Europe midday: Stocks nudge up ahead of ECB rate announcement

European stocks nudged higher as investors looked to the European Central Bank’s rate announcement amid expectations of further stimulus.

At midday, the benchmark Stoxx Europe 600 index and France’s CAC 40 were both up 0.2%, while Germany’s DAX was 0.3% higher.

At the same time, West Texas Intermediate was down 0.7% to $38.02 a barrel and Brent crude was 1.1% weaker at $40.63.

“With a raft of new stimulus measures expected investors will be hoping the ECB meet increasing expectations however, if they come up short like we witnessed in December we will see this have a significant negative impact on markets and we may be in for a volatile session,” said Andy McLevey at Interactive Investor.

The European Central Bank rate announcement is at 1245 GMT, followed by the press conference with chief Mario Draghi at 1330 GMT.

Market participants are pricing in a 10 basis points cut to the deposit rate, an extension of asset purchases and maybe even the introduction of tiered interest rates.

Societe Generale expects the central bank to cut the deposit rate by 20 basis points and extend the LTRO for one year, but it does not expect the pace of asset purchases to be increased.

“There are other options such as a corporate bond purchase programme or expanded collateral eligibility, but these would have limited economic effect.

“Our main concern is that, whilst the bank will continue to signal its willingness to do whatever it takes, we think the ECB is approaching the effective limit of what it can do.”

Meanwhile, as some investors warned the ECB could disappoint like it did in December, Goldman Sachs seemed fairly confident it would deliver.

The bank – which expects to see a 10 basis-point cut to the deposit rate, a €10bn increase in the monthly asset purchases and another six-month extension of the QE programme – highlighted three factors that make this meeting different to the last.

It said the central bank will have had more time to digest low inflation data and pointed out that Draghi has been fairly quiet in the run-up to this meeting, unlike last time when he was pretty vocal in saying inflation needed to be brought up quickly.

Finally, GS said noted the fact the Fed was likely to stand pat on rates at next week’s meeting, as opposed to last time when the rate hike was around the corner.

In corporate news, Aviva was the standout gainer on the FTSE 100 after the insurer reported better-than-expected full year profit.

Societe Generale edged up as it announced plans to cut 550 jobs by 2020 in an attempt to streamline its operations and posted a drop in 2015 profit.

French supermarket operator Carrefour slipped despite posting a rise in full year operating profit.

German resources group K+S was in the red after it cautioned it would post a big drop in operating profit this year.

Shares in French media company Lagardere tumbled after disappointing results.