FTSE down in morning trading

The FTSE 100 Index was near to a three-year low today after weaker banking shares pushed the top flight down another 1.8%.

Halifax Bank of Scotland was the hardest hit by the Lehman fall-out, which left the Footsie 94.1 points at 5110.1 by mid-morning. The index fell nearly 4% yesterday.

HBOS was down more than 16% or 37.4p to 195.1p after a fall of nearly 18% for the stock yesterday. Royal Bank of Scotland was off 17.5p at 193p, while Barclays dipped 15.25p to 300.75p after announcing it was in talks to buy some of Lehman’s non-toxic assets.

As well as the fall-out from the Lehman collapse, sentiment was hit by Bank of England Governor Mervyn King’s letter to Chancellor Alistair Darling, which was issued after inflation hit 4.7% in August. Analysts said the tone of the letter suggested interest rates may not be coming down as soon as some have hoped.

There was some buying interest elsewhere in the market, with defensive stocks such as National Grid ahead 5p at 723p and Centrica up 11.5p to 333.5p.

Fuel-dependent stocks were on the front foot after oil prices fell to 94 US dollars a barrel. British Airways rose 8.75p to 270p, a gain of 3%, while Thomas Cook improved 4.25p to 260.25p and TUI Travel gained 6.25p to 245.25p.

Outside the top flight, low-cost airline easyJet shared in the gains with a rise of 28.5p to 378.5p.

Department store chain Debenhams jumped 8% after it reassured analysts over its recent trading performance. The stock rose 3.5p to 46,25p as the group reported a 0.9% fall in annual like-for-like sales.

Recruitment firm Michael Page International moved in the opposite direction, down 23% or 74.25p to 247.5p, after Adecco ended its recent takeover interest.