Barclays remains under pressure

Barclays fell another 9 per cent on Wednesday afternoon as fears about the health of the banking sector following the government’s latest bail-out persisted.

The UK’s second largest bank, which has more than halved in a week, closed 6.8p lower at 66.1p. Earlier in the session the bank’s shares had fallen as low as 47.4p, a fall of 35 per cent, amid speculation it could bring forward its annual results statement. The bank, which turned down the opportunity to participate in the government’s bank rescue earlier this week, is due to release full-year results on February 17.

Worries about the banks’ potential exposure to further significant writedowns and the creeping threat of nationalisation have put the sector under pressure all week, but other banking stocks managed an afternoon rally on Wednesday.

Lloyds Banking Group, the recently enlarged group following its takeover of mortgage lender HBOS, rose 0.7 per cent at 45.1p. Earlier it hit a low of 33p.

Royal Bank of Scotland, which plummeted earlier this week after saying it would report a record loss of £28bn, rose 21.4 per cent to 12½p. HSBC, which is also expected to report further writedowns and cut its dividend, rose 6.3 per cent to 515½p, while Standard Chartered climbed 11.1 per cent to 766p.

In an article in Wednesday’s Financial Times John McFall, chairman of the Commons treasury committee, and Jon Moulton, the private equity veteran, both called for RBS and the newly enlarged Lloyds Banking Group to be fully nationalised.

”If it [full nationalisation] is to happen, the sooner the better. Let us get it over with - nationalise the pair of them,” wrote Mr McFall and Mr Moulton.

Overall, the FTSE 100 lost 0.8 per cent, or 32 points, to 4,059.88, while the FTSE 250 rose 0.3 per cent to 6159.5.

Sterling’s slide continued. The pound fell as low as $1.3695 against the dollar, its lowest since mid-2001 and sank to a record low against the yen of Y119.47.

“We see little reason why sterling should reverse its downward trend during 2009 given the concerns over the state of the UK financial sector and economy are likely to persist,“ said Jonathan Jackson, head of equities at Killik & Co.

Investors were scrutinizing minutes from the Bank of England’s December interest rate setting meeting, at which all but one member of its monetary policy committee voted to cut interest rates by 50 basis points to a record low of 1.5 per cent. David Blanchflower advocated a 100 basis point reduction.

Overnight, Mervyn King, the Bank’s governor, said that the official efforts to restore health to the banking system “are not designed to protect the banks as such. They are designed to protect the economy from the banks.”

Mr King also said the Bank would take “uncoventional measures” to limit the severity of the recession, including plans to buy corporate bonds in large quantities.

There was further grim economic data, which showed unemployment continued to soar in the final months of last year. The number of jobless climbed to 1.92m in the three months to the end of November - the highest level since 1997.

“The bad news on the labour market is absolutely relentless now as the deepening recession, slumping business confidence and persistent very tight credit conditions exact a heavy toll,” said Howard Archer at IHS Global Insight.