HSBC shares were down 1.2 percent after investors and analysts questioned whether the pledge to shed almost 50,000 jobs would be enough to lift earnings. JPMorgan analysts called the plan "evolution, not revolution."

Mining stocks Anglo American and Rio Tinto also took a hit from a broker downgrade. Global markets overall were hit by increasing speculation that the U.S. Federal Reserve could raise interest rates sooner than many expect, potentially putting an end to years of easy money.

"We have seen a little bit of a pullback ... There is a fair amount of volatility in the market," said London Capital Group analyst Brenda Kelly.

The blue-chip FTSE 100 index was down 0.5 percent at 1025 GMT, at 6,780.90 points. The index is up 3 percent year-to-date but has underperformed pan-European shares, which are up 11 percent over the same period.

Economic data brought some good news, with the UK's trade deficit falling to its lowest in over a year in April. Sterling hit a one-month low versus the euro while the UK received the strongest demand in more than five years at an auction of index-linked government bonds.

Shares of Sky underperformed after rival BT stepped up competitive pressure with a new free offer to customers for Champions League European football matches.

With HSBC launching drastic restructuring plans, investors said domestic rivals such as Lloyds looked better bets in terms of near-term growth.

"Whilst HSBC has now provided a much clearer picture of its business structure going forward, if you want a growth stock in the banking sector, HSBC may not be the one for you," said Dafydd Davies, partner at Charles Hanover Investments.

Media group Reed Elsevier rose 1.9 percent, lifted by a rating upgrade from Barclays.

(Reporting by Sudip Kar-Gupta; Editing by Janet Lawrence)

By Sudip Kar-Gupta and Lionel Laurent