Lloyds TSB was one of the worst performing blue chip stocks down 3 per cent at 121p as Jason Napier of Deutsche Bank reiterated sell advice. He said that with the ban on short selling of financial stocks about to be lifted, Lloyds had the most downside.

"We remain cautious on the UK banks given our fears over the impact of lower corporate credit availability on unemployment and loan losses. We see Lloyds TSB (Sell, with a target price of 110p) as most vulnerable to these trends, mostly as a consequence of its planned HBOS acquisition."

"We believe Barclays is best positioned given its relatively low exposure to commercial property and low loan to value UK mortgage portfolio in particular."

Barclays was down just 0.5 per cent at 159.9p.

Man Group, the world's largest hedge fund manager rose 14 per cent to 278p after Credit Suisse pointed out investors would reap a 12 per cent return just on its forecast dividend payment. It said the group had $1 billion excess cash on its balance sheet and had fallen too far amid worries about redemptions and the overall hedge fund industry.

Next gained 14 per cent after better than expected sales figures and Debenhams rose 28 per cent also on relatively resilient sales.

The FTSE 100 was up 38.28 at 4617.28 helped by rebouding retailers and mining stocks.

PV Crystalox Solar fell 10 per cent to 96.5p after a US listed solar cell maker LDK Solar issued a profit warning on weakening demand for solar cells. LDK's shares closed down 14 per cent.

But analysts at RBS said PV Crystalox has 95 per cent of this year's production locked in at fixed prices, while more than half revenue is in yen which has been strong against its reporting currency of the euro.

United Utilities lost 3.5 per cent after Goldman Sachs cut from neutral to sell saying that Ofwat might well force water companies to keep prices low over the next five years. Deflation will also not help water companies margins, it warned. It cut price targets on water companies across the board.

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