Fears that Wolseley will need a rights issue to reduce its debt made the world’s largest builder’s merchant the biggest blue chip loser.

ABN Amro, the house broker, struck the hardest blow, giving warning that Wolseley’s net debt could rise to three times earnings next year, assuming it made no acquisitions.

“The group’s financial gearing position . . . has created additional risk for Wolseley shareholders if banking covenants are breached,” ABN said, cutting its share price target from 630p to 530p. It frets that not only will debt providers demand higher interest payments, but Wolseley will not have the war chest to buy up smaller rivals and squeeze out cost savings – its growth strategy for the past 20 years. Gold-man Sachs also put the boot in, cutting its price target to 565p and giving warning that construction markets have farther to fall in the US and Europe. Wolseley lost 37p at 550p.

The FTSE 100 was down by 147.5 at one stage, depressed by US recession fears and the collapse of Carlyle Capital Corporation. The dollar plunged against most major currencies, driving oil and gold prices to new highs. However, Standard & Poor’s statement that the end of mortgage asset writedowns was in sight and US plans to buy up sub-prime mortgages helped to ease nerves slightly and London’s leading index ended down 84.0 at 5,692.4.

Xstrata was one of the few gainers, up 68p at £39.21 on hope that a takeover by Vale can be rescued. Bosses of Vale, Xstrata and its main shareholder, Glencore, were believed to be meeting in Brazil for the first time since talks stalled two weeks ago in a last-ditch attempt to thrash out an agreement.

Scottish & Southern Energy was up 36p at £14.56 on vague talk that RWE may be bidding. RWE was on Wednesday a rumoured predator for British Energy, down 14½p at 573p. Others pointed to relief at the lack of windfall green taxes on energy companies. United Utilities gained 4½p at 669p. National Grid rose 11p to 721½p, with International Power up 2p to 381¾p.

British Airways lost 12p at 230½p on worry over fuel costs as oil hit a record $110 a barrel and the airline sector was rocked by a profit warning from Air Berlin.

Fears over the next financial insolvency pushed banks and insurers back on the slide after Wednesday’s brief rally. Royal & SunAlliance lost 6.2p to 123.2p and Royal Bank of Scotland fell 16½p to 342½p.

In the FTSE 250, Benfield, the reinsurance broker, fell 29p to 230¾p after it gave warning that this year’s figures would be below those for last year, mirroring its January warning about 2007. The company has been hit by a trend for insurers to do their own reinsurance rather than use brokers.

Rank Group lost a further 8¼p to 83¼p after the Budget left VAT on bingo.

— New York: After initial falls, Wall Street was lifted by a forecast from Standard & Poor’s that financial companies are nearing the end of the huge asset writedowns that have hit the stock market and credit markets for months. The Dow Jones industrial average closed up 35.50 at 12,145.70.

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