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Last week, UK banking shares fell in the aftermath of Bear Stearns’ dramatic collapse and sale to JP Morgan Chase.

There was a brief recovery following the positive US results of Goldman Sachs and Lehman Brothers but then the market weakened once again.

Rumours of liquidity problems put HBOS under pressure. This talk was firmly denied by the company and its shares made a partial recovery as a result.

The Financial Services Authority revealed that it is investigating unfounded rumours and recent trading in financial stocks.

Spreading false rumours and dealing on the back of them amounts to abuse and is the last thing the market needs right now. It must be dealt with effectively to bolster investor confidence.

HSBC has been one of the best performing banks in the market recently. Given its strong capital ratios and broad exposure, it is seen as defensive stock in these uncertain times.

It has comfortably outperformed the riskier banks that have not diversified to the same extent.

John Goodall is a private client research analyst at stock broker WH Ireland.

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