Europe midday: Stocks push higher as investors bet on more ECB stimulus

At midday, the benchmark Stoxx Europe 600 index was up 0.7%, France’s CAC 40 was 1.3% higher and Germany’s DAX was up 0.9%, ahead of the ECB rate announcement at 1245 GMT, which will be followed by president Mario Draghi’s press conference.

“ECB president Mario Draghi has made it perfectly clear that further stimulus measures are being drawn up in preparation for this meeting. The result is that the question today is not whether the ECB will ease, but how far it will go,” said Craig Erlam, senior market analyst at Oanda.

“The problem the ECB may now face is that the need for stimulus has been so talked up that only something extremely bold will meet market expectations. Fortunately, under Draghi, the ECB does have history of exceeding market expectations when it comes to monetary stimulus and I expect the same to happen again today.”

Erlam said a combination of a cut to the deposit rate and an expansion of the central bank’s quantitative easing program may be necessary to meet market expectations, adding that this would be “the sensible option”.

Meanwhile, the US central bank looked to be heading in the opposite direction.

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 labour 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, figures released by Eurostat showed retail sales in the Eurozone declined unexpectedly in October.

They fell 0.1% month-on-month compared with analysts’ expectations for a 0.2% gain and a 0.1% drop the previous month.

On a year-on-year basis, retail sales grew 2.5% last month compared with a 2.9% advance in October and short of consensus expectations for a 2.6% gain.

Elsewhere, data showed the economic recovery in the euro bloc continued in November, although price pressure remained largely muted.

The final Markit Eurozone purchasing managers’ index rose from 53.9 in October to 54.2 in November, registering the 29th consecutive month of expansion, The figure was a touch below the flash estimate but slightly above the 53.9 reading registered in the previous three months.

Still to come, investors will be listening out for speeches from Fed chair Yellen and vice chair Fischer, while US initial jobless claims are at 1330 GMT, followed by industrial new orders and ISM non-manufacturing at 1500 GMT.