Stocks fall as HSBC overhaul fails to impress

LONDON (Reuters) - Britain’s top shares fell on Tuesday as a new turnaround plan from Europe’s biggest bank, HSBC, failed to impress markets.

A man walks past the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth

HSBC took the most points off the blue-chip FTSE 100 index. Its shares closed down 0.9 percent after investors and analysts questioned whether its pledge to shed almost 50,000 jobs would be enough to lift earnings. JPMorgan analysts called the plan “evolution, not revolution.”

Mining stocks Anglo American and Rio Tinto also took a hit from a broker downgrade. Global markets overall were hit by increasing speculation that the U.S. Federal Reserve could raise interest rates sooner than many have so far been expecting, potentially putting an end to years of easy money.

“We have seen a little bit of a pullback ... There is a fair amount of volatility in the market,” said London Capital Group analyst Brenda Kelly.

The FTSE 100 index closed down 0.5 percent at 6,753.80 points. The index is up about 3 percent year-to-date, but has underperformed pan-European shares, which are up 11 percent over the same period.

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Economic data brought some good news, with the UK’s trade deficit falling to its lowest in over a year in April. Sterling hit a one-month low versus the euro, while the UK received the strongest demand in more than five years at an auction of index-linked government bonds.

Shares of Sky underperformed after rival BT stepped up competitive pressure with a new free offer to customers for Champions League European football matches. Sky shares fell 1.1 percent, while BT Group was up 0.4 percent.

With HSBC launching drastic restructuring plans, investors said domestic rivals such as Lloyds looked better bets in terms of near-term growth.

“Whilst HSBC has now provided a much clearer picture of its business structure going forward, if you want a growth stock in the banking sector, HSBC may not be the one for you,” said Dafydd Davies, partner at Charles Hanover Investments.

Media group Reed Elsevier rose 1.4 percent, lifted by a rating upgrade from Barclays.

Reporting by Sudip Kar-Gupta; Editing by Janet Lawrence