Now the big guns of the FSA and the Bank of England have stepped in to try and dismiss the idea of a big bank going bust, the market seems less febrile. HBOS, the main victim of yesterday's gossip, is up 5%, for example. But the nervousness is still out there, as investors await the outcome of the meeting between the big banks and the Bank.
"They need to come out with a positive statement and say there are no major problems with the banking system," said one dealer. "They have to seize the initiative and get back on the front foot after yesterday's rumours, which seemed devious. The system looks like it is being abused. You can't stop short selling, although I suppose you could make it more difficult for people to borrow stock."
Meanwhile brokers and spread betting firms dealing in contracts for difference are demanding that clients put up more cash to cover their positions. MF Global is believed to have raised the margin on stocks outside the FTSE 350 from 25% to 90%. Saxo Bank has announced that "due to the recent turmoil in the financial markets" it has raised the margin required to 50% on financial stocks.
IG Index is set to follow suit next Tuesday, raising the margin from 5% to 10% on most bank shares, with volatile ones like Anglo Irish and Alliance & Leicester to 15%. A week later it will raise its margins on commodities, which have also seen wild fluctuations in prices.
"We are asking clients for an appropriate level of cover," said IG's Tim Hughes. "It is a justifiable response given the market volatility."
Some smaller company shares in particular are likely to be under more pressure as a result, as some clients may well have to sell out rather than put up the extra cash.
Meanwhile the FTSE 100 is down 30.7 points at 5514.9 at the moment. The Bank of England has pumped in another £5bn to aid liquidity this morning, while retail sales figures for February proved unexpectedly strong. This has prompted differing views on whether the Bank will be able to come up with an imminent rate cut.
Martin Slaney at GFT Global Markets said: "High street spending is holding up in 2008 despite a slowing housing market and inflation creeping higher.
"Despite the tighter credit market conditions and global financial market unease, this will now make it very difficult for the Bank of England to justify cutting rates at the next meeting in April."
But Richard McGuire at RBC Capital Markets said: "While this report's headline argues in favour of the Bank waiting until May to deliver the next cut, the sectoral breakdown and, specifically, the clearly soggy nature of discretionary expenditures see these data provide little in the way of a challenge to the increasingly compelling case being made in favour of a more imminent ease as the ongoing troubles in the financial markets broaden out in the form of increasingly tight doemstic credit conditions."
Back with shares, Rentokil is the biggest riser in the leading index, up 20% after wholesale board changes. Carphone Warehouse is up 5p at 275.75p as it sold its underperforming Swiss distribution business.
Housebuilder Redrow added 8.5p to 271p as activist hedge fund Toscafund took a 9.68% stake
