Like some epic western hero, Ben Bernanke came riding to the rescue yesterday. Fears over the solvency of US banks had spread to London and investors were going into meltdown. The FTSE 100, led by Royal Bank of Scotland, had lost more than 100 points and was showing no signs of stopping. But that was before the Chairman of the Federal Reserve had leapt off his horse and spread calm over America’s lawmakers. Speaking to Congress, he soothed that Fannie Mae and Freddie Mac could be restored to health without any significant changes to their structure.

That was the cue for investors to hurl their hats into the air and get a grip of themselves. London’s main index rallied to close down 21.3 points at 5,150.6, with Royal Bank of Scotland down 2.3p at 165p – at one stage it fell as low as 144.2p – way below the 230p price at which the underwriters recently sold the rump of the rights issue shares. HBOS, with its rights issue at 275p due to close on Friday, fell 5½p to 254½p.

Another fall in the oil price helped to drive down commodity stocks, but it also lifted transport companies. British Airways experienced turbulence, falling 8½p in the morning panic before recovering to close up 17p at 225¼p on the falling oil price. Tui Travel rose 12p to 188.6p.

Falling zinc and metal prices made Xstrata the worst-performing miner, falling 182p to £35.38. Shell slid 66p to £17.73 and BPdropped 14¾ p to 509½p.

Wolseley, the builder’s merchant, fell 18p to 272¼p after it scrapped its final dividend and gave warning of further deteriorating sales. British Land fell 19p to 618½p after it went ex-dividend.

Salamander Energy announced a £100 million placing and open offer at a slight discount of 300p to finance developing its oilfields in SouthEast Asia and some acquisitions. It fell 21p to 285p as analysts said that price targets would be diluted by the new issue.

Yell lost 2p to 59¼p after UBS cut its target price on the Yellow Pages publisher from 135p to 65p and said that it may struggle to meet debt repayments from next year onwards. A rights issue at present prices would be very difficult, as illustrated by UTV Media, which dropped another 6p to 117p after its revelation on Tuesday that its issue was only 41 per cent subscribed.

AGA Rangemaster at first lost 10¾p but ended up 2½p to 144½p. Goldman Sachs said there was a risk that Pension Corporation might sell its 26 per cent stake, but traders said this was unlikely since it should be able to meet the rules on pension buyouts.

Minerva, the property developer, closed down 2½p at 61¼p, way below the 110p that it reached after receiving a bid approach from Limitless, a Middle Eastern developer.

— New York: Stocks rallied, breaking a three-day losing streak, after oil prices dropped sharply and estimate-beating second-quarter results from Wells Fargo helped to allay fears about the banking sector. At the close the Dow Jones industrial average was up 276.70 points at 11,239.30.

Clarification: We have been asked by Trinity Mirror to make it clear that the new five-year bank loan it revealed two weeks ago has not been drawn down, nor have the terms of the facility been tightened, contrary to our report (Business, July 16). We are happy to set the record straight.

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