European Shares to Edge Up Ahead of Rate Decisions

European shares are expected to stage a modest rally on Thursday ahead of two key central bank decisions and after a strong performance on U.S. and Asian markets.

Financial bookmakers in London expect Britain's FTSE 100 index to open 30 to 31 points higher, after a near-3 percent rally on Wednesday, Germany's DAX to open 21 to 25 points up and France's CAC-40 to open 22 to 23 points up.

On Wall Street, the Dow Jones Industrial Average rallied by about 1.5 percent after data supported the view that the U.S. economy is still holding up and inflation pressures continue to moderate.


European markets staged a strong rally on Wednesday as investors bet on a higher chance the Bank of England will cut rates from their current 5.75 percent when it releases its policy decision at 1200 noon.

The European Central Bank is expected to hold eurozone rates at 4.00 percent later in the session and reiterate its intention to control inflation despite a growing global bias towards monetary easing.

"Quite a bit (of the rates outlook) was factored into Europe. Europe was strong yesterday, especially the FTSE, but we have seen the Dow go slightly higher ... which is really why we're calling (the indexes) higher," one trader said. "A lot of the Dow move was factored into the European session, but it looks like another upmove today."

On the corporate front, Royal Bank of Scotland will deliver a full-year trading update, which is expected to unveil the extent of the bank's exposure to the credit market squeeze and the progress on its integration of ABN AMRO's wholesale bank.