The near-9 per cent gain that Tate & Lyle, the sugar producer, made in December dissolved away yesterday amid concern over mounting competition and talk that Harbinger, the activist shareholder, was selling out.

The American hedge fund run by Philip Falcone built a 19 per cent stake in the group last summer amid suggestions that it would push for a link with Bunge, a US food group in which it has also invested.

However, Mr Falcone is said to have been inundated with redemption demands at the end of 2008 after his flagship $10 billion Capital Partners Master fund fell by 23 per cent over the year. Harbinger investors have asked for about $3.5 billion (£2.4 billion) back and Mr Falcone is having to restrict redemptions. Nevertheless, he will still have to liquidate some holdings and Tate fell 35¾p to 386¼p amid high volume that was in driven by talk that Harbinger was selling more shares, having already brought down its holding to 14 per cent in a series of sales since mid November.

There was also talk yesterday that Tate’s annual round of negotiations with fizzy drinks producers for its corn-based sweeteners were proving disappointing. Martin Deboo, of Investec, who has a “sell” rating on Tate, notes that negotiations have dragged on.

Last month a rival to Tate’s Sucralose produced by PureCircle, down 8p at 191p, won approval by the US Food and Drug Administration. Directors in PureCircle revealed that they had bought stock at 193p, despite a near-doubling in its price in six weeks.

Shares in Inmarsat, where Harbinger holds 28 per cent and has been considering a bid, fell 6½p to 447½p.

International tension sparked by Israel’s actions in the Gaza Strip and the Russia-Ukraine gas crisis drove up the oil price and oil stocks, helping the FTSE 100 to continue its new year rally. It closed up 17.85 points at 4,579.64.

Amec, the oil service group, rose 25p to 533p and BG Group was up 41p at £10.41. British utilities not dependent on oil or Russian gas also benefited. International Power, which has a big European wind farm portfolio, was the top blue-chip performer, up 18¼p to 265¾p. Drax, the coal-fired power station operator, closed up 33p at 609p.

Financial stocks performed poorly amid fears that the Government is preparing a second bank bailout. Deutsche Bank analysts warned of higher than expected loan losses from UK banks. It said that the likelihood of further writedowns would “call capital adequacy into question in first half of this year in particular”. It cut price targets across the board and advised “sell” on Lloyds TSB, down 4.3p at 125.7p. HBOS fell 6.7p to 65.8p.

Punch Taverns slid 3½p to 55p as JD Wetherspoon’s offer of 99p a pint for some beers highlighted the problems facing the pub industry. Wetherspoon slipped 9¾p to 316p.

Hays, the recruiter, rose 6¾p to 79¾p after UBS upgraded to “buy” with a trading update due on Thursday, saying that its low debt of £80 million would ensure that the dividend could be maintained.

— New York: After the Dow Jones industrial average surged to a two-month high on Friday, caution returned to Wall Street. At the close the industrial average was down 81.80 points at 8,952.89.

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