World stocks, euro moves up ahead of European Central Bank stimulus plan decision today

BRUSSELS, Belgium - World shares climbed to a near three-month high on Thursday as encouraging China data and a record high Wall Street kept traders upbeat ahead of an expected extension today of the European Central Bank's already generous stimulus program.

There is an outside chance the bank could signal an eventual scaling down of the aid, but most economists expect the European Central Bank to extend its main stimulus program in an effort to secure economic growth and inflation in a region beset by political uncertainties.

The ECB is aiming to boost stubbornly weak inflation, but with much of its firepower exhausted it may also debate sending a token signal about the eventual end of such purchases.

Emphasizing abundant risk, including from elections in potentially four of the euro zone's five biggest economies, ECB President Mario Draghi is expected to argue that premature tapering - or slowly ending - bond-buying could abort a still timid recovery, unravelling the impact of the purchases.

Analysts say the central bank for the 19 euro countries is likely to extend by at least six months past March the earliest end date of its stimulus program, in which it buys 80 billion euros ($86 billion) in bonds a month.

"Post the U.S. elections and Italian referendum the market is overwhelmingly expecting unchanged monetary policy," said Aberdeen Asset Management Investment Manager Patrick O’Donnell.

A decision against the extension could worsen market concerns about Italy, where Prime Minister Matteo Renzi has resigned and there are concerns about the banks.

The ECB will also issue new forecasts for growth and inflation, which it wants to push up to healthier levels. 

At last count, inflation was 0.6 percent, far below the aim of just under two percent.

The euro, meanwhile, hit a three-week high in anticipation of the announcement of the monetary policy.

Against the dollar the euro had broken through $1.08 till a while ago, after hitting lows in the last month of $1.0506. 

The pound/euro spot exchange rate was broadly flat for the day.

The ECB is expected to extend the program by six months. But if it opts for an extension of only three-months, according to Kathleen Brooks, research director at City Index, the euro could potentially rise to $1.0887, its 50-day simple moving average. 

“Although the ECB may not want to continue its QE program, it really has no choice,” Brooks, research, in a note.

“We expect Draghi to reiterate that tapering is coming, but what he may not say is that with so many risks, particularly around the Italian banking sector, now would not be an expedient time for the ECB to reduce its monthly bond purchases.”

European stocks, in particular, hovering around their highest in more than two months.

The Stoxx Europe 600 index SXXP, picked up 0.2 percent at 348.57, led by telecommunications and technology shares. 

But the overall gain was limited by losses for oil and health care stocks.

The pan-European benchmark on Wednesday rose 0.9 percent to end at 347.70, the highest close since Sept. 22, according to FactSet data. 

The win was the index’s third in a row.

The Euro Stoxx 50 Index has climbed 3.1 percent in the last month of 2016. 

Britain's FTSE 100 gained 0.2 percent to 6,914.73 and France's CAC 40 added 0.3 percent to 4,709.35. Germany's DAX rose 0.6 percent to 11,051.22. 

Futures augured a tepid start on U.S. markets. 

Dow futures gained 0.1 percent while S&P futures also added 0.1 percent.

The ECB has already spent 1.4 trillion euros ($1.5 trillion) buying bonds and has been at pains in the past month to emphasise that maintaining easy financing conditions is 'crucial' as underlying inflation seems to be stuck below 1 percent.

The ECB will announce its rate decision at 12:45 p.m. London time, or 7:45 a.m. Eastern Time. 

ECB President Mario Draghi will hold a press conference at 1:30 p.m. London time, or 8:30 a.m. Eastern Time.

The European Union has witnessed economic and political turmoil in recent months. 

Eurozone economic growth is, however shrugging off Britain's decision to leave the European Union, and Germany, the bloc's growth engine, seems to be picking up speed again.

Ironically, the collapse of Italy's government this week may actually hasten instead of delay the recapitalisation of ailing lender Monte dei Paschi, much to the ECB's relief. 

It has pointed to weak banks as a key obstacle to transmitting stimulus.

Italian bank shares are up over 10 percent this week, and the yield differentials between the sovereign bonds of Germany and peripheral countries like Italy and Spain have narrowed since Sunday's vote.

Economic activity in the eurozone could, however, suffer if U.S. president-elect Donald Trump implements protectionist promises made on the campaign trail.

Asian markets

Major Asian benchmarks were higher today in line with global cues.

Japan's Nikkei 225 gained by 0.9 percent at 18,654.93 while South Korea's Kospi jumped by 1.3 percent at 2,016.99. 

Hong Kong's Hang Seng index gained 0.65 percent, or 147.46 points, at 22,948.38 by the break. 

The Shanghai Composite Index dropped by 0.05 percent, or 1.71 points, at 3,220.53 and the Shenzhen Composite Index, dipped by 0.23 percent, or 4.84 points, at 2,085.49. 

India’s NSE Nifty was trading around 1.19 percent higher at 8,199.25 points and BSE Sensex was trading at 0.98 percent higher at 26,494.27 points.

Australia's S&P/ASX 200 advanced by 1.2 percent to 5,545.50, with banks and miners among the leading gainers

The major miners advanced after iron ore prices rose more than three percent overnight. 

BHP Billiton added more than one percent, Rio Tinto gained almost four percent and Fortescue Metals was higher by more than three percent.

In the banking space, ANZ Bank, Commonwealth Bank, Westpac and National Australia Bank were higher in a range of 0.8 percent to almost two percent.

On Wall Street, markets closed higher on Wednesday. 

The Dow Jones industrial average jumped 297.84 points, or 1.5 percent, to 19,549.62. The Standard & Poor's 500 index rose 29.12 points, or 1.3 percent, to 2,241.35. 

The Nasdaq composite recovered from an early loss to gain 60.76 points, or 1.1 percent, to 5,393.76