Rio Tinto shares reached a new high yesterday, driven up by a rumour that BHP Billiton would raise its bid and bullish talk about soaring demand from Tom Albanese, its chief executive.

Rio jumped 236p to £66.45 as market chatter suggested that BHP was preparing to raise its paper offer of 3.4 of its shares for each Rio share to 3.8 for one. However, sector-watchers also noted that Rio’s price was still below BHP’s original offer. BHP itself reached a high, up 27p to close at £20.20.

It was a big day for the miners, Vedanta Resources was the second-biggest riser after Rio, up 73p to £24.23, after Citigroup raised its price target to £27.50, saying that Vedanta would benefit from a global power crunch because it had its own power supply for the energy-hungry production of aluminium from bauxite.

Eurasian Natural Resources rose 41p to £13.77 after saying that it would pull out of its £15.50 offer for Kazakhmys. A trading statement, expected to be strong, is due today.

The frenzy among mining stocks helped to offset growing economic gloom in almost every other sector and the FTSE 100 closed down 8.7 points at 6,211.9.

Bradford & Bingley (B&B) was hit worst by data showing weakening mortgage lending and by Alliance & Leicester (A&L) revealing rising mortgage arrears and another asset writedown. A&L fell 51¾p to an eight-year low of 458¾p, while B&B, which has unveiled a surge in the number of customers behind on mortgage payments, fell 14¼p to 158¾p, its lowest level since demutualisation in 2000. HBOS lost 20½p to 485p.

Sentiment was depressed by consumer price inflation rising to 3 per cent, which in turn dented the chances of the Bank of England Monetary Policy Committee cutting interest rates. This, combined with a warning by Redrow that the number of customers cancelling purchases had increased suddenly, drove another sell-off among housebuilders. Redrow fell 22½p to 270½p. Barratt Developments slipped 18¼p to 257¼p before results today and amid growing fears that it would reveal a dilutive equity issue. Persimmon fell 19½p to 580½p.

ITV slipped 2.3p to 64.5p after Goldman Sachs predicted that ITV1’s advertising sales would fall 3.8 per cent in the first half, accelerating to 16 per cent in the second. It cut its rating to “sell”.

Dismal national retail sales figures, particularly for clothing, wiped 43p off Next, which ended the day at £12.66, while J Sainsbury fell 8½p to close at 389¾p before results tomorrow.

In the mid-caps, Misys rose 10½p to 178¼p amid vague speculation of a break-up bid, despite its recent deal with Allscripts.

Taylor Nelson Sofres closed 3¼p down at 246p after it rejected a raised 241½p cash and shares bid from WPP, its media and advertising peer, which was up 2p at 640½p. Empresaria, the specialist temp recruitment firm, fell 2p to 95½p, despite talk that Tony Martin, the chairman, was raising his 14.5 per cent stake.

New York: Wall Street was in bleak mood, worrying about comments by Ben Bernanke, the Chairman of the US Federal Reserve, and a fall in retail sales. At the close the Dow Jones industrial average was 44.10 points down at 12,832.20.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive