Europe open: Stocks edge higher as investors look to ECB rate announcement

European stocks edged higher in early trade as investors looked to the rate announcement from the European Central Bank.

At 0845 GMT, the benchmark Stoxx Europe 600 index was up 0.2%, France’s CAC 40 was 0.6% higher and Germany’s DAX was up 0.4%.

As the rate decision loomed, analysts grew increasingly sceptical that ECB chief Mario Draghi would be able to deliver.

“It is action day for Draghi as market participants eagerly await the ECB’s actions to do ‘what it must’ to raise the inflation path. But with high expectations comes a high risk of disappointment,” said Societe Generale.

“We expect a broad set of measures, including a 10 basis points deposit rate cut and more asset purchases (€70-80bn).”

On Wednesday, Federal Reserve Bank of Atlanta president Dennis Lockhart said the case for raising interest rates this month was “compelling”, while Chairwoman Janet Yellen also signalled that she was ready for a hike.

“On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labor market,” Yellen said in a speech.

“Continuing improvement in the labor market helps strengthen confidence that inflation will move back to our 2% objective over the medium term.”

In corporate news, Royal Dutch Shell won approval from Australia’s Foreign Investment Review Board for its proposed $70bn takeover of BG Group.

Barclays edged up as it announced an agreement to sell its Italian retail banking network.

Solvay was under the cosh after the Belgian chemicals company launched a share issue to complete the funding for its purchase of Cytec Industries.

Aluminium producer Norsk Hydro was a little weaker after launching new cost-cutting measures to combat declining aluminium prices.

On the data front, Eurozone retail sales are at 1000 GMT and the ECB rate announcement is at 1245 GMT.

In the US, initial jobless claims are at 1330 GMT, followed by industrial new order and ISM non-manufacturing at 1500 GMT. Investors will also be listening out for speeches from Fed chair Yellen and vice chair Fischer.