FTSE endures loss

The London market sunk into the red today as Lloyds Banking Group suffered further misery in the wake of its shock HBOS profits warning.

Lloyds closed down 8% after a volatile session amid a growing backlash to the HBOS rescue as fears grow that the Government may have to increase its stake.

The FTSE 100 Index dropped 54.8 points to 4134.8, with news of a deepening recession in Japan adding to the gloomy sentiment and little direction coming from Wall Street as US markets closed for President's Day.

Lloyds shares slumped as much as 20% early on as Friday's warning of £10bn (€11.1bn) in losses at merger partner HBOS did further damage - although the firm recovered the ground to lead the top-flight risers board at one stage before slumping back into the red.

Shares in Lloyds - which fell 32% on Friday - closed down a further 5p today to 56.4p.

The worse-than-expected HBOS losses prompted concerns the bank would need extra taxpayer help, even though fears of a full-blown nationalisation were played down.

Royal Bank of Scotland - which is 68% owned by the British taxpayer - was down 1.4p at 20.4p, while Barclays slipped 3.4p to 97.1p.

HSBC - seen as the safest haven among UK banks - was 0.5p better off at 530.5p.

Meanwhile insurers had a difficult session, led by Legal & General. L&G was hit by fears over its exposure to falling stock markets, although the firm insisted its capital position was robust.

L&G fell 5.2p to 44.3p - the leading Footsie faller - while Prudential followed close behind, shedding 25.75p to 295p. Aviva fell 24p to 317.25p as the trio accounted for three of the leading four fallers.

In the property sector Land Securities lost 21.5p to 621.5p after becoming the latest player to confirm that it was considering calling on shareholders for funding.

British Land and Hammerson, which both unveiled similar funding moves last week, were also lower, down 10.75p at 450.25p and 12.75p off at 387.25p respectively. Liberty International - another potential rights issue candidate - was 11.75p lower at 366.5p.

Telecoms giant BT briefly returned to the risers' board after a torrid week in which it revealed an 81% fall in third-quarter profits and hefty writedowns.

But the group slipped back in the wider market woes, closing down 0.6p at 98.4p despite UBS brokers upgrading the stock from 'sell' to 'neutral' in light of recent share price falls.

Elsewhere, FTSE 250 broadcaster ITV fell 0.5p to 27.5p after reports suggested it was considering selling off its social networking site Friends Reunited, bought for up to £175 million in 2005.

The biggest Footsie risers were Shire up 16p at 1020p, Capita Group ahead 10.5p at 683p, Autonomy up 17p at 1227p and Sage Group up 2.4p at 174.5p.

The biggest Footsie fallers were Legal & General down 5.2p at 44.3p, Lloyds Banking Group off 5p at 56.4p, Prudential down 25.75p at 295p and Aviva down 24p at 317.25p.