Lloyds' 'black swan' clips FTSE 100's wings

A dramatic fall in the price of Lloyds Banking Group drove London's leading shares lower today, with the FTSE 100 recording a weekly fall of more than 100 points.

Lloyds' early afternoon profits warning blew apart the FTSE's earlier gains, leaving the blue-chip index to close down 12.65 points at 4189.59.

Lloyds shares plunged as much as 40% as investors digested the news that the recently acquired HBOS business could report annual losses of around £10bn for 2008. But they rallied slightly to end the day at 61.4p, down almost a third or by 29.5p.

Collins Stewart analyst Alex Potter described Lloyds' unscheduled trading statement as "another black swan" and drew attention to the bank's dwindling capital base.

"Earlier this week, we wrote of our concerns about Barclays having posted relatively strong 2008 results but retaining a high risk profile and weak capital levels," he wrote in a note.

"Lloyds, thanks to HBOS, is taking this further by having weaker-still capital levels and posting results that are disturbingly weak."

Other bank shares were dragged down by the announcement from Lloyds, which is 43%-owned by the government. Royal Bank of Scotland, itself 70%-owned by the state, dropped more than 9% or 2.2p to 21.8p, while Barclays slid 4.5p to 100.5p.

HSBC edged down 3.5p to 530p, and the Asia-focused Standard Chartered slipped 25.5p to 790.5p.

Sugar group Tate and Lyle was another faller, down 14.75p to 322.5p as Numis cut its rating to 240p from 330p, with a sell rating.

Top of the day's gainers was the travel group Thomas Cook, which reported a reduced first-quarter operating loss.

Shares in the group rose more than 7% or 15p to 224p.

Investors reacted positively to the resignation of London Stock Exchange chief executive Dame Clara Furse, as shares in the company gained 18p to 488p.

B&Q owner Kingfisher rose 5p to 141.7p, benefiting from an upgrade by analysts at UBS, who changed their rating from "neutral" to "buy" and raised their target price from 132p to 160p ahead of fourth-quarter results next week.

Rio Tinto, which is embroiled in a row with investors over its controversial plans for a $20bn injection from Chinalco, was one of a number of mining groups to perform well, gaining 50p to £19.89.

BT bounced back from yesterday's record low, up 2p to 99p as chief executive Ian Livingston bought 99,500 shares.

Standard and Poor's equity analysts cut their target from 119p to 105p, while JP Morgan followed suit, lowering its sights from 135p to 110p.

Newspaper groups prospered on hopes that an Office of Fair Trading review of local and regional media ownership could allow previously off-limits mergers.

Trinity Mirror gained 2p to 49.75p, while Daily Mail and General Trust also rose 2p, closing at 270.75p.

But regional group Johnston Press's bombed-out shares found no relief, dropping 0.2p to 7.3p.