By Raissa Kasolowsky
LONDON, Feb 13 (Reuters) - Britain's leading share index
fell more than 1 percent on Wednesday, led by falls in mining
and oil companies, while some investors reassessed Warren
Buffett's plan to help troubled bond insurers.
At 1228 GMT, the FTSE 100 index <> was 1.1 percent at
5,846.1, as oil produces such as BP <BP.L> and Royal Dutch Shell
<RDSa.L> lost ground.
The FTSE surged 3.5 percent on Tuesday after billionaire
investor Buffett offered to reinsure $800 billion worth of debt
guaranteed by bond insurers.
But investors were divided on what to make of the move, with
some sceptical that it would help troubled bond insurers and
areas of the credit market besides municipal bonds.
This rethinking put pressure on banks such as Alliance &
Leicester <ALLL.L>, Barclays <BARC.L> and HBOS <HBOS.L> which
fell between 1.9 and 4.5 percent.
Fuelling fears over the fall-out of the credit crisis,
British specialist mortgage lender Bradford & Bingley <BB.L>
took a 94 million pound ($184 million) write-down on its
exposure to tarnished assets. The stock tumbled more than 14
percent.
"We have been living underneath this shadow of the credit
crisis and we have been surprised day after day by various banks
owning up to bigger and bigger losses," Edward Menashy, an
economist at Charles Stanley said.
The concerns may have been heightened after Japan's
financial regulator said the country's financial firms held
about $14 billion worth of subprime-related investments at the
end of December.
Northern Rock <NRK.L>, which has been the biggest victim of
the credit crisis, fell 5.7 percent. Two suitors competing to
rescue the ailing lender have been told to improve their offers
to beat the alternative of nationalisation, sources familiar
with the matter said.
BUFFETT OFFER
After pushing stock markets higher in the previous session,
investors now wondered how beneficial Buffett's offer would be
for bond insurers.
"Far from being the miracle cure, the Buffett plan cherry
picks out the most worthwhile parts of the monoline business,
leaving them (banks) with all the toxic waste," Societe Generale
said in a note.
But Menashy said his move showed the current situation was
not beyond repair: "Buffett is not the kind of man that would
take on a dead loser and so therefore (the fact) that he
initiated a move goes to show that if the financial institutions
got together they can actually solve this problem."
The market showed little reaction to forecasts by the Bank
of England that inflation was likely to overshoot the central
bank's 2 percent target.
This, coming on the back of recent data showing price
pressures are still building, could limit the scope for monetary
easing for Britain's central bank.
A downbeat overall market and lower metal prices hurt miners
across the board, with Rio Tinto <RIO.L>, BHP Billiton <BLT.L>,
Vedanta <VED.L>, Anglo American <AAL.L>, and Lonmin <LMI.L> down
between 1.3 and 4.3 percent.
The losses came even as global miner Rio Tinto <RIO.L>
posted a 9 percent rise in half-year underlying profit, boosted
by record iron ore production.
Nuclear power generator British Energy <BGY.L> climbed 8.1
percent making it the best performer on the FTSE as traders said
its results were better than expected.
The company said it was looking at four designs for the next
generation of nuclear power stations in Britain, as it posted a
4 percent fall in core earnings in its first nine months.
(Editing by Richard Hubbard)
