Investors see ECB abandoning monetary tightening policy

Most investors also expect the ECB to announce an expansion of its bond-buying programme

Global stock markets are pinning their hopes on the European Central Bank, expecting it to give up plans to tighten monetary policy and take decisive steps to stop the eurozone crisis from spreading to larger economies such as Spain.

Most investors also expect the ECB to announce an expansion of its bond-buying programme.

However, speaking at a hearing of the economic and monetary affairs committee of the European parliament in Brussels on Tuesday, ECB president Jean-Claude Trichet refrained from commenting on the bond-purchase programme but said it was "ongoing" and that the governing council would make decisions on its future path.

Nevertheless, the remarks were interpreted by some as a signal that the central bank is prepared to step up its bond purchases. So far it has spent 67bn euros (£56bn) on purchasing government bonds.

The euro posted its biggest one-day rise in more than a month on Wednesday while the German Dax added 2.7 per cent, the FTSE 100 was up 2 per cent and the CAC 40 in Paris rose 1.6 per cent.

World stocks rose, pushing markets up by an average 2 per cent to recover some of the losses registered following the €85bn bailout of the Irish economy.

Global investor sentiment has also been cheered by reports that the US government is prepared to allow more International Monetary Fund money to be used to help indebted eurozone countries.