THE Northern Rock suffered another bruising day on the stock market as potential buyers circled the ailing bank.

After a temporary rally, shares in the Newcastle-based group fell more than 16 per cent amid rumours that the group had received a bargain basement take-over offer.

Its troubles were in stark contrast to a general stockmarket recovery, fuelled by the US Federal Reserve's move to cut interest rates by half a per cent to 4.75 per cent, and a fresh intervention to unfreeze money markets from the Bank of England.

Northern Rock's shares fell amid rumours that the group had received take-over approaches of 200p or less - well below the group's share price and valuing the firm at less than £1bn.

That is a far cry from the £2.7bn that Northern Rock had been worth before its emergency request to the Bank of England on Thursday night. Less than a week ago, the shares were changing hands for almost £7.

Yesterday, shares in the bank ended the day 49p lower at 257p.

The stock exchange was awash with rumours that several banks were waiting to snap up Northern Rock at a knockdown price.

Among those believed to be interested are Barclays, Royal Bank of Scotland, Lloyds and National Australia Bank.

Yesterday's shares collapse was prompted by a rumour that Halifax Bank of Scotland had tabled a bid worth 100p a share, equivalent to only £421m, with Lloyds TSB said to be considering a £842m offer.

The big sticking point appears to be the size of Northern Rock's ongoing funding liabilities.

David Buik, of Cantor Index, said traders seemed to think "the sale value of the business is not worth the current share price".

The decline in Northern's Rock's share price came as it also emerged that major shareholders had been cutting their stakes in the bank.

Martin Slaney, head of spread betting at GFT Global Markets, said: "Investors should be braced for continued volatility in the share price as the uncertainty persists. The longer we go without a bid, the lower that bid is likely to be."

However, London's benchmark share index closed above the 6,400 mark for the first time since the crisis began in late July.

Firms recently rocked by Northern Rock's woes made further gains, with Alliance and Leicester gaining three per cent, Bradford and Bingley up nearly 11 per cent and specialist lender Paragon gaining nine per cent.

In the wider banking sector, Barclays rose five per cent, while Northern Rock's rumoured suitors, Lloyds TSB and HBOS, lifted four per cent.

The bank did receive a vote of confidence by one famous name yesterday. Alan Shearer, the England and Newcastle United legend, opened an account in a show of confidence. He said: "Northern Rock have been great for the people of the North-East, particularly with sport."

England rugby star Jonny Wilkinson, whose team Newcastle Falcons is sponsored by Northern Rock, described it as a part of the fabric of his club.

With fellow England and Falcons team-mates Mathew Tait and Toby Flood, he left messages of support for the bank on the club's website.

Meanwhile, last night, The Bank of England announced it would pump at least £10bn into longer-term money markets.

The bank has already moved to prop up overnight markets between banks crippled by fears over losses on high-risk US mortgages, but had refused to intervene in three-month money markets, saying that banks should face the consequences of risky longer-term lending.

But confidence in the banking system has been shaken by the problems at Northern Rock, prompted by soaring interest rates in three-month money markets where the firm borrows most of its cash for mortgage lending.

The decision is an embarrassment for the bank's governor, Mervyn King, who said a week ago that providing short-term liquidity to markets in trouble "encourages excessive risk-takings".

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