UK's FTSE hit by valuation concern and Wall St slide

* FTSE 100 down 0.6 pct in mid-session

* Index tracks Wall Street’s sell-off

* Some traders cite concern over FTSE valuations

By Sudip Kar-Gupta

LONDON, April 7 (Reuters) – Britain’s top equity index fell on Monday, retreating from a three-week high as a slide on Wall Street on Friday and concern about valuations weighed on the UK stock market.

The blue-chip FTSE 100 index, which rose 0.7 percent on Friday to reach its highest in around three weeks, fell back by 0.6 percent, or 38.60 points, to 6,656.95 points in mid-session trading.

“It’s all being driven by the sell-off we saw on Wall Street,” said Prime Wealth Group senior trader Dafydd Davies. Benchmark U.S. equity indexes fell around 1 percent on Friday.

Concern that corporate earnings were not strong enough to justify the ratings of companies on the FTSE 100 also weighed on stocks. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.2 times, compared with a five-year average of 11 times, according to Thomson Reuters Datastream.

“There are question marks about valuations,” Brown Shipley fund manager John Smith said. “This year, stocks have to deliver earnings growth to justify the rating.”

The FTSE 100 rose 14.4 percent in 2013 to post its best annual gain since 2009, and the index reached a peak of 6,867 points in January this year, its best level since early 2000.

It has since slipped back, after a slump in emerging markets and tensions grew between Russia and Western powers over Ukraine. Smith said he expects the market to remain trapped in that range in the near-term.

“There is not enough belief at this point in time to push the market higher,” he said. (Additional reporting by Tricia Wright; Editing by Larry King)

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