FTSE falls after Wall St slide but CRH gains on consolidation hopes

Mon Apr 7, 2014 4:39am EDT

* FTSE 100 down 0.8 pct; only five stocks post gains

* Index tracks Wall Street sell-off

* Investors concerned valuations looking frothy

* CRH top riser on sector consolidation hopes

By Tricia Wright

LONDON, April 7 (Reuters) - Britain's top share index fell on Monday, taking its cue from Wall Street which slid on Friday as high-growth firms mainly in the tech and biotech sectors were sold off.

The FTSE 100 was down 52.31 points, or 0.8 percent, at 6,643.24 points by 0801 GMT, with every sector in the red aside from building materials & fixtures as M&A activity in Europe fuelled hopes for more consolidation in the sector.

Irish building supplies group CRH rose 0.9 percent, heading a list of only five blue-chip risers, after Switzerland's Holcim unveiled an all-share deal to buy France's Lafarge to create the world's biggest cement maker.

Traders saw scope for the groups to divest assets that could boost other players, such as CRH. Trading volume in CRH stood at three quarters of its 90-day daily average after just an hour's trade, while the FTSE 100 was on only 10 percent of its average.

The UK benchmark broke a three-week winning streak after the Nasdaq Composite sank 2.6 percent on Friday, pressured by a sell-off in tech and biotech shares, seen as "momentum stocks" that had led 2013's rally.

Frothy valuations are curbing investor interest in putting more money to work in equities. The FTSE 100 trades on a 12-month forward price/earnings ratio of 13.2 times, against its five-year average of 11 times, Thomson Reuters Datastream shows.

"I just think valuations have got further ahead than is justified by the underlying earnings. Each rally has petered out when we've got to the top end of that valuation range. I think that probably remains the case until the earnings base looks a bit more solid and the forward estimates start going up rather than down," Peel Hunt equity strategist Ian Williams, said.

Williams reckoned on a period of consolidation for the FTSE 100 until at least mid-year, enabling earnings to catch up and perhaps setting the scene for the market to rise into year end.

The FTSE 100 has been trapped in a range between around 6,400 to 6,800 since late October.

The index is currently finding some support around 6,640 - which provided support last week. Alpari analyst Craig Erlam said that should the index break below this level, further support could be found around 6,628, a previous resistance level, followed by 6,600.

"This (6,600) is not just a key psychological level for the index. The 20 and 200-day (moving averages) also cross at this level so I expect this to be key. A break of it would be extremely bearish in my opinion," he said. (Additional reporting by Blaise Robinson; Editing by Hugh Lawson)