By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Shares of Barclays PLC led U.K. stocks higher on Tuesday after the bank said it would cut costs as part of a strategy overhaul.
The FTSE 100 index rallied 1% to close at 6,338.38, adding to 0.2% gain from Monday.
Barclays (>> Barclays PLC) jumped 8.6% as the bank announced a strategy to refocus investments in Africa, the U.S. and the U.K., in a plan that will slash at least 3,700 jobs, mainly from its investment bank activities. The cost-cutting is expected to shave off 1.7 billion pounds ($2.66 billion) from the bank's cost base down to around GBP16.8 billion by 2015.
Additionally, Barclays posted a net loss for 2012 of GBP1.04 billion, mainly due to a noncash charge from the increasing value of its own debt.
"Today's numbers are solid and the strategic outlook offers a beacon of light in the sector gloom. We remain buyers," said Ian Gordon, analyst at Investec Securities, in a note.
"We welcome the continuing attack on excessive [investment bank] pay. In this division, [former Chief Executive Bob Diamond] cut costs from GBP8.3 billion in 2010 to GBP7.3 billion in 2011. [CEO] Antony Jenkins has achieved a reduction to GBP7.2 billion in 2012 (including GBP0.2 billion of the LIBOR settlement), and we expect further significant progress," he added.
Other U.K. banks followed Barclays higher, with shares of Lloyds Banking Group PLC up 5.1%, Royal Bank of Scotland Group PLC 4.1% higher and sector heavyweight HSBC Holdings PLC (>> HSBC Holdings plc) up 1.5%.
On the data front in the U.K., figures from the Office for National Statistics. showed the consumer prices index--the government's target measure for inflation--rose 2.7% in January, marking the fourth consecutive month at that level.
"Whilst CPI inflation, overall, has remained unchanged for four months now, we do see near term pressures lying to the upside of this recent range. We continue to judge that the knock-on effect of last summer's U.S. droughts are likely to feed through to higher food prices as we head further through this year," said Victoria Clarke, economist at Investec Securities in a note.
"We judge that these pressures are likely to push CPI inflation above 3% by the middle of this year," she said.
Also on the rise in the U.K., shares of International Consolidated Airlines Group SA picked up 2.6%. The company said Iberia has started the formal collective redundancy process over 3,807 jobs as part of a transformation plan to implement structural changes in efforts to return to profitability.
On a more downbeat note in London, mining firms posted losses, even as most metals prices were on the rise.
Antofagasta PLC fell 1.1%, BHP Billiton PLC (>> BHP Billiton Limited) dropped 0.4% and Kazakhmys PLC lost 0.5%.
Shares of BAE Systems PLC dropped 1.8%, as J.P. Morgan Cazenove initiated coverage of the defense and aerospace firm with a neutral rating. The analysts said it believes BAE faces major structural problems and is likely to underperform the sector over the next 12-24 months.
Reed Elsevier PLC fell 0.9%, as HSBC cut the academic publisher to neutral from underweight.
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