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LONDON (Alliance News) - London shares were higher Thursday midday, as investors await the European Central Bank's monetary policy decision, which analysts expect to include both an interest rate cut and a longer period of quantitative easing.

The decision is expected to be announced at 1245 GMT, followed by a press conference with President Mario Draghi at 1330 GMT.

Analysts are largely expecting Draghi to announce a cut to its deposit rate which is currently at -0.20%, as well as an extension to the bank's asset purchase programme beyond September 2016.

"It looks like a done deal that the ECB will deliver further easing," said Reinhard Cluse, economist at UBS.

"We expect the ECB to cut the deposit rate by 10 basis points to -0.3% and extend the QE programme (EUR60 billion per month) by 3-6 months beyond September 2016, while leaving the door open for more accommodation in the future, if needed," added UBS's Cluse.

Supporting this widely held view, preliminary inflation data showed on Wednesday that eurozone consumer prices grow by less than forecast in November.

A report from Eurostat showed the eurozone consumer prices index rose 0.1% year-on-year, the same rate as seen in October, marking the second consecutive rise in prices after the 0.1% fall in September. However, core prices, which exclude energy, food, alcohol and tobacco, eased to 0.9% year-on-year from 1.1% a month ago. Core inflation was forecast to remain at 1.1%.

The FTSE 100 index was up 0.3% at 6,441.23 point at midday. The mid-cap FTSE 250 was up 0.4% at 17,628.57, and the AIM All-Share was up 0.1% at 742.43.

European stocks were outperforming those in London ahead of the ECB decision, with the CAC 40 index in Paris up 1.3% and the DAX 30 in Frankfurt up 0.9%.

In Asia, the Nikkei 225 index in Tokyo closed flat, the Hang Seng in Hong Kong ended down 0.3% and the Shanghai Composite up 1.4%.

US stock futures pointed higher, with the Dow 30 index seen up 0.5%, the S&P 500 up 0.6% and the Nasdaq 100 called up 0.7%.

Such an open would allow Wall Street take back some of the losses seen Wednesday after Federal Reserve Chair Janet Yellen signalled the US central bank is on track to raise interest rates at its December 15-16 meeting. Yellen stopped short of explicitly saying the Fed will hike rates this month, but acknowledged that conditions for tightening are on the verge of being met.

"I currently judge that US economic growth is likely to be sufficient over the next year or two to result in further improvement in the labour market," Yellen said at the Economic Club of Washington.

Focus will be back on the Fed chair later Thursday, as she testifies before the Joint Economic Committee in Senate at 1500 GMT. In the US economic calendar, alongside Yellen's testimony, there are continuing and initial jobless claims data due at 1330 GMT, before US factory orders and ISM non-manufacturing Purchasing Manager's Index due at 1500 GMT.

A chunky economic calendar for Thursday has already provided services PMI readings from several European countries and the UK.

The UK service sector activity expanded at the fastest pace in four months in November, according to survey figures from Markit Economics. The Chartered Institute of Procurement & Supply/Markit services PMI rose more-than-expected to 55.9 in November from 54.9 in the previous month. Economists had expected the index to increase slightly to 55.0.

"A welcome upturn in service sector expansion helped counter slower growth in manufacturing and construction in November, suggesting the UK continues to enjoy the 'Goldilocks' scenario of solid economic growth and low inflation," said Chris Williamson, chief economist at Markit.

Following some gyrations after the data, the pound came back to the levels just prior, quoted at USD1.4925 Thursday midday, having stood at USD1.4938 at the London equities close Wednesday.

Meanwhile, the eurozone services PMI final reading for November improved marginally to 54.2 from 54.1 in October, below the initial score of 54.6. The same from Germany came in at 55.6, up from 54.5 in October and in line with flash estimate, while the reading for France dropped to 51.0 from 52.7 in October, revised down from 51.3.

The euro was lower against the dollar, quoted at USD1.0554 at midday, have been at USD1.0578 late Wednesday in London.

On the London Stock Exchange, stock movements were mainly driven by broker rating changes, but with miners trading lower as the gold, silver, zinc and copper prices all sunk on Thursday morning.

BHP Billiton was down 2.2%. Antofagasta, down 1.9%, Anglo American, down 1.1%, Fresnillo, down 1.4%. Gold was quoted at USD1,050.56 an ounce, having hit a morning low of USD1,046.

Whitbread was up 2.2% at 4,798.00 pence after Credit Suisse lifted its price target on the owner of hotel chain Premier Inn and coffee shops Costa Coffee to 5,800.00 pence from 5,500.00p, keeping an Outperform rating.

Royal Bank of Scotland Group, up 2.1%, was benefiting from an upgrade to Neutral from Underperform by Macquarie, according to traders. Meanwhile, fashion retailer Next was up 1.0% at 8,095.68p after Goldman Sachs raised it to Buy from Neutral and lifted its price target to 8,700.00p from 7,400.00p.

At the other end of the blue-chip index, Ashtead Group was down 2.3% after Exane BNP cut the industrial equipment rental company to Neutral from Outperform, while Primark owner Associated British Foods was down 0.8% after Goldman Sachs cut it to Sell from Buy.

In the FTSE 250, department store operator Debenhams was the worst performer, down 7.4% after Goldman cut the stock to Sell from Neutral.

Go-Ahead Group was the best mid-cap performer, up 3.9%. The transport operator said its 65%-owned London Midland arm has secured an extension of the franchise to run the West Midlands passenger train service in the UK until October 2017.

The direct award by the UK's Department of Transport has been agreed, the company said, and will include schemes to benefit passengers throughout the new franchise, including two extra evening services on weekdays between London and the Trent Valley, earlier services to Birmingham on Sunday mornings and free WiFi on long-distance journeys.

On AIM, Starcom was up 60%. The wireless monitoring products company said it has signed a supply and support deal with Pinnacle Systems for its Helios fleet tracking units. Pinnacle, a Nairobi, Kenya-based road safety, fleet management and vehicle security systems company, will buy thousands of Helios units over a three-year period in a deal valued at around USD5.5 million for Starcom.

DiamondCorp was off 17%. The diamond miner late Wednesday said it has secured formal approval to reschedule its loan with the Industrial Development Corp of South Africa and said it has proposed raising GBP4.0 million via a share placing. The company said it has secured approval from the IDC to reschedule its ZAR220.0 million loan held by its Lace Diamond Mine.

Under the terms of the new agreement, ongoing capitalisation of interest previously payable in 2016 will be carried out, while no capital repayments will be made before the start of 2017. In addition, DiamondCorp said it has proposed raising up to GBP4.0 million via a share placing, to be conducted via a bookbuilding process which will begin immediately.

By Daniel Ruiz; danielruiz@alliancenews.com

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