FTSE sees early rally after record plunge

THE main share index in the UK recovered slightly today after record falls yesterday.

In early trading, the FTSE 100 Index was up two per cent at 4684, buoyed by an overnight cut to interest rates in Australia and a late rally on Wall Street.

It follows yesterday's sharp falls, with £93 billion being wiped off the value of the shares in London in the worst day of trading since Black Monday in October 1987.

The Dow Jones Industrial Average was down more than 800 points at one point last night, but recovered in the final 90 minutes of the session to finish down 370 points at 9,955.50 – still its first close below 10,000 since 2004. There had been hope that the £380bn rescue package agreed in the US last week would ease the effects of the credit crunch. But that hope evaporated with the FTSE-100 Index slumping by eight per cent.

Royal Bank of Scotland today opened at around the same level as it closed yesterday at 148.9p.

Ratings agency Standard & Poor announced yesterday that it had cut RBS' credit rating, while it also said the outlook on the Edinburgh-based shares is "negative".

The agency cut its long-term counter-party credit rating from AA- to A+, saying that the bank's capitalisation remained a "relative weakness", despite the bank's £12 billion rights issue.

It said that its actions on RBS reflected the fact that its financial profile may continue to weaken. It also said that its financial flexibility was "currently low" despite the opportunity of disposing of non-core assets. It is trying to sell its insurance businesses.

S&P added the bank's liquidity and funding "does not present any particular vulnerabilities". It came as RBS shares fell 20 per cent, slashing £6bn off its value.

The extent of the decline led to speculation that it could become a takeover target for HSBC.

Yesterday's bloodbath came as governments rushed to prop up banks across Europe.

In London, investors were unnerved by reports that the Government could take big stakes in banks to strengthen their finances.

• Trading was suspended on Moscow's stock exchanges today – a day after they suffered their biggest-ever one-day losses.

The opening of trading was delayed until at least 1pm, two-and-a-half hours after the usual opening.