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FTSE, DAX, CAC Seen Higher; Eyes on ECB

European stocks are expected to make modest gains at the market open as investors await news on whether both the European Central Bank and Bank of England will change policy in response to the economic slowdown and the euro zone debt crisis.

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Asian stocks were mixed following solid gains on Wall Street despite the Fed’s Beige Book indicating the US economy remains weak.

Federal Open Markets Committee member Charles Evans said late on Wednesday that the US economy never really pulled out of recession. Federal Reserve Chairman Ben Bernanke is due to speak to the House Financial Services Committee at 16:30 London time and is expected to avoid discussing the prospects for another round of quantitative easing.

Thursday night, President Obama will unveil his latest plan to boost jobs growth with reports indicating a $300 billion stimulus package will include payroll tax cuts.

Before that, investors will hear from Jean-Claude Trichet in his monthly press conference as the ECB meets to decide on rates.

Analysts expect the ECB to say it is planning to reverse its recent rate-hiking cycle and analysts will be looking for any guidance on the central bank's bond-buying program put in place to support the Italian and Spanish markets.

In London the Bank of England is under pressure to help shore up the economy with a second round of quantitative easing. Analysts do not expect the BoE to move on Thursday but the Institute of Directors (IOD) wants action to support growth.

"The downside economic risks are sufficiently great to warrant an extension in quantitative easing now, in order to avoid the risk of a double-dip recession," Graeme Leach, the chief economist of the IOD, told the Wall Street Journal on Thursday.

The United States is calling on Europe to take decisive action ahead of Friday’s G7 meeting of finance ministers in France. Tim Geithner, the US Treasury Secretary is expected to push his European counterparts to act as he outlines America’s latest stimulus measures.

The Dutch Prime Minister has called for a European 'Budget Tsar' with powers to dictate taxes and spending within the euro zone. In an interview with the Financial Times Mark Rutte said a new “commissioner for budgetary discipline” should have significant powers to ensure fiscal targets are met.