Royal Bank of Scotland fell 6¼p to 231¾p after reports claimed that several potential bidders, including Ping An Insurance Group and Assicuraziono Generali of Italy, had decided not to bid for the bank’s insurance arm. It came as sources said that the bank had extended the first round of the auction into next week at the request of some companies in the running.

RBS was also a casualty of rights issue woes. UK banks saw their shares hit as fears spread that stakeholders would not fully take part in planned rights issues. If shareholders do not subscribe to the rights issue, the underwriters will be forced to take up the stock and will consequently try to sell them on causing stock overhang.

RBS has to compete for with HBOS and Bradford & Bingley for its £12 billion rights issue. HBOS, down 16¾p to 414¼p, is seeking $4 billion and B&B, off 6¾p at 90½p, is seeking £300 million.

Yell, the Yellow Pages publisher, has been creeping back from record lows in the past few days amid mounting speculation that it will float its US arm or make disposals to see off a covenant breach. The price had been driven as low as 125¾p by fear that it will have to dilute shareholders with a rescue share issue to satisfy its banks to whom it owes £3.7 billion.

However, Sami Kassab, the Exane BNP Paribas analyst, who believes it will breach covenants next year, yesterday suggested another option for the directories group.

He said that Yell could float a 40 to 50 per cent stake in its YellowBook directory business in the US, where rivals trade at a premium to its current valuation, giving it a currency for further acquisitions. He believes that its fast-growing Latin American directories business, which has 90 per cent market share in Chile, Peru and Argentina, could be sold for up to £350 million to an acquisitive company such as Telmex’s recently spun off Yellow Pages unit. He cut his price target from 330p to 160p. Yell stood still at 130p.

The FTSE 100 ended up 1.5 points at 6,068.1 after hitting 6,130.5 when low US oil stocks drove the price of the black gold back up. This lifted oil stocks such as Tullow Oil, up 24.5p at 922p, and Shell, up 28p at 2,145p.

Housebuilders were on the slide after Nationwide revealed that prices had fallen in May at their fastest level since records began 17 years ago. Persimmon lost 26p at 487½p, Taylor Wimpey lost 8p to 85½p and Bovis Homes slid 19p to 429p. Land Securities lost 20p to £14.16 after Cazenove said any value from the demerger of Trillium would be wiped out by write-offs and demerger costs. Citigroup cut its target saying it expected net asset values to fall another 17 per cent this year as City office and retail rents fall.

Wolseley lost 19½p to 537½p, after Andy Brown of Panmure Gordon reiterated his “sell” rating and 400p target. He said that there was better value in the specialist distribution outfits such as BSS, up 6p at 387p and SIG, up 1p at 704½p, the provider of insulation materials which could be the target of overseas predators after Saint Gobain’s bid for Gibbs & Dandy.

— New York: Shares rose for the third session in a row as oil prices fell and after the US Government reported that the economy had grown faster than estimated during the past quarter. The Dow Jones industrial average closed at 12,646.20, up 52.20.

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