European stocks are expected to open slightly higher on Thursday as investors await the European Central Bank (ECB) rate decision.
Any indication as to what ECB President Mario Draghi is planning after his pledge to do “whatever it takes” to save the euro would be welcomed by markets.
The FTSE 100 is expected to open 11 points higher at 5724, the DAX is predicted to open 19 points higher at 6773 and the CAC in Paris is expected to gain 13 points to 3334.
Draghi’s commentson Thursday last week sent stocks and risk assets sharply higher on hopes the ECB would take bold action to support Spain and Italy in the debt markets.
Since then, expectations of significant intervention at August’s meeting have lowered significantly with Reuters reporting no action will be taken until September at the earliest. The ECB interest rate decision is due at 1:45 pm GMT, and will be followed by a press conference from Draghi at 2:30 pm GMT.
On Wednesday, the Federal Reservesaid the U.S .economy may require further support but did not take any new measures.
In London the Bank of England’s Monetary Policy Committee will decide on whether to change interest rates. Economists polled by Reuters predicted the UK central bank will keep rates and its bond buying program on hold.
Ahead of the ECB meeting Spain will attempt to raise between 2 and 3 billion euros ($2.45 – $3.67 billion) via the bond market with the market expecting the government in Madrid’s borrowing costs to rise amid uncertainty about what the ECB will do.
Italian Prime Minister Mario Monti will meet with Spanish Prime Minister Mariano Rajoy in Madrid on the next leg of a European tour. On Wednesday at a meeting in Helsinki Monti called on European policy makers to end the ‘panic mentality’ that has seen Spain and Italy’s borrowing costs soar over the last month.
After the European market closed on Wednesday, Greek lawmakers finally agreed on new austerity measures to be implemented over the next two years that should allow the coalition government in Athens to continue to access EU and IMF funds.
The UK government is considering fully nationalizing RBS, according to a report in the Financial Times. The report claims the government believes buying up the 18 percent of RBS stock it does not already own would allow it to force RBS to lend more to businesses and consumers.
In the early hours of Thursday, S&P cut its rating on Cyprus by one notch and warned of further downgrades due to weak public finances and the weakness of the island state’s banking system. The ratings agency then reaffirmed its AAA rating for Germany, and said the euro zone’s largest economy is more than able to cope with any potential financial and economic shocks.