FTSE drops after Wall St sell-off, led down by Experian

Wed May 7, 2014 4:51am EDT

* FTSE 100 down 0.3 percent

* Experian top faller after results

* Ex-divs knock 6.8 points off index

* Heavily shorted Sainsbury gains after profit beat

By Tricia Wright

LONDON, May 7 (Reuters) - Britain's top shares fell on Wednesday after a sell-off on Wall Street unsettled investors, with credit checker Experian leading the UK market lower on concerns about headwinds facing the company.

The FTSE 100 was down 22.57 points, or 0.3 percent, at 6,775.99 points by 0837 GMT, having shed 0.4 percent on Tuesday, retreating further from a two-month closing high set on Friday.

Its falls reflected weakness on Wall Street, where Twitter led a rout in tech stocks with a 17.8 percent tumble after the expiration of a six-month lock-up period for early investors.

Experian shed 5 percent after reporting full-year results. While its annual earnings beat expectations, traders focused on comments from Chief Executive Don Robert.

He said that soccer's World Cup in Brazil, which will divert attention from the company's consumer services, and changes to Experian's North American consumer business would constrain growth in the first half.

Equity markets have been buoyed in the past weeks by a burst of deal-making and bids largely in the healthcare sector, which have offset a lacklustre corporate earnings season.

With just over half of the reporting season wrapped up, roughly 47 percent of STOXX Europe 600 companies which reported through May 6 have missed analyst forecasts, the worst performance since the first quarter of 2013, StarMine data showed.

Analysts said a rebound in corporate dealmaking could offset concerns surrounding UK companies in terms of lofty valuations and a slashing of analyst forecasts, but added that the FTSE 100 was likely to be stuck in a range in the near term.

The index is trading on a 12-month forward price/earnings ratio of about 13 times, against its five-year average of 11 times, Thomson Reuters Datastream shows. Meanwhile, analysts have been steadily lowering profit forecasts since the start of 2014, data from Thomson Reuters Datastream shows.

Peel Hunt equity strategist Ian Williams saw little scope for gains on the UK benchmark until at least mid-year, enabling earnings to catch up.

"Valuations have come as far as they can in the short term purely on an earnings basis so it does require that corporate activity to add a bit of upside potential."

In a relatively quiet day in terms of UK blue-chip deal making, German engineering giant Siemens said it was buying energy assets from Rolls-Royce for roughly 950 million euros ($1.32 billion). Rolls-Royce slipped 0.9 percent.

SAINSBURY SHORTED

British grocer J Sainsbury rose 1.5 percent after posting a better than expected 5.3 percent rise in annual profit - although this was its slowest growth in nearly a decade, illustrating the pressure the industry is under to cut prices and stem the rise of the discounters.

The supermarket group is the most shorted stock on the UK benchmark, with 10.2 percent of its shares out on loan, according to data from Markit.

"Overall, issues from low-cost rivals remain and I would expect the shares to move back below 300 pence towards my six-month target of 275 pence," Jordan Hiscott, senior trader at ayondo markets, said.

Sector peer Wm Morrison was the second-top FTSE 100 faller, off 4.8 percent, as it traded without the attraction of its latest dividend - along with Bunzl, BP, Rexam, and Unilever. ($1 = 0.7177 Euros) (Reporting by Tricia Wright; Editing by Andrew Heavens)