European Stocks Cautious Ahead of Central Bank Decisions

European stocks traded mixed in the early minutes as investors remained cautious ahead of European Central Bank and Bank of England interest rate decisions and economic policy-related comments.

The pan-European FTSEurofirst 300 index gained 0.05 percent to 1,152.75.

The UK's FTSE 100 fell 0.2 percent while Germany's DAX eased 0.02 percent. France's CAC-40 was down 0.09 percent.

Italy's FTSE MIB gained 0.2 percent, while Spain's IBEX added 0.3 percent.

The single currency remained firm against the dollar, trading at about $1.35.

Most major Asian markets had ended lower earlier, led by Japanese stocks as the yen paused its plunge against its peers after dropping to a near three-year low the previous day.

In Tokyo, the Nikkei average ended 0.93 percent lower at 11357.07, while South Korea's KOSPI fell 0.23 percent to 1931.77. Australia's S&P/ASX 200 added 0.30 percent to 4935.70.

China's Shanghai Composite Index fell 0.66 percent to 2418.53, with Hong Kong's Hang Seng index slipping 0.32 percent to 23182.03 towards close.

The ECB is set to meet for a policy review during the day, and analysts expect the central bank to hold its interest rates steady while speculating on the positive financial market trends and the single currency's strengths against the dollar.

Though the ECB President Mario Draghi is not expected to announce further stimulus initiatives, his comments on the bloc's recovery optimism and the euro could dominate financial market sentiments. Draghi is also expected to be questioned over the recent Italian banking scandal.

The Bank of England will also meet for a policy review and its interest rate decision is expected by mid-day. No changes in rates are expected for the moment; however, traders will be keeping a close watch on the incoming central bank governor Mark Carney's meeting with policy makers at a parliamentary committee, where he is expected to present plans for future central bank policies.

A two-day EU summit kicks off in Brussels later in the day to reach an agreement on the bloc's budget for the coming years. It is the first meet after David Cameron announced his referendum plans.

Traders are also awaiting British and German industrial output figures, set for release this morning. Spanish bond sales, which look to collect about 4.5bn euros, are also under the spotlight as traders speculate on the impact of recent political scandals on investor sentiments.

In Asia, the Japanese currency's movements remained in focus as traders looked to book profits ahead of the Chinese New Year festival season. The yen plunged to about a three-year low against the dollar and the euro earlier this week, after the Bank of Japan's governor Masaaki Shirakawa announced plans to step down from his post earlier than expected.

Shirakawa's departure plans had boosted stimulus optimism, prompting investors to sell the yen in the previous session, but the dollar picked up early in the day. The greenback traded at 93.69yen after climbing as much as 94 yen.

Markets in China will remain shut during the next week. In a bid to meet an anticipated surge in cash demand during the festival season, the People's Bank of China has injected a record 860bn yuan through reverse purchase agreements. Although the monetary injection measure is short term in nature, analysts point out that the initiative further reiterates the central bank's open market operations to support banks, companies and traders.