A sharp rise in the interbank lending rate ended the three-day FTSE rally with Royal Bank of Scotland leading the fallers. The bank lost 18½p to 912p after Barclays revealed its £1.3 billion writedown. Now that Barclays has revealed its exposure, RBS is under pressure to do the same. But even Barclays failed to reassure investors and, after an initial gain of 6 per cent, closed down 2½p at 530½p on 107 million shares traded.

Credit Suisse said it applauded the disclosure but there were many more questions to be answered: “There could be worse to come for the banking sector as a whole.”

Three-month Libor, the rate at which London banks lend to each other, rose from below 6.3 per cent on Wednesday to 6.3425 per cent overnight. The rise in the cost of borrowing could hurt mortgage lenders such as Alliance & Leicester, which lost another 21p to 648p, and HBOS, down 25½p to 783p. Northern Rock fell 4½p to 134.7p, at one time dropping to 128p, below its record low of 132p. One trader said: “What better way to get rid of a mortgage competitor than refuse to lend to Northern Rock?”

The FTSE 100 lost 72.5 to 6,359.6. Experian was the heaviest faller, down 45p to 429½p, after it gave warning that profits growth would slow further in the second half as the US credit crisis hit home.

Whitbread, the Costa and Beefeater leisure group, lost 71p to £15.34 as the leisure sector was hit by SABMiller’s warning that it would have to pass on rising raw material prices to customers. SAB fell 43p to £13.32. Scottish & Newcastle rose 16½p to 757p after Carlsberg and Heineken increased their bid to 750p a share. SAB, seen as a potential rival predator, helped to talk up S&N’s price with positive comment about the prospects of the Russian beer market.

British Land lost 38½p to 912p after it wrote off retail properties. That dragged down Liberty International, which has more exposure to shopping centres, off 39p to £10.81. Compass, the world’s biggest catering group, fell 10¾p to 301¼p after its French rival, Sodhexo, seen as a potential predator, unveiled profits below forecast, saying it had been hit by rising food prices.

Tate & Lyle was the top performer, buoyed by Kai Nargolwala, a nonexecutive director, buying £42,500 of shares. BATrecovered 43p to £18.01 as fears faded that its 20 per cent shareholder Richemont, the Swiss luxury goods group, would sell down its stake. Richemont is expected to unveil good results today. Cable & Wirelessedged up another 3.6p to 184.4p after strong results.

Euromoney, the financial publishing group, was the worst mid-cap performer, off 64¾p to 415½p, after it said it had minimal visibility on orders for the second quarter as the credit crisis took hold. Lorna Tilbian, the Numis analyst, cut the target price to 529p. New Star Asset Management fell another 20¾p to 269p on fears over property values. There is talk that remuneration costs will soar once managers sell shares.

New York: Investors grappled with concerns about the strength of consumer spending and the overall economy after downbeat comments from JC Penney, the department store operator, and Wells Fargo, the bank. Falling oil prices hurt energy shares. The Dow Jones industrial average closed down 121.00 points at 13,110.00.

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