Three consecutive months of negative UK equity performance came to an end after July as the focus temporarily switched in August from deteriorating growth prospects to merger activity and falling commodities. The optimism was short-lived and events in September dominated the quarter both in terms of news and returns, being characterised by intense equity market volatility as the worst financial crisis of the modern era unfolded.This saw both the biggest daily rise and fall on record in the FTSE 100 index. The FTSE All-Share index finished the quarter 12.18% down in sterling, total return terms. The US Treasury's bailout of mortgage lenders Fannie Mae and Freddie Mac sparked a rally in UK stocks early on, before the bankruptcy of Lehman Brothers caused share price collapses in major Financials on both sides of the Atlantic.UK Banks and building societies were hard hit and under severe share price pressure, HBoS agreed a takeover by Lloyds TSB. Stocks surged on news of a large scale bailout plan in the US, while US and UK regulators banned short selling in a number of financial companies.Those gains were wiped out when US lawmakers failed to rubberstamp the bailout plan, and UK markets fell again in the aftermath of the nationalisation of the country's largest buy-to-let landlord, Bradford and Bingley.
