Halifax Bank of Scotland's shares staged a dramatic bounce-back on the London stock market yesterday as the company shrugged off last week's funding crisis rumours.
Britain's biggest lender saw shares surge by 15 per cent with investor confidence returning after an overnight rally on Wall Street eased concerns over the global credit crisis.
HBOS's stock plummeted by as much as 20 per cent at one stage last week as speculation that it had asked the Bank of England for emergency help spread across trading floors.
The sell-off, which wiped some £3 billion of HBOS's market value, prompted City watchdogs to launch an inquiry amid accusations that traders were profiting from spreading false rumours.
The bank said it would hand over its own report on the bear raid to City investigators.
"We are pulling together our understanding of what happened and will send that to the regulator and they will use it if they see fit," an HBOS spokesman said.
News that JP Morgan had upped its offer for troubled US investment bank Bear Stearns helped America's Dow Jones Industrial Average soar ahead on Monday.
And the FTSE 100 Index followed its lead with an initial rise of more than four per cent as trading resumed after the long Easter weekend.
The benchmark index's early gains were later pegged back to about three per cent to close 193.9 points up at 5689.
Some of the steam was taken out of the early morning rally by another clutch of disappointing economic updates from the US. These showed a record 11.4 per cent fall in house prices and a further drop in consumer confidence levels.
David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, warned that US house prices could have even further to fall.
He said: "The figures highlight the continuing downward pressure on prices, especially in the cities which saw the largest increases during the boom years. Any lasting stabilisation in sales activity appears to be at least six months in front of us, if not more."
In London, HBOS led a rebound among banks following the increase in the bid for Bear Stearns, which analysts interpreted as suggesting the bank - and the wider sector - was not in as bad a state as first feared.
Its shares closed 703/4p, or 15 per cent, up at 5441/2p
News over the weekend that about 250 directors and senior staff at HBOS had snapped up more than £6 million of the bank's shares the day after the share price collapse also added to the stock's recovery.
Barclays followed HBOS with a rise of seven per cent, closing on 459p, with NatWest parent Royal Bank of Scotland up nine per cent at 350p and mortgage group Alliance & Leicester closing two per cent up at 5491/2p.
Companies with significant US operations also did well, with plumbing materials company Wolseley ten per cent ahead at 5501/2p.
Market experts said the mood on the London market would continue to be dictated by the US.
Martin Slaney, at GFT Global Markets, said: "This is all about Bear Sterns.
"While the major European markets enjoyed a four-day break, US markets were open, and the improved price tag from JP Morgan has provided major upside to American and Asian shares and sets a positive lead for us."
JP Morgan raised its bid for Bear Stearns Investment fivefold in a bid to appease the shareholders of the stricken investment bank.
The new offer - now valuing the credit crunch victim at around about $1.2 billion (£606 million) - came after Bear Stearns ran into a cash crisis and was forced to turn to the US Federal Reserve for emergency funding.
The funding rescue and cut-price sale of Wall Street's fifth-biggest investment bank sparked a global share sell-off last week.
