(Alliance News) - Stocks in London are set to open lower on Monday, as weak trading in Asia looks set to weigh on sentiment.

IG says futures indicate the FTSE 100 to open down 16.8 points, 0.2%, at 7,507.36 on Monday. The index of London large-caps closed down 94.44 points, or 1.2% at 7,524.16 on Friday, and ended the week down 0.5%.

"Asia markets have fallen sharply this morning as a sell-off on Chinese markets, amidst concern over defaults in its property sector, and broader economic weakness has prompted fears that this weakness could spread to other areas of the economy, after it was claimed that a Chinese trust company failed to make payments to some clients," said Michael Hewson, CMC Markets UK chief market analyst.

Shares in Chinese property giant Country Garden plunged on Monday after it missed bond payments and warned of multibillion-dollar losses, deepening concerns over the nation's heavily indebted real estate sector. Its stock price was down by more than 16% at around midday in Hong Kong.

Country Garden is a real estate firm named in Forbes' list of the 500 largest companies in the world. Its boss, Yang Huiyan, was until recently one of the richest women in Asia.

The firm has long been deemed financially solid but was unable last Monday to make two bond payments, and after a 30-day grace period, the company risks defaulting in September if it still cannot pay. Country Garden announced over the weekend it would suspend trading of onshore bonds from Monday, a decision likely to cause concern in the markets as the company said its debt was estimated at some CNY1.15 trillion, or USD159 billion, at the end of 2022.

Like its heavily indebted competitor Evergrande, any collapse of Country Garden would have catastrophic repercussions for the Chinese financial system and economy.

In Asia on Monday, the Nikkei 225 index in Tokyo was down 1.2%. In China, the Shanghai Composite was down 0.9%, while the Hang Seng index in Hong Kong was down 2.4%. The S&P/ASX 200 in Sydney was down 0.9%.

The dollar was slightly stronger in early exchanges in Europe.

Sterling was quoted at USD1.2679 early Monday, lower than USD1.2703 at the London equities close on Friday. The euro traded at USD1.0936, lower than USD1.0961. Against the yen, the dollar was quoted at JPY144.98, up versus JPY144.80.

In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average up 0.3%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.7%.

Gold was quoted at USD1,913.15 an ounce early Monday, down from USD1,916.88 on Friday. Brent oil was trading at USD85.91 a barrel, lower than USD86.97.

In the UK corporate calendar on Monday, there are half-year results from CentralNic, Plus500, and Stelrad.

It's a quiet start on the economic front, with German wholesale prices due shortly. On Tuesday, there will be Chinese industrial output and retail sales overnight, with UK unemployment in the morning. Highlights later in the week include UK inflation on Wednesday, the weekly US unemployment claims report on Thursday and EU inflation data on Friday.

By Elizabeth Winter, Alliance News senior markets reporter

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