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LONDON (Alliance News) - UK stocks closed firmly lower Friday, ensuring that both the FTSE 100 and FTSE 250 snapped a run of three consecutive weekly gains, with technology stocks leading the sell-off again.
For the second time this week, tech stocks were pushed significantly lower amid fears they are trading at unrealistic valuations. Concerns first emerged on the tech-heavy NASDAQ Composite index on Wall Street last Friday and these worries have since spread into Europe and Asia throughout this week.
"Finally it appears that markets are looking past the froth of unrealistic valuations and starting to adopt a 'show me the money' approach," said Michael Hewson, chief market analyst at CMC Markets.
The FTSE 350 Technology Hardware & Equipment sector index closed down 4.3%, led lower by Pace, Imagination Technologies Group, and ARM Holdings, which closed down 7.1%, 5.9%, and 4.5%, respectively. The Electronic & Electrical Equipment sector index ended the day down 1.4%, with the falls led by Hellermanntyton, down 2.8%, and Spectris, down 1.5%, among others. Biotechnology company BTG closed down 3.1%.
On AIM, Lombard Medical Technologies closed down 11%. Shares in the medical technology company plummeted after it said it has delayed its initial public offering on the NASDAQ, blaming the adverse US stock market conditions. It has been trying to de-list from London's AIM and move to the NASDAQ in an effort to accelerate the commercialisation of its Aorfix product in the US, but has been stymied by the recent volatility on NASDAQ, it said.
London's recent big IPOs have fared badly in the sell-off. AO World, Boodhoo.com, Just Eat and Pets at Home are now all trading below their IPO price.
Overall, the FTSE 100 closed down 1.2% at 6,561.7, meaning it ended the week 2% lower than it opened it. The FTSE 250 closed down 1.6% at 15,898.37, down 3.3% for the week, meaning it has more than offset the gains made over the previous three weeks, and the AIM All-Share index closed down 1.1% at 835.05, and down 2.1% for the week.
In Europe, the CAC 40 in Paris closed down 1.2% Friday, while the DAX 30 in Germany closed down 1.6%. For the week, the two indices were down 2.7% and 4%, respectively.
Earlier in the day, the Nikkei in Tokyo closed down 2.4%, the Hang Seng closed down 0.8%, and the Shanghai Composite index closed down 0.2%.
"There is a lot of pessimism in the markets right now, driven by the disappointing data of recent months, the potential for another flare up in Ukraine, the Fed's decision to continue scaling back its asset purchases and the low expectations as we head into earnings season," says Craig Erlam, market analyst at Alpari.
These low expectations were exacerbated Friday after JPMorgan's first-quarter results missed analyst's expectations. In the first first-quarter US bank earnings report of the season, the bank posted earnings per share of USD1.28, lower than analysts' forecasts of between USD1.38 and USD1.39 per share. Revenue also came in slightly behind forecasts.
This sent US stock futures into the red and saw the DJIA, NASDAQ Composite, and S&P 500 all open lower.
Wells Fargo & Co, the fourth-largest bank in the US by assets, reported a 14% increase in profit in the first quarter, despite lower revenue.
It said net income applicable to common stock for the quarter increased to USD5.61 billion, or USD1.05 per share, from USD5.17 billion, or USD0.92 per share, in the previous year. Economists had been expecting earnings of USD0.97 per share for the quarter. Revenue for the quarter declined 3% to USD20.63 billion from USD21.26 billion in the prior-year period, but still beat economists' USD20.60 billion estimate.
At the close of the UK equity markets, Wall Street has reversed some of its early weakness. The DJIA and S&P 500 are down between 0.3% and 0.1%, respectively, while the NASDAQ Composite is a touch higher.
At the individual UK stock level, and away from technology stocks, Fresnillo was one of just seven gainers in the FTSE 100 Friday. The precious metals miner closed up 1% after Numis Securities upgraded the company to Buy, from Hold, increasing its price target to 1,100.00 pence from 1,000.00p, while JPMorgan raised its price target to 1,030.00p from 965.00p.
Housebuilders were heavy losers. The stocks fell "amidst renewed talk of a house price crisis and potential bubble burst soon," said Farhan Ahmad, a trader at TradeNext.
FTSE 100-listed Barratt Developments and Persimmon closed down 2.3% and 2%, respectively, while FTSE 250-listed Bellway, Crest Nicholson, Taylor Wimpey and Redrow closed down 3.3%, 2.8%, 2.1% and 2.1%, respectively.
In an otherwise quiet UK corporate calendar, Jupiter Fund Management released an interim management statement Friday. The fund manager reported GBP547.0 million in first-quarter net inflows, boosting its assets under management past the GBP32.0 billion mark. It said assets under management increased to GBP32.21 billion at the end of March, from GBP31.66 billion at the end of December. Net inflows were boosted by GBP465.0 million of net inflows into mutual funds, with inflows from the UK and its international channels.
Nevertheless, the stock closed down 4.7%, placing it amongst the ten biggest losers in the FTSE 250.
In the forex market, the pound dipped in early trading following some disappointing UK construction output data. Construction output fell by 2.8% in February, having risen 2.1% in January, missing consensus estimates for a more modes fall of 1.3%
Construction could be the strongest sector in the UK as the economic recovery broadens thanks to low interest rates and government subsidies, but "exceptionally wet weather rained on the parade in February," said Rob Wood, chief UK economist at Berenberg.
Sterling extended its weakness against the dollar later in the day in the aftermath of some better-than-expected US data.
US producer prices rose by much more than expected in the month of March. The US Labor Department said its producer price index for final demand advanced by 0.5% in March after edging down by 0.1% in February. Economists had been expecting the index to tick up by 0.1%. Year-on-year, it rose 1.4% from 1.1% in February, beating the 0.9% economists had been expecting.
The preliminary reading of the Reuters/University of Michigan consumer sentiment index rose to 82.6 in April, up from 81.0 in March, and ahead of the 80.0 that had been forecast by economists.
At the close of the UK equity market, sterling trades at USD1.6731, EUR1.2037 and JPY170.027.
In the data calendar Monday, Italian consumer price inflation numbers are released at 0800 GMT, ahead of industrial production data for the euro area at 0900 GMT.
In the US, retail sales figures are published at 1230 GMT, with business inventories at 1400 GMT.
In a quiet day in the corporate calendar, AIM All-Share-listed MP Evans releases full-year results.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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