebuilding shares were shaken today after Northern Rock said turmoil in the credit markets had forced it to seek help from the Bank of England.

As well as asking for the emergency funding facility, the Newcastle-based bank said its annual profits would be up to £147m lower than City expectations. Its shares tumbled 21%, down 136.5p to 302.5p.

Other banking stocks were sharply lower as the ongoing credit crunch dealt a fresh blow to confidence on the London market. By mid-morning, the FTSE 100 Index was 91.9 points lower at 6272, a drop of almost 1.5%.

The biggest knock-on effect from the crisis at Northern Rock was felt by specialist lender Paragon, which fell 85p to 273p in the FTSE 250 Index.

Buy-to-let firm Bradford & Bingley, which is also in the second tier, dipped 7%, or 27p to 330.25p, and blue-chip Alliance & Leicester fell 8%, or 74p at 863.5p.

Barclays was 20.5p cheaper at 594.5p, even though it sought to ease market worries with a reassuring trading statement, which it issued ahead of a meeting of its shareholders to approve the planned takeover of ABN Amro.

Investors also rushed to sell housebuilding shares, amid fears that the crisis could cause a slowdown in the property market.

Barratt Developments fell 77p to 793.5p – a drop of 9% – while Persimmon was off 73.5p at 864p. In the FTSE 250, Bovis Homes dipped 61.5p to 673p and Taylor Wimpey declined 24.25p to 307.5p.

Meanwhile, retail stocks were affected by signs of a further easing in consumer confidence.

Argos and Homebase owner Home Retail Group was down 22.75p at 392p, Next dipped 87p to 1913p and Marks & Spencer fell 21p at 592.5p.

Traditionally defensive stocks came into play at a time of market crisis. That meant International Power lifted 0.75p to 425.75p, while Reed Elsevier added 4p to 605.5p.