HBOS registered its biggest one-day percentage gain in 8½ years as short-sellers scrambled to close their positions.

The frenzied buying was initially triggered by talk of predatory interest from Spain’s BBVA and then by speculation that Dresdner Kleinwort had managed to offload a large chunk of the unwanted stock it was left with when HBOS’s rights issue closed last week. Dresdner and Morgan Stanley were the underwriters to the £4bn cash call, which flopped spectacularly with just 8.3 per cent of shareholders taking up their rights.