London shares were on the fall again following a sell off on Wall Street on Friday after grim economic news and poor figures from insurer AIG.

HBOS was leading the London index down after UBS added its voice to those analysts downgrading the bank - formed form the merger of Halifax and Bank of Scotland - following results last week.

UBS said HBOS was "exposed to many areas of market concern" including, the "quality of treasury assets". The bank revealed last week it had £7 billion exposure to Alt A mortgages - a notch higher quality than subprime.

"With a retail loan to deposit ratio of 160 per cent HBOS remains heavily dependent on wholesale funding. With term funding markets still difficult we believe the group is currently funding its loan growth much more short-term than it would like. We suspect that if funding markets do not normalise in the third quarter then volume growth will be pulled back aggressively," said UBS.

It put a 650p price on the bank with a neutral rating. Bear Stearns also downgraded the bank over its £42 billion exposure to asset backed securities.

HBOS lost 5 per cent to 574.5p.

But all the banks bar HSBC, which reported strong figures from Asia, were on the slide. Alliance & Leicester was down 3.3 per cent at 545p, Barclays lost 3 per cent to 463.5p.

Royal Bank of Scotland fell 2.7 per cent to 374.5p, hit by a downgrade from Deutsche Bank which cut its price target to 480p and warned over the problems of squeezing together its ABN Amro acquisition. Citigroup's Tom Rayner retained his sell advice and 350p target but also trimmed his earnings forecast. "We believe that the share price will be unable to post a sustainable recovery until the issue of excessive balance sheet leverage is addressed," he said.

HSBC was up just 1 per cent at 774.5p.

The blue chip gainers were the usual defensive stocks such as Smith & Nephew, up 3.5p at 659p.

In the FTSE 250, Helphire rebounded from its huge 40 per cent sell-off after it unveiled rising debt on Friday, gaining 7.4 per cent to 184.75p, helped by director buying late on Friday.

Bradford & Bingley was down 6 per cent at 210.25p.

Moneysupermarket lost 5 per cent to 130.75p on profit taking after UBS said its recent rally had gone far enough with problems ahead for its money arm and downgraded to neutral.

In the small caps, Paragon gained 7p to 119p after Credit Suisse said that now its £280 million rescue rights issue was out of the way, the shares were pricing in too steep a housing market fall.

Silverjet, the business class only airline, rose 0.5p to 20.75p after it unveiled traffic volumes in February of 8,829, a load factor of 64 per cent. But Mike Stoddart of Daniel Stewart, who believes the shares are worthless, pointed out that there was no data on yield - the amount of cash each passenger is paying.

"We suspect that this is because it is not possible to say anything positive on the subject." He also noted that management's tone was less confident, in January they were "confident" that the firm woudl achieve its first month of profit before end of March now they are "making every effort to ensure that Silverjet will achieve its first month of operating profit in March 2008". Mr Stoddart said: "We remain of the view that Silverjet will need additional equity funding soon."

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