Northern Rock crisis confirms market fears

The UK equity market has experienced a volatile few months since reaching cyclical highs in mid-June. The FTSE 100 fell some 13% from its peak on 15 June to its recent trough on 16 August, battered by concerns banks may be sitting on large losses from the US sub-prime mortgage crisis. The Northern Rock saga appeared to confirm those fears. More recently, the UK stock market appears to have recovered somewhat, but remains unsettled. Financial stocks have generally failed to share in the recovery, with investors wary of exposure to banks with high levels of short term borrowing requirements...