Europe shares sag as U.S. tech sector sell-off spreads

Reuters - UK Focus

* FTSEurofirst 300 down 1.8 pct, loses 3.4 pct in week

* High-beta banking stocks also hit

By Blaise Robinson

PARIS, April 11 (Reuters) - European stocks sank on Friday,extending the week's retreat and mirroring a sell-off on WallStreet led by technology and biotech shares that has beenfuelled by worries some stock valuations are overstretched.

European tech shares were among the most hit, with ARM, whose chip designs feature in smartphones such asApple (NasdaqGS: AAPL - news) 's iPhones, falling 4.9 percent.

ASML, the world's biggest manufacturer of toolsfor the semiconductor industry, dropped 3.9 percent, telecomgear maker Alcatel (Paris: FR0000130007 - news) -Lucent lost 4 percent and chipmaker Infineon (Xetra: 623100 - news) fell 3.3 percent.

"There's been contagion from the correction in the U.S.which is probably not over, but the fact is: this is mostly aU.S. correction," said David Thebault, head of quantitativesales trading at Global Equities, in Paris.

"People are getting out of overvalued sectors and lookingfor bargains elsewhere. The market's positive longer-term trendis still intact, this pull-back will just remove the froth."

European tech stocks have been trading at a premium to theoverall market, but unlike peers on Wall Street, valuations havenot spiked.

The STOXX Europe 600 tech index trades at 19.7 timesexpected earnings, according to Thomson Reuters (Frankfurt: TOC.F - news) data, withhealth care, industrials, travel, and leisure and constructionsectors more expensive.

At 1421 GMT, the FTSEurofirst 300 index of topEuropean shares was down 1.8 percent at 1,306.70 points, oncourse to post losses of 3.4 percent for the week.

On Thursday, the Nasdaq suffered its biggest drop in 2 1/2years, losing 3.1 percent, with the Nasdaq biotechnology index sinking 5.6 percent.

"We've recently taken a little bit out of equities," saidVeronika Pechlaner, who helps manage $13 billion of assets atAshburton Investments.

"During the first quarter, when the market came backstrongly, we decided to lock in some of our gains that we madein a good fourth quarter. It might be a little bit early to talkabout redeploying that."

European banking shares, which have been more volatile thanthe broad market in recent years, also featured among the toplosers on Friday, with Bankinter (Frankfurt: A0MW33 - news) down 3.6 percent andNatixis (Paris: FR0000120685 - news) down 3.7 percent.

The STOXX Europe 600 banking index is on course topost a loss of 5 percent for the week.

Europe bourses in 2014:

Asset performance in 2014:

Today's European research round-up (Additional reporting by Alistair Smout; Editing by JamesRegan)

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