London midday: Stocks gain as Eurozone inflation miss gives ECB green light on QE-expansion

London stocks rose as worse-than-expected Eurozone inflation data increased the chance of further quantitative easing by the European Central Bank.

Eurozone inflation rose 0.1% in the year to November, unchanged from the previous month, according to the 'flash' estimate from Eurostat on Wednesday. Analysts had predicted year-on-year growth of 0.2%, adding pressure on the ECB ahead of its policy decision on Thursday. The ECB is targeting inflation of just below 2%.

ECB President Mario Draghi is expected to announce new measures to counter prolonged low inflation, including an increase in monthly asset purchases, an extension to the quantitative easing programme beyond September 2016 and a cut to the deposit rate.

"November’s weaker-than-expected Eurozone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow’s policy meeting," said Jonathan Loynes, chief European economist at Capital Economics.

In the UK, the British Retail Consortium revealed that a drop in British shop prices accelerated in November. Prices declined 2.1% over the 12 months to November, worse than October's 1.8% decrease.

Markit’s construction purchasing managers’ index declined from 58.8 in October to 55.3 in November, comfortably below the 58.5 reading analysts had expected. A reading above 50 signals an expansion while a level below that suggests growth.

Across the Atlantic, ADP releases its employment report at 1315 GMT which is forecast to reveal employers added 190,000 jobs in November. The figures come ahead of Friday’s all-important non-farm payrolls report.

Meanwhile, Federal Reserve Governor Lael Brainard has said the central bank should go slow in raising interest rates. Speaking at the Stanford Institute for Economic Policy Research, he said there may be confines to the Fed’s ability to tighten monetary policy.

Fed policymakers Dennis Lockhart and John Williams may elaborate on interest rates when they speak separately in Florida at 1310 GMT and Portland, Oregon at 2040 GMT, respectively.

On the company front, Morrison Supermarkets was sitting lower as the London Stock Exchange said the group is likely to be moved from the FTSE 100 to the FTSE 250 as it suffers from a price war. The index updates its list after the close on Wednesday.

The Sage Group dropped after reporting a fall in statutory operating profits due to the impact of currency fluctuations in Sage's key markets of Europe, the US and Brazil.

Greene King rallied after posting a rise in first half pre-tax profit and revenue thanks in part to the integration of Spirit Pub Company.

Moneysupermarket.com was in the red after founder Simon Nixon sold a 5.8% stake in the comparison website, pocketing a gross £98m.

Astrazeneca advanced as Morgan Stanley double upgraded it to ‘overweight’ from ‘underweight’ and said it was among its top picks. The bank, which lifted AZN’s target price to 5,300p from 4,300p, said it has underperformed dramatically over the past year but looks set to reap the rewards of heavy investment, at an attractive valuation.