* FTSEurofirst 300 falls 0.8 pct, off 5 1/2-yr high
* Tech shares slip; "momentum" stocks seen overvalued
* Bouygues, Iliad fall; Numericable spikes on SFR deal
By Atul Prakash
LONDON, April 7 European equities retreated on
Monday after a three-week rally, with technology shares falling
the most on concern they had advanced too far, too fast and a
correction was due.
The stock market also came under pressure from a drop of 5.4
percent in Bouygues and 5.7 percent in Iliad,
after Numericable won a bid to acquire Vivendi's
SFR telecom unit. Numericable shares spiked 15 percent.
Iliad investors were disappointed because the company stood
to benefit if Bouygues's bid for SFR succeeded. It had agreed to
buy Bouygues' mobile network and some spectrum.
The FTSEurofirst 300 index of top European shares
was down 0.9 percent at 1,341.03 points by 1112 GMT, slipping
from a 5 1/2-year high on Friday. A 1.7 percent drop in the
STOXX Europe 600 Technology index led the decline.
Tech shares followed Friday's decline in U.S. momentum
stocks, which are typically high-growth companies, mostly in the
tech and biotech sectors. Those shares led the 2013 rally, and
investors were anxious about how much further they might fall.
"The tech sector seems to have become overvalued and there
is a particular punishment for momentum stocks, which have run
strongly ahead the last couple of months and are now taking a
beating," said Geneva-based Lorne Baring, managing director of B
Capital Wealth Management.
"The weakness could continue in the short term as there is a
need for some of these price-earnings multiples to come back to
more realistic levels," Baring said.
The European technology index trades at 18.7 times expected
earnings in the next 12 months, according to Thomson Reuters
Datastream. That's above a 10-year average of 16.4 times.
"This could be the start of a 'profit taking' consolidation
period," said Aurel BGC chartist Gerard Sagnier. "People should
buy only when the pull-back is done, while it could also be time
to hedge the portfolios."
The Euro STOXX 50 Volatility index jumped 9.4
percent on Monday, signalling a sharp rise in investor risk
aversion. The higher the index - used to measure the cost of
protecting stock holdings against market corrections, since it
usually moves in the opposite direction to cash equities - the
lower investor appetite for risky assets such as stocks.
Losses were cushioned, however, by M&A activity in the
construction sector, which fuelled hopes of more consolidation.
Holcim disclosed an all-share deal to buy France's
Lafarge on Monday, which would create the world's top
cement maker, with combined sales of 32 billion euros ($44
billion). Shares in both companies rose more than 1 percent,
extending rallies on Friday after news of the deal emerged.
"A modest rebound in M&A might certainly help support
markets a little bit," said Gerhard Schwarz, head of equity
strategy at Baader Bank. "I am not too optimistic about a
full-fledged rebound in M&A, because corporates overall are
still very cautious. It will not be such a strong rebound what
we have seen in the peaks of the last cycles."
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Additional reporting by Blaise Robinson in Paris; Editing by