LONDON (ShareCast) - Footsie is back in the blue but it’s been a chaotic morning for the index due largely to a topsy-turvy performance from HBOS.

The bank rallied early on after it issued a statement saying it is well-funded, then fell victim to heavy selling again and subsequently jumped on news of merger talks with Lloyds TSB. Sellers briefly gained the upper hand again, but HBOS is now sitting in the blue.

Lloyds TSB is up 13%, while fellow bank Barclays has gained 11%.

Mining stocks have also recovered after metals prices rallied. Rio Tinto and the platinum miner Lonmin are among the top gainers.

More woe on the banking front has come from over the Irish Sea. Bank of Ireland has decided to slash the full year dividend in half in an effort to cope with “increasingly difficult” trading conditions in the first six months.

Insurer Friends Provident has dampened down concerns about its exposure to the collapse of Lehman Brothers. The company said its nominal debt exposure to the fallen US bank is £18m, largely in the form of senior debt.

Struggling retailer Woolworths posted a loss of £99.7m (£63.8m) in the half-year to end July. Sales fell 3% to £1.1bn. "For the first half of the year EUK and 2 entertain are performing ahead of our expectations, while Woolworths Retail manifestly is not," said the firm, which is under takeover threat from Iceland boss Malcolm Walker and Icelandic investor Baugur.

The figures from Woolworths prompted Landsbanki to maintain its ‘reduce’ rating on the stock.

In other broker coverage of the retail sector, JP Morgan has raised its rating on Russian grocery chain operator X5 following declines in the company’s share price.

KBC Peel Hunt has raised its rating on Just Retirement, a company that provides life assurance to pensioners, with a ‘buy’ rating and a 200p target price, following a meeting with its management.

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