Earnings worries knock UK's FTSE off 2-month highs

* FTSE 100 down 0.3 pct in morning trading

* Ashmore outflows weigh on asset manager peers

* US pre-announcements add to earnings concerns

By Toni Vorobyova

LONDON, Jan 14 (Reuters) - UK stocks retreated on Tuesday, with news of steep client outflows at Ashmore hitting other asset management shares and exacerbating concerns about the strength of the upcoming earnings season.

Ashmore tumbled 11.7 percent, on track for its biggest one-day drop in five years, after saying volatility in core emerging markets had spooked investors, who withdrew a net $3.5 billion from its funds in the last three months of 2013.

The drop in mid-cap Ashmore helped push the FTSE 250 down 0.7 percent, and the negative sentiment also reverberated around its blue-chip peers.

Aberdeen Asset Management (Other OTC: ABDNF - news) , which is due to issue a trading update on Jan. 16 and which also has a strong focus on emerging markets, dropped 1.7 percent. Schroders (LSE: SDR.L - news) also fell 1.7 percent, while Old Mutual (Other OTC: ODMTY - news) lost 1.2 percent.

"In general it has probably helped moderate expectations for some of the others that are more exposed to emerging markets - the likes of Aberdeen and Schroders. It highlights the fact that clients do consider allocations right up to the year end," said Stuart Duncan, analyst at Peel Hunt.

Overall, financials were one of the biggest drags on the blue-chip FTSE 100, taking 6.16 points off the index.

The FTSE 100 itself was down 19.07 points, or 0.3 percent at 6,738.08 points by 1059 GMT, retreating from a two-month closing high of 6,757.15 points set the previous session.

The weak news from Ashmore generally fed into investor concerns about whether the quarterly reporting season will be sufficiently strong to justify the relatively expensive valuations at which the equity market currently trades.

Such concerns have been fuelled by a string of negative pre-announcements in the United States, where disappointments from the likes of SodaStream, Lululemon Athletica (NasdaqGS: LULU - news) , Express Inc (NYSE: EXPR - news) and Aaron's saw the S&P 500 suffer its biggest one-day fall in two months on Monday.

"The absence of good news in the fourth-quarter reporting season is likely to be a headwind for the market," Daniel McCormack, strategist at Macquarie, said.

"When earnings disappoint, cyclicals, which are more exposed to that, are going to get hurt more than defensives."

Energy, mining and industrial stocks - which, like financials, are closely tied to the global economic cycle - were among the other top fallers.