MARKET COMMENT: UK Stocks Set For Lower Open As "China Spoils The Party"

LONDON (Alliance News) - UK stocks are set to open lower Wednesday as Tuesday's relief rally gives way to Chinese bank concerns.

London's main stock indices are expected to follow Asian markets lower, just a day after the FTSE 100 index hit its highest level in nearly five months.

Global stocks rallied Tuesday as "the bad news in the September jobs report was layered on thick," comments Kathleen Brooks, research director at FOREX.com.

US Non-Farm Payrolls figures showed the economy had added 148,000 jobs in September, short of the 180,000 increase that many economists expected. As a result, Christopher Vecchio, currency analyst at DailyFX, believes that the Fed is now likely to further delay the tapering of its USD85 billion-a-month quantitative-easing program, continuing the availability of cheap money.

However, China has spoiled the party, says Nishtha Asthana a market commentator with CitiFX Wire, as Asian markets have reversed gains made earlier in the day on the US data.

Michael Hewson, chief market analyst at CMC Markets echoes this sentiment. The news that Chinese banks have tripled debt write-offs in the first half of 2013 has prompted profit taking in Asian markets, which are close to multi-week highs, Hewson says.

"Given concerns earlier this year about the Chinese shadow banking sector, it would appear that the acknowledgement that there is a problem, and Chinese authorities are starting to deal with it, has seen some investors take some money off the table in case there are a lot more provisions to come," he adds.

Ahead of the UK market open, the Hang Seng is down 0.2%, while the Nikkei is down 2.0%

Both IG and CMC Markets are calling the FTSE 100 to open lower.

There has been a number of corporate releases ahead of the open Thursday. Results GlaxoSmithKline, Home Retail Group and ASOS, and trading statements from British American Tobacco, Computacenter and Sports Direct International, are likely to influence in London share trading Wednesday morning.

In the data calendar Wednesday, the minutes of the Bank of England's monetary policy meeting is due at 0930 BST, headlining a light day for the European economic news. UK mortgage approvals data are expected at 0930 BST.

In the US, mortgage applications are scheduled for 1200 BST, ahead of export and import price index figures at 1330 BST, with house price index data at 1400 BST. EU consumer confidence data is set to be released at 1500 BST.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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