By Simon Miller

European markets were up this morning as investors gained confidence over newspaper reports that the European Central Bank (ECB) was preparing to buy massive amounts of Italian and Spanish debt to shore up the eurozone.

The apparent action would be a significant shift in policy and European markets responded positively to the news with the FTSE 100 up 19.78 at 5,844.15, the CAC 40 rose 26.7 to 3,507.28 while EuroStoxx 50 saw a rise of 17.05 to 2,483.37 (as of 10.37 BST).

ECB officials are reported to be examining proposals to cap on Italian and Spanish bond yields, among other options and the ECB’s director-general of market operations, Ulrich Bindseil, is spearheading the plans in talks with experts from the ECB’s family of national central banks. Market, monetary policy and risk management committees are working to put together a draft.

“They don’t take sides. They just lay out the pros and cons and leave it to the governing council to decide,” one EU diplomat told the Daily Telegraph.

Sentiment spread to the euro which saw its value hit two-week high against the dollar while this morning Spain sold €4.5bn of 12- and 18-month T-bills, with average yields falling to 3.07% on the 12-month bill from 3.918% in July while the 18-month paper fell to 3.335% compared with 4.242% previously.

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