Royal Bank of Scotland is hoping for a further boost for its largely cash bid for ABN Amro tomorrow, when the Dutch bank reveals whether it can continue to back the rival share-heavy bid from Barclays which lost £1bn of value in last week's market sell-off.

The Dutch bank's supervisory board was locked in talks over the weekend to decide whether to stick with Barclays' offer, which is two-thirds shares, switch its support to the Royal Bank-led consortium, or move to a neutral position.

Despite announcing a pioneering agreement with the China Development Bank a week ago, Barclays' shares crashed by 7.2% last week, while the banking sector was off by only 5%. That cut the value of its £46bn offer for ABN Amro by around £1bn.

This week could see further pressure on Barclays shares, with HSBC's half-year results today signalling whether the crisis in sub-prime lending in the US has spread to other parts of its loan portfolio.

Analysts will be reading across to the wholesale banking businesses of Barclays and Royal Bank, for signs of any contagion from the US credit crunch.

The FTSE-100 index lost 410 points between Tuesday morning and Friday's close, giving up all its gains for 2007, while the Dow Jones lost 4.2% over the week, finishing the week with falls of 311 points on Thursday and 208 on Friday. Analysts see the Barclays' bid, already around 8% below the consortium bid in value, as being more vulnerable to further market turmoil.

Professor Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said yesterday the correction in world credit, bond and equity markets was "overdue and will head off the risk of a much larger crash later on". But he added that it would help to rebalance UK growth "by slowing the financial industries that were growing too rapidly".

ABN, meanwhile, is unlikely to switch support to the higher bid until after the shareholder meeting at consortium member Fortis a week today. The Belgian-Dutch bank needs approval for the e13bn (£8.7bn) fundraising it needs to finance its share of the bid, amid reports yesterday that hedge funds have been buying up stock and intend to vote the resolution down.

Almost half of ABN's shares are owned by hedge funds, which broadly favour the higher Royal Bank offer, and some funds are reported to be taking short positions in Barclays' stock, expecting a further fall in the shares. Among them was said to be Vega, a Spanish hedge fund with links to Santander, which on Friday won approval from its shareholders for its e9bn fundraising.

Fortis, however, is said have been targeted by other funds, who have built stakes in an attempt to block the fundraising and thus the deal, which would create a spike in the depressed Fortis share price as the bank would then be seen as up for sale.

Late last week ABN chief executive Rijkman Groenink was revealed to have protested, in a leaked letter to Royal Bank chief Sir Fred Goodwin, that Fortis is using out of date assumptions in its calculations of profitability.

However, Fortis received a significant boost at the weekend when two leading proxy voting agencies recommended that institutional investors support the deal, and a bank spokesman has said the "vast majority" of its hedge funds owning 25% of the stock are backing the deal.

Meanwhile, the credit squeeze may continue to weigh on the markets and the banking sector, calling into question the price being offered for ABN by the Royal Bank consortium.

Sceptics are already observing that blue-chip investment banks Goldman Sachs and Morgan Stanley are off 14% and 27% respectively in the past month, and that ABN shares would probably crash by 40% without bid support.

However, the squeeze will also impact on the influential hedge funds. "It would actually be surprising if there weren't hedge fund troubles after the recent surge in volatility and asset allocation swings," analysts at Action Economics wrote in a note.