European stocks rise, euro drops before rate decisions

European stock markets rose but the euro fell against the dollar on Thursday, as traders looked ahead to key monetary policy decisions from the European Central Bank and Bank of England. The ECB was expected to announce a cut to its main interest rate at 1145 GMT, shortly before policy announcements from the BoE tipped to include a plan for more stimulus aimed at aiding Britain's recession-hit economy. In late morning deals, London's benchmark FTSE 100 advanced 0.28 percent to 5,700.78 points, Frankfurt's DAX 30 index rose 0.56 percent to 6,601.00 points and in Paris the CAC 40 edged up 0.10 percent to 3,271.55. In foreign exchange trade, the European single currency slid to $1.2512 from $1.2527 late Thursday in New York. "Eyes will be on Europe once again but this time it will be to see what monetary policy modifications the ECB and Bank of England will take to counter a region in decline," said Andrew Taylor, market strategist at GFT trading group. "As it stands, markets have factored in a 25 basis points cut (to the ECB rate) which means that delivering just this will have a diluted effect ... A 50 basis points cut will send a clear signal that they are working together with European leaders on a common goal to stop the rot and tackle growth." The ECB's main lending rate stands at a record-low 1.0 percent and as does the BoE's at 0.50 percent. Markets expect the BoE to announce plans to pump out an additional £50 billion ($78 billion, 62 billion euros) of stimulus over the coming months. In company news on Thursday, shares in British vehicle engineering group GKN soared 12.97 percent to 210.8 pence after the company said it had agreed to buy Volvo's aerospace engine division for £633 million. "The combination of GKN Aerospace and Volvo Aero creates a world leader in both aero structures and aero engine components," GKN said in a statement. Barclays' shares meanwhile fell 0.33 percent to 165.45 pence as Moody's cut its outlook on the British bank's financial strength rating to "negative" from "stable" after top executives resigned over an interest rate rigging scandal. France Telecom edged up 0.67 percent to 10.48 euros, as more of the group's former executives were to go before an investigating magistrate Thursday, a day after the ex-head of the company was placed under investigation over a spate of employee suicides. Europe's biggest automaker Volkswagen jumped 6.05 percent to 135.75 euros as it prepared to wrap up its takeover of German luxury sports car group Porsche two years earlier than planned in order to unlock hitherto untapped economies of scale. Asian stock markets closed mixed in subdued trading, as investors took to the sidelines following recent gains and waited for a ECB and BoE meetings. It is hoped that an ECB rate cut will build on the progress made by European leaders last week, whose surprise agreement to help the embattled single currency has lifted markets in recent days. The leaders agreed emergency measures, which included using rescue funds to directly recapitalise ailing banks as well as $150 billion in new stimulus, to help ease a eurozone debt crisis that is threatening the world economy. But with the rate cut now factored in, some analysts argued there could be disappointment without additional measures from the bank, such as the resumption of its bond-buying programme which has lain dormant for 16 weeks. "We expect the ECB to cut its main interest rate by 25 basis points to 0.75 percent," said Berenberg Bank economist Christian Schulz, but warned that such a move alone "would probably disappoint markets."