Britain's leading shares are forecast to open modestly higher on the last full-trading session of 2011, with financial bookmakers expecting the FTSE 100 <.FTSE> index to open up 2-4 points, or 0.1 percent on Thursday, recouping the previous session's falls as investors square positions ahead of the year-end.
Investors are expected to remain cautious, however, ahead of another key debt auction in Italy, which plans to sell up to 8.5 billion euros (7.1 billion pounds) of bonds, including new tranches of its three-year and 10-year benchmarks, in its first long-term debt sale since ECB's huge three-year funding operation last week.
Despite yesterdays Italian 6 month bill auction being hailed as a success by some, the real test for the markets appetite will be today's longer dated auction of 3 and 10 year debt, said Jonathan Sudaria, Night Dealer at Capital Spreads.
With yields already hovering just above 7 percent and banks making it clear they are reluctant to expose themselves to anything without the credit rating of a central bank, a poor auction could see another day of falls, particularly as volume remains thin, Sudarias added.
The UK blue chip index closed down 5.30 points, or 0.1 percent on Wednesday at 5,507.40, albeit in thin volumes, weighed on by falls from riskier banking and mining assets which more than offset gains in defensive stocks.
U.S. blue chips <.DJI> fell more than 1 percent on Wednesday, retreating in thin trade after a hefty year-end rally last week, while the S&P 500 <.SPX>erased gains for the year on renewed concerns about the euro zone's financial health.
Asian stocks were modestly lower on Thursday, with the MSCI ex-Japan Asia Pacific index <.MIAPJ0000PUS> off 0.3 percent, weighed down by weaker energy and basic material stocks.
Copper prices fell for a second straight session on Thursday as a firm dollar weighed, while Brent crude eased back slightly, after a loss of nearly $2 on Wednesday.
No important British data will be released on Thursday, so investor attention will be focused across the Atlantic on the latest U.S. weekly jobless claims, due at 3:00 p.m. (British time), November U.S. pending home sales at 3:00 p.m., and the December Kansas City Fed survey at 4 p.m.
(Reporting by Jon Hopkins)