Banking stocks among heavy London fallers

Banking stocks were among the heavy fallers in London today as recession fears again dominated the thoughts of investors.

A weak finish to trading on Wall Street on Friday and confirmation that Japan - the world’s second-largest economy – had slipped into recession contributed to the downbeat session.

The Footsie struggled for direction early on and stood 72.9 points lower at 4160.1 by mid-morning after heavy losses for miners and UK banks.

Merger partners HBOS and Lloyds TSB were both down by more than 10%, or 8.7p at 77.8p and 16.8p at 149.2p respectively after a financier conceded defeat in his battle to broker an alternative deal to the proposed takeover by Lloyds.

Jim Spowart, who founded Intelligent Finance and Standard Life Bank, blamed UK government ministers and a series of leaks for ending his campaign to stop the Lloyds TSB deal going through.

Some of the biggest gains of the session were seen outside the top flight, following speculation at the weekend about the future of two debt-laden companies.

Premier Foods rose 17% or 4.75p to 31.75p after a report said McVitie’s-to-Penguin firm United Biscuits had made a secret bid to buy Mr Kipling from its rival.

Premier, which is looking to reduce its £1.8 billion debt mountain, is understood to have rejected the £250 million approach.

Meanwhile, Taylor Wimpey shares rose 8% after it was reported to be in the sights of a number of private equity firms. The housebuilder is saddled with debts of £1.9 billion and must renegotiate terms with lenders before early next year to avoid breaking banking covenants.

Shares were up 0.66p to 9.95p.