Housebuilders were among the hardest fallers today after Dresdner Kleinwort in a note entitled "apartments implosion threatens Britain's house of cards" downgraded Persimmon, Taylor Wimpey and Bovis Homes to sell from reduce in a review of the sector ahead of results next week, which it expects to be "dreadful".

Persimmon was down 23p at 717p, Taylor Wimpey lost 5 per cent at 171.5p and Barratt Developments fell 4 per cent to 395.25p. Bovis was off 11.5p at 582p.

"We believe it is payback time for years of speculation and sharp practice, to which most housebuilders are now indirectly exposed. Take advantage of the recent bounce and head for the escape exit," Alastair Stewart, at Dresdner, said. "Reckless lending and over-building of flats threatens recession."

An effective profit warning from Alliance & Leicester also weighed on London shares.

A&L was down 14 per cent at 451.5p, sending Bradford & Bingley down 3 per cent to a new low of 176.5p and the FTSE 100 lost 62 at 5904.9 by 10.24am.

Rexam rallied on slightly better than expected profits and a postive outlook, up 5.5 per cent at 445p.

Rising copper prices helped lift miners Kazakhmys and Antofagasta 2.7 per cent and 1.7 per cent respectively.

Xstrata was up 1 per cent at £39.36 on talk that it was about to agree a bid from Vale at £47 a share. However, Vale's management are thought to be in New York today briefing shareholders.

BAE Systems gained 1.7 per cent to 469.75p after Morgan Stanley's Scott Babka said fears that UK defence budget cuts would hit BAE were overdone. "Even if UK revenue growth stagnates, there are significant opportunities for the company to outpace our current above-consensus forecasts through a stronger ramp up in Saudi Arabia earnings, higher spending on US land vehicle resets, and effective deployment of the company's £2.5 to 3 billion cash pile for acquisitions. We maintain our overweight rating and 540p price target."

Heineken, the Dutch brewer, warned that its input costs would rise 15 per cent this year and it could not be sure how much of this it could pass on to customers. That sent SABMIller down 4 per cent to £10.83. But Scottish & Newcastle was bouyed 5p at 793p by the 800p offer from Heineken and Carlsberg.

In the FTSE 250, Bluebay Asset Management shot up 20 per cent to 287.25p as it defied expectations of fund outflows and said that it was confident of meeting its growth in funds under management targets for the full year.

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