LONDON MARKETS: Banks Knock FTSE 100 Lower After Stress Tests

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- U.K. stocks dropped on Monday, erasing earlier gains as investors digested a disappointing report on German business confidence.

Stress-tests results of 150 European banks, although showing that most banks are well capitalized, didn't infuse confidence into the market.

The FTSE 100 index dropped 0.4% to end at 6,363.46, after closing out last week with a 1.2% gain. The slide came among a wider selloff in Europe, spurred by the Ifo business-climate index for Germany, which dropped to a 22-month low in October and by weakness among banks. Read: Banks shares catch a cold even after surviving health check

Bank shares fell in London, after the European Central Bank and European Banking Authority stress-tests results were announced on Sunday. All four U.K. banks under scrutiny passed the EBA's stress tests, but Lloyds Banking Group PLC (LYG) passed only narrowly. Lloyds shares erased 1.8% and Royal Bank of Scotland Group PLC (RBS) fell 1.4%. Other U.K. banks also slipped, including Barclays PLC (BCS), which lost 2%, while HSBC Holdings PLC (HSBC) gave up 1.2%.

Miners were also falling. Shares of Antofagasta PLC dropped 2.1%, Rio Tinto PLC (RIO) lost 0.9% and Anglo American PLC fell 0.9%.

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