After TPG bought its discount stake in Bradford & Bingley this week, short-sellers spent yesterday searching for the next potential target for a private equity-led rescue. Their attentions turned to Alliance & Leicester and thus it outperformed the rest of the banking sector, rising 12¼p to 412½p. Such deals – in which a private equity firm injects cash into a listed company by taking a stake in new shares – are seen as a growing trend in a market where bank debt for leveraged buyouts is unavailable.

Mitchells & Butlers, which ended the day down 9½p at 293½p, had been looking at arranging just such a deal before deciding to postpone the plan until it had identified an acquisition. Paragon, the buy-to-let specialist, rose 8½p at one stage yesterday before investors decided that its lack of retail depositor cash and its exposure to an ever-falling property market made it an unlikely target for private equity. It closed up only ½p at 84½p.

The FTSE 100 fell 87.6 points to 5,970.1 as big stocks such as Vodafone dived on going ex-dividend and as miners and oil stocks fell amid worries over falling commodity prices.

Vodafone lost 8.1p, or £2.8 billion of its value, to end the day at 154.65p. There were also fears that it will overpay for Tiscali, the broadband operator in Britain and Italy. Goldman Sachs said that Vodafone’s rumoured offer price of €2.80 a share, or €1.6 billion (£1.3 billion), looked steep, nearly €1,000 per broadband customer, far higher than the amount paid in recent broadband acquisitions. Earnings growth in Europe is stalling for the mobile group and integrating a broadband company could be costly and protracted.

Others falling on going ex-dividend were National Grid, down 28½p to 720p, and Enterprise Inns, off 10½p to 449¼p.

A retreating oil price helped to lift British Airways 13p to 243¾p, despite the airline unveiling falling premium and economy-class passenger numbers in May, although numbers travelling on lucrative long-haul flights in first class were slightly up. The oil price and worries about BP’s growing spat in Russia with its partner in TNK-BP weighed on the oil producer, which slipped down 23½p to 581p.

Vedanta Resources lost another 102p to £23.22 amid worries over falling zinc prices and funding its $2.6 billion (£1.3 billion) purchase of Asarco, the bankrupt American copper miner.

Morgan Stanley helped Royal Bank of Scotland to rise 4¾p to 249½p as the broker raised its rating from “underweight” to “overweight”, saying that RBS’s £12 billion fundraising had helped to allay concerns. It said that risks were higher at HSBC, up 3p to 859p, and Lloyds TSB, up 1½p to 390¼p.

Rentokil Initial rose 2½p to 100p amid rumours of a management buy-out, but sceptical traders said that the new management team stood to make more money keeping the company public.

UBS issued a bearish note on housebuilders, driving Barratt Developments down 12¾p to 143¾p, Bovis Homes down 23p to 388p and Taylor Wimpey down 4¼p to 78p. New York: Stocks drifted marginally as oil prices retreated and a survey on the services sector showed a slightly better-than-expected reading. The Dow Jones industrial average closed down 12.40 points at 12,390.50.

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