(Alliance News) - Blue-chip shares in London are set to open lower on Tuesday with markets tetchy ahead of a US inflation reading, and as Silicon Valley Bank contagion worries continue to hurt market sentiment.

IG says futures indicate the FTSE 100 index of large-caps to open 19.3 points, 0.3%, lower at 7,529.33 on Tuesday. London's benchmark index dropped by 199.72 points, 2.6%, to 7,548.63 on Monday. It is now down 0.1% for 2023 to date.

Stocks in Asia struggled on Tuesday. The Nikkei 225 in Tokyo fell 2.2%, while the S&P/ASX 200 closed down 1.4%. Both have now suffered three successive daily declines.

In China, the Shanghai Composite was down 0.5%, while the Hang Seng in Hong Kong was doing even worse, down 2.3%.

Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial tumbled 8.6% and 7.6% in Tokyo.

Those declines followed heavy falls for US banking stocks on Monday. First Republic and Western Alliance were among the worst of the lot, plunging 62% and 47%.

The Dow Jones Industrial Average lost 0.3% and the S&P 500 0.2%, though the Nasdaq Composite rose 0.5%.

"Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week," Swissquote analyst Ipek Ozkardeskaya commented.

Eyes now turn to a US inflation reading at 1230 GMT, an hour earlier than normal for Europe due to US summer time. The US inflation rate is expected to have ebbed to 6.0% in February, from 6.4% in January.

What the inflation reading, as well as the SVB worries, mean for Federal Reserve policy will also be in focus.

Analysts at Capital Economics commented: "Even if the collapse of several mid-tier banks doesn't develop into a full-blown systemic crisis, it will more than likely trigger a credit crunch. That raises the risk that the economy will suffer a harder landing, which would accelerate the needed disinflationary adjustment. Under those circumstances, it makes sense that futures markets now expect little in the way of additional rate hikes from the Fed, and instead see rates being cut later this year."

Elsewhere in the economic calendar, there is a UK inflation reading at 0700 GMT.

The dollar was mixed. The pound edged up to USD1.2162 early Tuesday in London from USD1.2157 on Monday, but the euro traded at USD1.0699, down from USD1.0737. Against the yen, the dollar rose to JPY133.58 from JPY133.25.

A barrel of Brent oil bought USD79.93, down from USD81.23 late Monday. Gold rose slightly to USD1,908.75 an ounce from USD1,904.07.

In Tuesday's UK corporate calendar, there are half-year results from Close Brothers, full-year results from Costain and Old Mutual, and a trading statement from Pennon.

By Eric Cunha, Alliance News news editor

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