January 22, 2015 / 11:42 AM / 3 years ago

FTSE hits 7-wk high in cautious trading ahead of ECB meeting

* FTSE 100 rises 0.3 pct to 7-week high

* Cautious trading ahead of ECB meeting

* Royal Mail top gainer after update (Updates prices)

By Atul Prakash and Alistair Smout

LONDON, Jan 22 (Reuters) - Britain’s top share index hit a seven-week high in cautious trading on Thursday ahead of the European Central Bank’s policy meeting at which it is likely to announce a government bond buying scheme to try to boost the region’s economy.

A euro zone source said on Wednesday the ECB’s Executive Board has proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month from March - the last big policy tool for breathing life into the flagging euro zone economy and fending off deflation.

“It is likely that the ECB measures are discounted and we might see an initial rally on the confirmation, but then a sell-off,” said John Smith, senior fund manager at Brown Shipley.

The blue-chip FTSE 100 index was up 0.3 percent at 6,748.56 points by 1115 GMT after rising to 6,750.65 points, the highest level since early December.

Expectations of the ECB’s quantitative easing programme, printing money to purchase the sovereign bonds, have helped the benchmark index to advance for a sixth straight session on Thursday. The index is up nearly 3 percent so far this week.

The ECB’s 25-member policymaking Governing Council will discuss the proposal later in the day before the central bank President Mario Draghi holds a news conference at 1330 GMT.

Among the main individual movers, Royal Mail rose 4.4 percent, the top gainer in the FTSE 100, after saying group revenue for the nine months to Dec. 28 rose 1 percent, marking a slowdown from the half year as an improved parcels performance was offset by lower letter volumes.

“Although initially viewed as a bit lacklustre, an improvement in parcel delivery numbers which have hindered performance for so long, are being well received,” Mike van Dulken, head of research at Accendo Markets, said.

British insurer RSA rose 3.1 percent to 466 pence, with traders saying the stock was helped by a a note from Credit Suisse raising its stance to “outperform” from “neutral” and increasing its target price to 525 pence from 450 pence.

“The fundamental appeal of the UK life and savings companies is underpinned by low interest rate risk, solid growth dynamics and attractive dividend profiles,” analysts at Credit Suisse said in the note.

Mid-cap Oxford Instruments slumped 29 percent after saying it expected higher revenue for the second half, but would fall short of market expectations due to weak trading in Russia and Japan. (Editing by Toby Chopra)

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