THE rally on London’s FTSE 100 Index ground to an abrupt halt yesterday as investors rushed to secure profits amid more gloomy news on banks after their recent bull run.

The FTSE initially brushed aside a poor update from Lloyds Banking Group and an unexpected move by the Bank of England to increase its quantitative easing programme by £50bn.

But stocks tumbled after Wall Street opened, dragging the top tier from a gain of more than 100 points – above the 4500 mark at one stage – to close up 2.2 points at 4398.7.

The pound also lost some of its recent gains, easing by more than 1.5 per cent against the euro and 0.7 per cent against the US dollar as the Bank of England effectively said it was printing more money to combat the recession.

An unscheduled report on first quarter trading from Lloyds added to a dramatic day in the City.

The recovery among many major bank stocks was reversed after Lloyds cautioned over a ‘‘significant’’ rise in impairments due to the impact of recession on its loan book. It also reiterated its warning that it expected to make a loss this year. Shares in the group fell 14 per cent, or 16.2p to 97p.

Barclays also issued a trading update, but the group’s 15 per cent rise in first quarter profits to £1.37bn were overshadowed by the Lloyds disappointment.

Shares fell 12.25p to 275.75p. HSBC was 16p higher, at 555p ahead of its trading statement on Monday, but partnationalised bank, Royal Bank of Scotland, was down 4.1p at 41.6p. It is due to update investors today.

Guinness-to-Smirnoff drinks firm Diageo also cheered markets after holding firm on profit guidance despite weakening global markets and a seven per cent fall in underlying sales.

Shares were up three per cent or 26.5p to 881p.