Credit concerns have taken the shine off the market today despite a raft of takeover speculation.
HSBC shares fell 15.5p to 811.5p after a negative note from Goldman Sachs. Goldman said 56% of the sub-prime loan book held by HSBC's US arm, formerly known as Household, could be in negative equity if US property prices fell 10% across the board. It estimated 13% was in the red at the end of June.
The note came ahead of news that HSBC is taking two structured investment vehicles onto its balance sheet and backing them with funding of up to $35bn.
Other banks were also weaker, with Lloyds TSB down 3% after UBS advised clients to sell the shares and cut its target from 520p to 440p.
Martin Slaney, head of spread betting at GFT Global Markets, said: "The markets continue to be apprehensive of anything credit-related, and the Goldman downgrade of HSBC was today's trigger for a renewed bout of negativity. Every day now seems to give investors further reason to re-evaluate the balance sheets of banking stocks; there are just more reasons to sell than buy or hold right now."
Alliance & Leicester lost 31p to 614.5p ahead of its trading statement, due any day now, while Northern Rock of course is a law unto itself, up 24.2p to 110.1p after news that Virgin was the preferred bidder for the troubled business.
Oil services group Wood jumped 8% on talk of a bid from Amec. But just after the market closed Amec said it had not been preparing an approach for Wood.
By the close the FTSE 100 had fallen 81.6 points to 6180.5, reversing an earlier bright start.
