Reuters: Hot Stocks: UK's FTSE hit by profit-taking after 4 days' gains

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UK's FTSE hit by profit-taking after 4 days' gains Apr 12th 2013, 11:48 Fri Apr 12, 2013 7:48am EDT * FTSE 100 down 0.4 percent * 50-day moving average acts as floor for weakness * Euro zone concerns resurface as finance ministers meet By Toni Vorobyova LONDON, April 12 (Reuters) - Britain's top share index succumbed to profit-taking on Friday after its best four-day run in three months, with sentiment dented by investor nervousness about the adequacy of the bailout for Cyprus. Banks, the British sector most exposed to euro zone sovereign risk, sold off as EU finance ministers gathered for an informal two-day meeting, where the Cyprus bailout package tops the agenda. EU officials said there were no plans to increase the 10 billion euro bailout agreed for Cyprus, but that the country is considering asking to front load the payment of EU structural funds. Any prospect of a flare-up of the euro zone crisis, coupled with escalating geopolitical tensions over North Korea , prompted investors to lock in profits on the FTSE 100, which had gained 2.7 percent in the previous four sessions. The benchmark index was down 25.97 points, or 0.4 percent, at 6,390.17 points by 1051 GMT. "The market had a fairly decent run for the week so ... there is no harm in locking away some profits ahead of the weekend. People are just being prudent," said Trevor Coote, head of equity sales at Alexander David Securities, noting activity in banks and insurers. Friday's sell-off pushed the FTSE 100 through technical support at the 30-day moving average, although the 50-day line, around 6,371.97 points, provided a floor for the weakness. With the index still in sight of 5-year highs at 6,533.99 hit in March and up 8.8 percent for the year, some companies are increasingly looking expensive relative to fundamentals, prompting a string of analyst downgrades. Shares in Croda dropped 3.6 percent, the top FTSE 100 faller, after UBS downgraded the speciality chemicals maker to 'sell', saying that a rise in its price/earnings ratio to 20 times from 16 times left it looking expensive relative to Swiss peer Givaudan. Valuation reasons also prompted JP Morgan to downgrade Legal & General to 'underweight', sending the insurer's shares down 2 percent. Legal & General is trading on 13.1 times its current earnings, making it the second-most-expensive FTSE 100 insurer after Admiral on that measure, according to Thomson Reuters StarMine. Given the relatively high valuations - the 12-month forward price/earnings ratio on the FTSE 100 itself has jumped from around 8.1 times in October 2011 to 11.5 times now according to Datastream - are increasingly putting the emphasis on companies' ability to grow earnings. Here, Britain potentially looks better than its European rivals, prompting HSBC to upgrade the country to 'overweight' from 'underweight'. "The short-term drivers are positive for the UK, driven primarily by earnings momentum. This has rebounded sharply and it is now the strongest in Europe," HSBC analysts wrote. "This indicates a higher degree of confidence in the 2013 earnings outlook. We forecast 9 percent earnings per share growth, an upside surprise versus the consensus estimate of 5 percent." (Editing by Stephen Nisbet) Link this Share this Digg this Email Reprints

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