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Tech stocks lead global downturn in equity markets

Technology stocks led a global downturn on Monday, after a selloff in U.S. stocks on Friday hit market confidence.

"The momentum meltdown continues to be the story," said Art Hogan, chief market strategist at Wunderlich Securities. "There is money on the sidelines waiting for some oft these popular, cult-like names to fall," Hogan added.

The Nasdaq fell another 0.8 percent in the early minutes Monday after Friday's 2.6 percent decline, though by 10:15 a.m. it had made back all of those losses and turned positive. Momentum names led the initial decline, with tech notables like Facebook and Priceline opening lower.

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Traders work on the floor of the New York Stock Exchange in New York.
Jin Lee | Bloomberg | Getty Images
Traders work on the floor of the New York Stock Exchange in New York.

The pan-European STOXX 600 exchange also fell 0.6 percent on Monday, with all major country bourses in the red.

The technology sub-sector of the STOXX 600 traded 1.7 percent lower, with French telecom group Iliad the worst performer amid M&A activity in the sector, down by up to 6.4 percent. Meanwhile, Alcatel-Lucent fell 3.2 percent, Finnish mobile maker Nokia lost 2.6 percent and chipmaker ARM slid 2.2 percent.

Meanwhile, Moscow's benchmark MICEX index traded down 2.3 percent.

In Asia, the Japanese Nikkei led losses in Asia, trading down some 1.7 percent. The region-wide CNBC 100 Asia index also fell, by around 0.5 percent. E-commerce giant Rakuten and Yahoo Japan slumped 5 percent each, while Softbank and Panasonic both tumbled over 4 percent.

The wobbly start to Monday trade followed a 2.6 percent drop on the U.S. Nasdaq exchange on Friday, its second-worst one-day fall of the year. The Nasdaq is heavily weighted towards technology stocks like Tesla, Netflix, and Amazon.com, which had their worst day in nearly a year on Friday.

The downturn shocked some, as it followed U.S. employment data for March, which came in only marginally weaker than forecast. 192,000 jobs were created during the month, rather than the 200,000 expected.

"Friday's selloff took many by surprise, especially since the initial reaction in stocks seemed to be positive with the S&P 500 breaking new intra-day records shortly after the opening bell," said Deutsche Bank's Gael Gunubu in a research note on Monday.

"The selloff started with the U.S. tech sector but the reality is that anything from high growth to high beta to high P/E stocks were all targeted by sellers."

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Gunubu noted however that it had been a "pretty bad run" of late for tech stocks. Google (class A shares) are down 11 percent from peaks, while the U.S. biotech index is down 14 percent from February peaks.

In addition, Evan Lucas of IG, warned of rising concerned that first-quarter earnings would miss expectations.

"There is a growing feeling that last-quarter earnings are not going to measure up to valuations," the market strategist said in a morning research note.

"Considering the macro data out over the January to March period, and the fact that the market once more hit record all-time highs last week, will earnings back the prices? Is earnings season going to be the reason for a pullback?"

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