London: The euro sank to a two-year low point on Wednesday as investors prepared for the ECB to tip its hand on measures to stimulate a stagnating eurozone economy.
The prospect of quantitative easing from the ECB helped lift eurozone stocks, but London slipped as the government signalled more austerity measures despite higher growth forecasts.
The Paris CAC 40 edged up 0.08 percent to finish the day at 4,391.86 points, while in Frankfurt the DAX 30 climbed 0.38 percent to 9,971.79.
Madrid jumped 1.18 percent and Milan rose 1.0 percent.
London`s benchmark FTSE 100 index shed 0.38 percent to 6,716.63 points, as markets chose to focus on austerity and busted deficit targets rather than growth forecasts being revised upwards.
"The FTSE`s immediate response to the autumn statement was negative, with the implicit threat of continued austerity if the Conservatives were re-elected resulting in a bearish sentiment around the UK index," said analyst Connor Campbell at Spreadex.
He said the euro was buffetted by expectations that the ECB will at least signal if not announce additional stimulus measures at its meeting on Thursday.
Eurozone government bond yields fell on the expectations of the ECB jumping into the market, with the rate of return to investors on Spain`s 10-year bond hitting a record low of 1.804 percent. Italy`s also touched a record low of 1.853 percent.
Meanwhile the euro touched $1.2302 in late afternoon trading in London, a level last seen in August 2012. It recovered somewhat to stand at $1.2310 around 1700 GMT, still down from $1.2381 late on Tuesday.
"If firm action is announced by the ECB tomorrow, the gulf between positivity on the eurozone indices and the woes of the euro against other currencies will continue to increase," said Campbell.Meanwhile Russia`s currency hit a new record low of 54.87 rubles to the dollar and all-time trough of 67.89 against the euro. The ruble recovered somewhat to stand at 53.02 to the dollar and 65.37 to the euro in late trading.
The ruble, hit by Western sanctions against Russia over the crisis in Ukraine and plunging oil prices, suffered on Monday its worst one-day drop since Russia`s debt meltdown in 1998.
The further drop in the price of oil in recent days -- to five-year lows -- has a major impact on the Russian economy as oil and gas exports are a main source of revenue for the federal budget, and has helped push the ruble down sharply.
In other currency trading, dollar struck a seven-year high of 119.80 yen. It later stood at 119.77, up from 119.22 yen on Tuesday.
"The US dollar has derived support this week from less dovish than expected rhetoric from Fed officials who do not yet appear overly concerned by the increased downside risks to inflation from lower commodity prices and falling inflation expectations," said Bank of Tokyo-Mitsubishi analyst Lee Hardman.
On the London Bullion Market, gold rose to $1,204.75 an ounce from $1,197 on Tuesday.Meanwhile crude oil prices rebounded slightly after sharp falls on Tuesday.
The US benchmark West Texas Intermediate (WTI) for delivery in January rose 45 cents to $67.33 a barrel.
Brent North Sea crude for January added 13 cents to stand at $70.41 in late London deals.
Oil prices had tumbled by about two dollars on Tuesday after Iraq announced plans to boost the country`s crude oil exports after striking a deal with the autonomous Kurdish region.
The decline compounded the hammering taken by oil prices late last week after the Organization of Petroleum Exporting Countries left its output ceiling unchanged, despite the supply glut that has been driving prices sharply lower since June.
Oil prices also got some support from a surprise drop in US stocks of crude oil by 3.7 million barrels to 379.3 million barrels at the end of last week, a signal of stronger demand, when analysts had expected stocks to rise.
A rebound in the US services sector helped lift Wall Street.
The Dow Jones Industrial Average inched up 0.03 percent to 17,885.20 points in midday trading..
The broad-based S&P 500 rose 0.15 percent to 2,069.57, while the tech-rich Nasdaq Composite Index climbed 0.21 percent at 4,765.84.
