LONDON (AFP) - Shares in the top home-loan lender HBOS swung wildly on Wednesday amid a report it might be taken over, spinning London stocks into volatile uncertainty after an overnight rescue for US insurer AIG.

London's FTSE 100 index of leading shares switched back and forth from gain to loss in a one-percent range in mid-morning trade, and was standing with a gain of 1.15 percent at 5,083.30 points.

Bank Lloyds TSB was in talks to buy HBOS, the BBC reported, and the financial service regulator in London said that "HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way."

Shares were moving sharply by the minute as the markets digested the AIG rescue, worried about the state of the financial system and sought direction amid uncertainty.

HBOS stock fell by up to 50 percent, rose by 20 percent, and was then showing an unsteady gain of 0.99 percent.

World equities have experienced traumatic losses this week following the dramatic collapse of US investment bankLehman Brothers.

European markets opened to news that the US Federal Reserve would extend an 85-billion-dollar loan to the American International Group (AIG).

The Federal Reserve plan, under which the US government will take a nearly 80 percent stake in AIG, marks an unprecedented intervention by the US central bank into a private business.

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