* FTSEurofirst 300 falls 1.3 pct, off 5 1/2-yr high
* Bouygues, Iliad fall; Numericable spikes on SFR deal
* Raiffeisen slips as Ukraine tensions simmer
(Updates with closing prices)
By Alistair Smout
LONDON, April 7 European equities retreated on
Monday after a three-week rally, led down by French companies
Iliad and Bouygues on expectations that a
failed acquisition bid by Bouygues would hurt the earnings of
Bouygues fell 6 percent to 29 euros ($39.85) and Iliad
dropped 5.5 percent after Numericable won a bid to
acquire Vivendi's SFR telecom unit. Numericable shares
spiked 14.8 percent.
Bouygues had been up 12.9 percent on the year, compared with
a rise in the Euro STOXX 50 of 3.9 percent.
"We believe that the recent share price outperformance was
due to possibility of this transaction going ahead," Olivia
Peters, analyst at RBC Capital Markets, said in a note. "We
estimate that Bouygues is now worth 27 euros per share, having
stripped out the positive impact of the potential merger."
Iliad investors were disappointed because Iliad had agreed
to buy the Bouygues mobile network and some spectrum if
Bouygues's bid for SFR succeeded.
Iliad's decline was the biggest on the STOXX Europe 600
Technology index, which overall fell 2 percent.
The FTSEurofirst 300 index of top European shares
was down 1.3 percent to 1,335.90 points at the close, slipping
from a 5 1/2-year high on Friday and posting its biggest decline
for a month.
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, above a 10-year average of 16.4 times.
The FTSEurofirst 300 fell after posting its third successive
week of gains, rebounding 5.3 percent from its March low. It had
been knocked back at the end of February amid tension between
Russia and the West over Ukraine.
The market is still vulnerable to developments in the
region, with Russia-exposed Raiffeisen Bank down 4.1
percent on Monday. It extended the losses after pro-Russian
protesters seized arms in eastern Ukrainian cities.
The Euro STOXX 50 Volatility index jumped 10.5
percent, signalling a sharp rise in investor risk aversion. The
higher the index - used to measure the cost of protecting stock
holdings against market corrections - the lower is investor
appetite for risky assets such as stocks.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
($1 = 0.7277 Euros)
(Additional reporting by Atul Prakash in London and Blaise
Robinson in Paris; Editing by Larry King)