Europe close: Stocks edge higher as euro drifts lower

The majority of Europe's main equity benchmarks ended the session near their best levels of the day, as expectations built up ahead of Thursday's European Central Bank interest rate meeting, putting pressure on the euro.

By the close of trading, the benchmark Stoxx 600 index was up 0.46%, France’s CAC 40 was 0.56% higher and Germany’s DAX had gained 0.78%.

The single currency on the other had drifted lower by 0.25% to reach 1.0565, while three-month copper futures edged higher by 0.3% to $4,592.5 per metric tonne in LME trading.

"According to rumours, the ECB has seemingly been putting all its creativity to work in trying to come up with just the right measure (s).

"However, we believe that at this stage the ECB will not implement any out-of-the-box policies yet.

"Instead, we see the ECB stick to what it knows, cutting the deposit rate by 15bps and increasing monthly asset purchases by €30bn," analysts at Rabobank said in a research note sent to clients.

“With expectations set high, the risk of disappointment is also high. On the data side, inflation will likely see a moderate rise while final PMIs should point to resilient growth. In the US, we expect a string of upbeat figures that will support Fed tightening in December, with non-farm payrolls at 225,000 and unemployment at 4.9%,” Societe Generale chipped in.

As was expected by economists, German consumer prices advanced at a 0.4% year-on-year pace in November, after a rise of 0.3% in the month before.

"There is nothing here to put the ECB off increasing its policy support this week and perhaps beyond," Capital Ecocomics said following the data.

For their part, on the back of Monday's release analysts at BNP Paribas concluded that "risks to the Eurozone core HICP inflation are also to the downside."

Aberdeen Asset Management was in the red after the investment house revealed that its full year profits were hit by a slump in Asia and emerging markets equities.

Dutch insurer Delta Lloyd also slumped after it announced a €1bn rights issue and said it will not pay a final dividend this year.

On the upside, Deutsche Lufthansa rallied 1.75% following an agreement with trade union Verdi on the wages and pensions of its ground staff and personnel.

Data released earlier by Destatis showed German retail sales unexpectedly fell in October, missing analysts’ expectations.

Retail sales slipped 0.4% in real terms, compared with forecasts for a 0.3% increase. On the year, they rose 2.1%, falling short of expectations for a 2.9% gain.