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updated: 8/2/2012 6:50 AM

Markets in wait-and-see mode

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Associated Press

LONDON -- Financial markets were in a tentative mood Thursday as investors waited to hear what the European Central Bank plans to do to get on top of the continent's crippling debt crisis.

Hopes that the ECB will back new measures were stoked a week ago when ECB chief Mario Draghi vowed to do what it takes to keep save the euro. Many expect the bank at the very least to resume its bond-buying program to keep a lid on Spain's and Italy's borrowing costs.

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Draghi's comments sparked a bout of euphoria in the markets, particularly in the bond markets of Spain and Italy. Both saw their borrowing rates fall to more manageable levels. The interest rate, or yield, on Spain's 10-year bonds is at 6.66 percent -- below the 7 per cent level that many market-watchers consider is unsustainable in the long term.

However, much of the positive momentum generated by Draghi's comments has lost its steam ahead of the bank's monthly policy statement later Thursday. There are concerns that, as so often before in the debt crisis, Europe's leaders will under-deliver on their bold verbal indications.

"Some investors are tentative given previous disappointments and any surprise could see a move to the downside," said Matthew Nelson, a sales trader at Spreadex.

In Europe, Germany's DAX was 0.1 percent lower at 6,745 while the CAC-40 in France rose 0.1 percent to 3,325. The FTSE 100 index of leading British shares was 0.3 percent higher at 5,727.

The euro was fairly solid ahead of Draghi's statement to the press. It was 0.2 percent higher at $1.2271.

U.S. stocks were poised to recoup Wednesday's losses, with both Dow futures and the broader S&P 500 futures 0.2 percent higher.

U.S. markets were left unimpressed by the Federal Reserve's statement on Wednesday. The Fed held off from enacting another monetary stimulus and even failed to extend its guidance of keeping interest rates at super-low levels into 2015.

However, the Fed did appear to signal a growing inclination to take further steps to lift the U.S. economy out of its funk. It noted that growth had slowed over the first half of the year.

"There may have been some disappointment on Wall Street yesterday .... but evidently this is looking rather short lived," said Fawad Razaqzada, market strategist at GFT Markets.

Earlier in Asia, Japan's Nikkei 225 stock average finished up 0.4 percent at 8,653.18 while Hong Kong's Hang Seng dropped 0.7 percent to 19,690.20. South Korea's Kospi shed 0.6 percent to 1,869.40 and China's Shanghai Composite fell 0.6 percent to 2,111.18.

Oil markets were fairly subdued ahead of the ECB statement -- benchmark crude for September delivery was up 14 cents at $89.05 a barrel in electronic trading on the New York Mercantile Exchange.

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