LONDON MARKETS: U.K. Stocks Lose Ground, Head For Weekly Downturn

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- U.K. stocks struggled Friday, pushing toward a loss for the week in which investors globally turned their attention to valuations.

The FTSE 100 fell 1.1% to 6,569.78, with only three stocks able to advance: Wm. Morrison Supermarkets PLC picked up 1.3%, HSBC Holdings PLC rose 0.2% and BT Group PLC edged up 0.1%.

The index is on pace to fall 2.1% for the week, which would be its first decline in four weeks.

U.K. and European stocks this week have been cut down as part of a global slide in equities, set off by worries about valuations in so-called momentum shares, such as biotech and Internet issues. A 3.1% drop in the Nasdaq Composite(RIXF) on Thursday underscored such concerns.

Among London-listed tech shares Friday, chip designer ARM Holdings PLC slumped 4.6%, and business software maker Sage Group PLC lost 2.3%.

Barclays told clients Friday that while the U.K. market is close to all-time highs, valuations are not.

U.K. stocks have risen 70% since the end of 2008, at the time of the world-wide financial crisis, said Barclays, adding that some see further gains from current levels as being limited. "However, we would argue that the outlook is one in which valuations are either in line or below historical averages, earnings growth only now showing signs of accelerating and corporate activity is likely to increase," said U.K. equity strategist Ian Scott.

Barclays said the FTSE 100 could hit 7,400 by year-end, and suggested that investors become overweight financial -- excluding insurers -- oil, materials and industrial issues, and become underweight in consumer staples and health care.

U.K. stocks on Thursday ended a choppy session with a 0.1% rise. Investors this week received, as expected, the Bank of England's decision to hold its key lending rate at a record low of 0.5% and maintain asset purchases at 375 billion pounds ($629 billion).

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