Nobody seems to fancy a canter with Lloyds TSB these days. The Black Horse bank was not only the worst performing blue chip in a rising stock market yesterday, but its troubles appear to be mounting as fast as the pound is tumbling.

The shares fell 6.7p to 119p – more than 5 per cent – amid talk that it was in for a bout of indigestion after swallowing HBOS. The bank could be in for a fresh bout of short-selling, given that the ban on betting against financials will be lifted on January 16 – two days before its takeover of HBOS. On top of that, HBOS’s investments and loans in property-market buyouts such as McCarthy & Stone and Crest Nicholson are believed to be turning sour and there is talk that Lloyds will have to take a bigger write-down on HBOS than it expected.

Jason Napier, of Deutsche Bank, reiterated “sell” advice on Lloyds. HBOS rose 3.1p to 68.9p as the takeover was seen as almost inevitable. Mr Napier believes that Barclays, up 2.3p at 163.3p, “is best positioned, given its relatively low exposure to commercial property and mortgage lending”.

The FTSE 100 closed up 59.28 points at 4,638.92, helped by rebounding commercial property and mining stocks, but many traders believe that this was driven by funds closing their short positions to provide room to bet against bank share prices when the short-selling ban ends.

Man Group, the world’s largest hedge fund manager, should benefit from the lifting of the ban, since it has been targeted by shorters as a proxy for the bank sector. Also, some of its funds rely on short-selling as an investment strategy. Its 42½p rise to 287p was also helped by Credit Suisse saying that investors would reap a 12 per cent return on its forecast dividend payment. It said that the group had $1 billion excess cash on its balance sheet and worries about redemptions had been overdone. Jason Streets, of Evolution, raised his forecasts for Man’s second half from $25 million to $225 million, based on “astonishingly strong” performance by the flagship AHL fund, up 25 per cent last year.

Marks & Spencer rose 8¾p to 238¾p, helped by Next, up 136p at £12.27, and Debenhams, up 5¾p at 34¼p, both unveiling sales falls not as bad as feared, although most analysts suspect that Debenhams is planning a deeply discounted rights issue.

Tesco went against the trend, falling 5.3p to 355.4p after Merrill Lynch cut from “buy” to “neutral”, saying that it expected Sir Terry Leahy, the chief executive, to sacrifice profits for market share growth this year.

United Utilities fell 13½p to 622½p after Goldman Sachs cut from “neutral” to “sell”, saying that Ofwat’s next price determination might force water companies to keep prices low over the 2010-to2015 period.

PV Crystalox Solar, the solar cell maker, fell 9¾p to 97½p after a profit warning by LDK Solar, an American-listed rival. RBS analysts said that Crystalox was being unfairly punished since it has 95 per cent of this year’s production contracted at fixed prices, while half its sales are in the strongly performing yen.

New York: Shares were lifted by expectation of a government stimulus package after minutes of the last Federal Reserve policy meeting painted a dismal picture of the US economy. The Dow Jones industrial average closed up 62.21 at 9,015.10.

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