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.

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