* MSCI World index falls 0.5 pct, MSCI Europe down 1.2 pct
* Sharp sell-off on Wall Street hits global stocks
* Tech shares suffer the most, valuations high
By Atul Prakash
LONDON, April 11 Global equities slipped to a
two-week low on Friday as a sell-off on Wall Street led by
technology and biotech shares and triggered by growing concerns
that valuations are over stretched spread to Asia and Europe.
With stocks out of favour, government bonds were set to
benefit, with the yield on the benchmark 10-year U.S. Treasury
note falling to its lowest since early March.
However, Greek 10-year government bond yields rose as
investors booked profits on a strong rally in the run-up to the
country's first debt sale since it defaulted two years ago.
The MSCI All-Country World index of shares
fell 0.5 percent by 1024 GMT to its lowest level since late
March, the MSCI Europe dropped 1.2 percent,
while the STOXX Europe 600 index was down 1.3 percent.
That followed a 3.1 percent slide in the tech-heavy U.S.
Nasdaq index on Thursday, the biggest drop in
two-and-a-half years, and a 2.4 percent decline in Japan's
Nikkei Average on Friday, the biggest weekly fall since
the March 2011 tsunami and nuclear disaster.
"The sell-off in tech stocks in the United States, where
gains were quite strong, is affecting other markets because the
U.S. is still setting the tone for global markets," said Klaus
Wiener, head of tactical asset allocation and chief economist at
Generali Investments Europe, which manages $500 billion.
"But I don't think this is the start of a longer correction
as the U.S. economy will gain further momentum. With key
interest rates pinned to the zero-bound, we are still in a
low-yield environment. Investors' hunger for yield will ensure
that every time equity markets correct, demand will rise."
What increasingly looks like a major portfolio shift from
momentum plays in U.S. technology and biotechnology stocks was
having a knock-on effect across all regions and sectors,
pressuring even defensive shares.
Momentum investing involves buying stocks that are already
trending higher, often taking their price/earnings ratios into
the stratosphere. When the momentum turns, prices can fall
rapidly as investors rush to the exits.
"The sell-off is the result of increasing concerns about the
future earnings growth," Christian Stocker, equity strategist at
UniCredit in Munich, said. "Valuations are high compared to
previous years and the trend of earnings estimates is very muted
in the U.S. and almost flat in Europe."
DOLLAR FLAT, OIL SOFT
Technology stocks led the retreat in Europe, with the sector
index, following its U.S. counterpart, down 2.4 percent
on growing fears the shares have risen too far, too fast and are
now relatively expensive compared with the broader market. The
European healthcare index was down 1.8 percent.
The STOXX Europe 600 Technology index, which surged nearly
50 percent in two years to the end of December 2013, is down
about 3 percent so far this year.
According to Thomson Reuters Datastream, the tech sector is
the most expensive in Europe, trading at 19 times its 12-month
forward earnings, against a 10-year average of about 16 times,
and 14 times for the broader STOXX 600 index.
"It's a pre-Easter, pre-earnings season correction and
represents an opportunity to invest in the value part of the
stock market as the cyclical shares suffer from past hype," said
Didier Duret, global chief investment officer at ABN-AMRO
The dollar stabilised after five sessions of losses against
a basket of currencies. The dollar index was flat at
79.395, having hit a three-week low of 79.33 on Thursday.
U.S. 10-year yields, which often correlate with the dollar, were
last at 2.641 percent in Europe, the lowest in around a month.
On the commodities front, the recent fall in the dollar and
weaker equities helped safe-haven gold to trade near its highest
in 2-1/2 weeks and stay on track for its best week in a month.
Oil remained soft in the wake of Thursday's disappointing
trade data from China and the prospect of increased supply.
Brent crude fell 0.3 percent to $107.17 a barrel.
London nickel rose 2.3 percent to a 13-month high
and headed for its ninth weekly gain in 10 weeks as a ban on ore
exports from Indonesia fuelled prices of the metal, mainly used
to produce stainless steel.
(Additional reporting by Wayne Cole in Sydney; Editing by