By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- Tesco PLC and HSBC PLC dropped in London
trade on Monday after major shareholders cut their stakes in each
company.
The FTSE 100 pulled out a gain of 0.1% at 6,825.31 after
switching between losses and advances throughout the session. The
index finished last week higher by 0.7%.
But Tesco shares were on the benchmark's losing end, falling
1.9% after David Herro, the chief executive of Harris Associates,
said the U.S. investment fund had cut its stake in the supermarket
chain to about 1%, from 3%. Herro told the Sunday Telegraph that
Tesco is facing many unknown risk factors that "are just too high
to justify" carrying a large position.
Herro also said he wants to hear a clear strategy from Tesco's
new CEO, Dave Lewis, on how he'll improve the business, which is
locked in tight competition with rivals. Lewis was slated to begin
work on Monday, a month earlier than had been planned.
On Friday, Tesco shares dropped 6.6% after the company cut its
full-year trading outlook, below analysts' expectations of 2.7
billion pounds ($4.49 billion) to GBP2.8 billion. It was the
company's third profit warning in three years. Tesco also cut its
interim dividend.
Among supermarket stocks Monday, shares of Wm Morrison
Supermarkets sank 2.3% and J Sainsbury PLC declined 0.3%, but Marks
& Spencer Group pushed 2.6% higher.
Meanwhile, high-profile British investment manager Neil Woodford
said his fund has sold its stake in HSBC PLC (HSBC). HSBC shares
gave up 0.7%, but finished off intraday lows.
In a blog post, Woodford said he's concerned the bank may suffer
"significant financial penalties" stemming from an investigation
into alleged rigging of the Libor interest rate and manipulation of
foreign-exchange markets. A hefty fine could hurt HSBC's ability to
grow its dividend, he said.
"Clearly, banks have attracted many fines in the post-financial
crisis world as regulators and policy-makers have cracked down on
past and ongoing wrongdoings in the industry. The size of the
fines, however, appears to be increasing," Woodford said, adding
he's concerned about "fine inflation" in the banking industry.
Financial stocks on the FTSE 100 were mostly lower, down 0.4% on
a sector basis.
Shares of Barclays closed down by 0.2%. They had been up earlier
Monday after Spain's Caixabank SA agreed to buy Barclays
retail-banking business in Spain for about 800 million euros ($1.05
billion). The move scales back the British bank's presence in a
less-profitable market.
Comment: "Russia's escalation of the conflict in Ukraine has
taken a toll on the internationally exposed manufacturing sector,
and that effect could yet worsen further in the coming months,
given recent confidence drops in the more directly exposed core
European economies," said Robert Wood, chief U.K. economist at
Berenberg, in note about a slowdown in the U.K. manufacturing
sector. Data from Markit/CIPS released Monday showed the sector
expanded at the slowest pace in 14 months in August.
Separately, the Bank of England said Monday mortgage approvals
in the U.K. fell in July to 66,569, which was less than the
consensus estimate of a fall of 66,000. Net lending in July rose to
GBP3.4 billion in July, the highest level of consumer lending since
mid-2008.
In European trade, the Stoxx Europe 600 turned higher, closing
up 0.3% at 342.86.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires