Europe Factors-Stocks set to extend gains

European equities were set to inch higher on Wednesday, adding to a sharp two-day rally, on growing optimism over the corporate earnings season.

But the gains could be limited by mounting investor worries over signs of tightening in China. Official media and banking sources said on Wednesday Chinese banking authorities have instructed some major banks to curb their lending over the rest of this month after an early burst of credit, sending China's key stock index down 3 percent on Wednesday afternoon.

Financial spreadbetters expected Britain's FTSE 100 to open unchanged to up 8 points, Germany's DAX to open 5 to 12 points higher, and France's CAC-40 to open 7 to 12 points higher.

European technology shares will be in focus after IBM raised its 2010 profit outlook and posted a higher-than-expected rise in fourth-quarter earnings, boosted by cost cuts and a shift to more profitable contracts.

Bank of America, eBay, Morgan Stanley and Wells Fargo are due to report results on Wednesday.

The pan-European FTSEurofirst 300 gained 0.8 percent on Tuesday, as buoyant pharma stocks helped propel the index to its highest close in more than 15 months, while Cadbury surged to a record high after it accepted a $19.6 billion takeover offer from Kraft.