FTSE closes on 6429

Northern Rock was once again the biggest loser on the London market as the FTSE closed down 31 points at 6429.

The troubled mortgage bank dived a further 28 per cent, or 71.8p to 185.2p, as confirmation that the Treasury's guarantee for savers would not cover newly opened accounts added to the negative sentiment.

The negativity surrounding Northern Rock, which has seen its shares suffer a near three-fold fall since last Thursday, resulted in pressure on shares across the banking sector with Alliance & Leicester off 7 per cent, or 60p at 755.5p, and Halifax parent HBOS down 37p at 837p.

Housebuilders also took a hit with Persimmon falling 5 per cent, or 50p to 939p while Barratt Developments shed 30p to 792p.

Allegations of price-fixing among supermarkets and dairy processors failed to knock Sainsbury's after it announced it had given potential bidder Delta Two access to its books.

The supermarket chain climbed 15.5p to 569.5p, as the news helped offset the impact of the Office of Fair Trading's announcement.

Tesco, also mentioned by the OFT, was down 1.5p at 434.5p, while Morrisons dipped 6.25p to 271.5p even as it posted a set of forecast-beating half year results.

However the company also warned over a cautious outlook for the rest of the year, and added that price rises were on the cards after a poor summer for farmers.

Back in the top flight, B&Q owner Kingfisher slid 6 per cent, or 11.3p to 181p, as it too warned of tougher times ahead.

Friends Provident led the FTSE as investors reacted to speculation that Zurich Financial could make a bid for the firm, which is currently pursuing a merger with closed life fund Resolution. Shares rallied 4 per cent, or 7.1p at 174.7p.

Cruise operator Carnival topped the risers - up 157p to 2374p - after it posted a 12 per cent rise in third quarter earnings.

Winners: Carnival up 157p at 2374p, Friends Provident ahead 7.1p at 174.7p, Sainsbury's up 15.5p at 569.5p and Kazakhmys ahead 27p at 1450p.

Losers: Northern Rock off 71.8p at 185.2p, Alliance & Leicester down 60p at 755.5p, Kingfisher down 11.3p at 181p and Home Retail Group down 21.25p at 373.75p.

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