(MENAFN- AFP) Investors turned cautious in Europe on Thursday amid jitters ahead of a widely-expected announcement by the European Central Bank to inject as much as 1.0 trillion euros of stimulus into the flat eurozone economy, dealers said.
However there was much uncertainty ahead of the announcement about the size and structure of a possible ECB programme of bond-buying known as quantitative easing. Such a programme, which is tantamount to printing money, would aim to fight off the threat of deflation and stimulate growth.
In late morning deals, London's benchmark FTSE 100 index of top companies rose 0.14 percent to 6,737.40 points.
On the downside, Frankfurt's DAX 30 fell 0.28 percent to 10,270 points and the CAC 40 in Paris lost 0.31 percent to 4,470.70 compared with Wednesday's close.
The Milan stock market however rose 0.79 percent and Madrid gained 0.44 percent in value.
In foreign exchange activity meanwhile, the European single currency firmed to $1.1624 from $1.1607 late in New York on Wednesday.
"Will they or won't they It's all about the ECB today, as the QE question will finally be answered," said analyst Alastair McCaig at trading firm IG.
Eyes are firmly on the ECB monetary policy meeting, with expectations high that it will unveil a QE programme of asset-purchasing.
Media speculation is building that the ECB will unveil proposals to buy 50 billion euros of sovereign bonds per month until the end of 2016.
According to analysts at UniCredit, the market is expecting the ECB to unveil a programme worth a total of between 500 and 800 billion euros.
- 'Biggest shocks' -
"It would be one of the biggest shocks in recent monetary policy history if the European Central Bank (ECB) did not announce some form of quantitative easing (QE) today," added Jonathan Loynes, chief European economist at research consultancy Capital Economics.
He added: "Given the importance of market effects as a key aspect of QE, the initial market reaction could be a strong steer to its ultimate impact.
"A bigger than expected programme should prompt a drop in the euro and some rise in the inflation expectations component of bond yields.
He added that "the relative behaviour of core and peripheral bond yields will presumably depend on the degree of risk-sharing. Rising equity prices would obviously be a good sign."
Speculation has been rife for several months that more stimulus would be announced as inflation continues to weaken -- and last month prices actually fell for the first time in five years.
Most analysts expect that ECB president Mario Draghi will use his most powerful policy tool yet in the battle against deflation in the euro area -- although they have warned that high hopes could be dashed.
"Yesterday (on Wednesday) the markets were rife with rumours that the European Central Bank was set to announce a 50 billion euro monthly quantitative easing policy today," added McCaig.
"The accuracy of these rumours will only become completely transparent ... today when we hear from Mario Draghi."
The expected QE programme comes after eurozone inflation turned negative in December, stoking fears that the region is on the brink of a dangerous spiral of falling prices.
Loynes added that the ECB could decide to pump as much as 1.0 trillion into the ailing eurozone economy.
"A programme of 1.0 trillion or above conducted over a year or less, with full risk-sharing, specific objectives and the prospect of a further extension would surprise the markets on the upside," Loynes said.
"Slower purchases of 500 billion euros or less, with no risk-sharing and little indication of more to come, would be a major flop."
Consumer prices dropped by 0.2 percent in December in the eurozone, dragged down by plummeting oil prices.
That was the first time that inflation has been in negative territory since October 2009 amid the global financial crisis.
In a deflationary spiral, businesses and households delay purchases, throttling demand, triggering recession and causing companies to lay off workers.
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