Northern Rock pushes FTSE down

Northern Rock was once again the biggest loser on the London market today amid growing fears that it would struggle to secure a decent takeover bid.

The troubled mortgage bank dived a further 28%, or 71.8p to 185.2p, as confirmation that the Treasury's guarantee for savers would not cover newly opened accounts added to the negative sentiment.

The FTSE closed down 31 points at 6429 as it gave back some of the gains from the previous session after blue chip stocks received a boost from the US Federal Reserve's decision to cut interest rates by 0.5% to 4.75%.

The negativity surrounding Northern Rock, which has seen its shares suffer a near three-fold fall since last Thursday, resulted in pressure on shares across the banking sector with Alliance & Leicester off 7%, or 60p at 755.5p, and Halifax parent HBOS down 37p at 837p.

Housebuilders also took a hit with Persimmon falling 5%, or 50p to 939p while Barratt Developments shed 30p to 792p.

Allegations of price-fixing among supermarkets and dairy processors failed to knock Sainsbury's after it announced it had given potential bidder Delta Two access to its books.

The supermarket chain climbed of 15.5p to 569.5p, as the news helped offset the impact of the Office of Fair Trading's announcement.

Tesco, also mentioned by the OFT, was down 1.5p at 434.5p, while Morrisons dipped 6.25p to 271.5p even as it posted a set of forecast-beating half year results. However the company also warned over a cautious outlook for the rest of the year, and added that price rises were on the cards after a poor summer for farmers.

Elsewhere, dairy processor Robert Wiseman - also named in the OFT probe - lost 3%, or 12.75p to 410p.

Back in the top flight, B&Q owner Kingfisher slid 6%, or 11.3p to 181p, as it too warned of tougher times were ahead. First-half profits fell at B&Q after heavy investment in its store revamp programme and discounting on outdoor ranges following poor sales amid the wet summer weather.

The news saw Argos and Homebase owner Home Retail Group 21.25p lower at 373.75p as the Office for National Statistics also said that non-food retail sales struggled during August.

Friends Provident led the Footsie as investors reacted to speculation that Zurich Financial could make a bid for the firm, which is currently pursuing a merger with closed life fund Resolution. Shares rallied 4%, or 7.1p at 174.7p.

Cruise operator Carnival topped the risers - up 157p to 2374p - after it posted a 12% rise in third quarter earnings.

In the FTSE 250 Index, London Stock Exchange jumped 16%, or 234p at 1687p, - after the Qatar Investment Authority bought a 20% stake in the firm and Borse Dubai agreed a deal to buy the 28% holding of US operator Nasdaq.

The biggest Footsie risers were Carnival up 157p at 2374p, Friends Provident ahead 7.1p at 174.7p, Sainsbury's up 15.5p at 569.5p and Kazakhmys ahead 27p at 1450p.

The biggest Footsie fallers were Northern Rock off 71.8p at 185.2p, Alliance & Leicester down 60p at 755.5p, Kingfisher down 11.3p at 181p and Home Retail Group down 21.25p at 373.75p.