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Weak utility stocks, HSBC take the spark out of Britain's FTSE
February 9, 2015 / 4:57 PM / 3 years ago

Weak utility stocks, HSBC take the spark out of Britain's FTSE

* FTSE down 0.2 pct

* UK utility stocks hit by rising bond yields

* HSBC falls after it admits Swiss bank failings

* Rise in gold price lifts Fresnillo and Randgold (Updates with closing prices)

By Sudip Kar-Gupta and Alistair Smout

LONDON, Feb 9 (Reuters) - Britain’s top share index edged lower on Monday, hindered by a fall in HSBC after the bank admitted tax failings at its Swiss unit, and by weakness in utility stocks.

The blue-chip FTSE 100 index was down 0.2 percent, or 16.29 points, at 6,837.15 points by the close, with United Utilities, National Grid and Severn Trent falling by between 3.1 and 2.1 percent.

Traders said utility stocks fell on rising debt yields, following a drop in the shares of their U.S. rivals on Wall Street on Friday, when the S&P 500 index of utilities had its biggest daily percentage drop since August 2011.

U.S. utility stocks were hit after strong jobs data on Friday supported expectations of a rise in U.S. interest rates by mid-year and pushed up U.S. Treasury yields. The data also pushed up UK gilt yields as it eased some concerns about the health of the global economy.

Utility companies tend to have large amounts of debt in order to operate their networks, and so any rise in interest rates would lead to higher borrowing costs for them.

“The rise in the bond yields and the weakness in the U.S. sector is hurting the UK utilities,” said Securequity sales trader Jawaid Afsar.

HSBC dropped 1.6 percent, taking nearly 8 points off the FTSE 100, the biggest individual weight on the index.

The falls came after the bank admitted failings by its Swiss subsidiary, in response to media reports it helped wealthy customers dodge taxes and conceal millions of dollars of assets.

Other banks lost ground, with Barclays down 0.7 percent, while Royal Bank of Scotland and Lloyds fell 0.8 percent and 1.2 percent.

“Anyone avoiding tax in this current environment is frowned upon, so it will be a big issue for HSBC,” Manoj Ladwa, head of trading at TJM Partners, said.

“Some of the other banks, like Lloyds and RBS, don’t have so much exposure to Switzerland, so they should recover quickly.”

Gold mining shares Fresnillo and Randgold outperformed the broader market to rise by 4.2 percent and 2 percent respectively. Both stocks were lifted by a rise in the price of gold after weak Chinese data boosted gold’s appeal as a safe asset.

Randgold also lifted its dividend, despite reporting lower profits on Monday.

The FTSE 100 reached a peak last year of 6,904.86 points, its highest since early 2000. Although it lost ground at the end of 2014, the index is up over 4 percent so far in 2015, and is 1.6 percent off a record high of 6,950.60. (Editing by Toby Chopra)

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