LONDON MARKETS: FTSE 100 Drops As HSBC Shares Turn Lower

By Carla Mozee, MarketWatch

U.K. stocks dropped Tuesday, with shares in HSBC PLC among those bruised after investors returned from a long holiday weekend.

The FTSE 100 fell 0.8% to 6,927.58, losing grip of earlier gains as all sectors turned lower. Trading was closed Monday for the Early May Bank holiday.

British shares on Tuesday were down alongside the broader European stock markets as "a spike in the euro and European bond yields unnerved a stock market rally that has been built on both being lower," said Jasper Lawler, market analyst at CMC Markets, in a note.

In London, HSBC (HSBC) shares had traded higher after the firm posted better-than-expected first-quarter results. Net profit (http://www.marketwatch.com/story/hsbc-profit-inches-up-in-first-quarter-2015-05-05) came in at $5.3 billion versus $5.2 billion a year ago.

But HSBC shares eventually fell 3.2%, the largest percentage fall since Feb. 23, "as regulatory uncertainty over currency rigging and a possible relocation hit sentiment," Lawler added. HSBC said it would decide by the end of the year on whether it will move its headquarters out of London (http://www.marketwatch.com/story/hsbc-to-decide-on-hq-move-by-end-of-the-year-2015-05-05). (http://www.marketwatch.com/story/hsbc-to-decide-on-hq-move-by-end-of-the-year-2015-05-05)

Elsewhere in the banking space, Royal Bank of Scotland Group's rating was upgraded by Nomura, to neutral from reduce. But shares finished 1.3% lower. Lloyds Banking Group PLC shares turned lower as well, falling 0.6%. Lloyds was upgraded to buy from hold at Jefferies.

Also among the biggest decliners Tuesday, Imperial Tobacco Group PLC shares lost 3.4%. Half-year results from the maker of Davidoff cigarettes, among other brands, are due on Wednesday.

Also due Wednesday is a financial update from J Sainsbury PLC and the supermarket chain is facing its annual loss since 2005. Its shares closed up 1.2% on Tuesday.

Glencore PLC shares managed to turn higher, finishing up 0.5%. The shares had been under pressure earlier after the miner posted a 9% drop in copper production (http://www.marketwatch.com/story/glencore-copper-production-drops-after-shutdown-2015-05-05) from its own sources to 350,700 metric tons in the first quarter, partly because of a planned shutdown for maintenance at its Collahuasi mine in Chile.

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