By Nina Bains The euro extended gains against the dollar Thursday after the European Central Bank left interest rates unchanged for the sixth month in a row, while a successful Spanish bond auction helped to drive down the country's borrowing costs to a 10-month low. German bunds were steady after the ECB's decision, while European stocks drifted, as investors waited for the ECB President Mario Draghi's press conference to explain its decisions. "The key question is whether President Draghi will signal any future policy action at the press conference," said Jonathan Loynes, Chief European Economist at Capital Economics. "While Mr. Draghi will no doubt state again that the ECB stands ready to buy Spanish government bonds through its Outright Monetary Transactions program, the current low levels of yields mean that Spain is under no imminent pressure to request such support." Spain's 10-year government bond yield sank below 5% for the first time since March 2012 after the Spanish Treasury sold more debt than its planned amount, while at lower yields compared with previous auctions. The debt sale also attracted strong demand. Italy's funding costs on 12-month Treasury bills fell to a three-year low at auction as it sold its targeted amount. The country's next test is its bond auction Friday. Bank shares in both regions rose, with Intesa Sanpaolo, Banco Santander, BBVA and UniCredit gaining. Index-linked U.K. gilts rallied sharply after the U.K.'s top statistician said an important measure of inflation tied to interest payments on some U.K. government bonds shouldn't be changed. This surprised some investors, who had been pricing in expectations for a shift in the retail price index closer to the consumer price index. The U.K.'s 10-year index-linked gilt yield fell to a record low of -0.97% after the news. Sterling, meanwhile, was steady against the dollar, while U.K. government bonds were stable after the Bank of England left its benchmark interest rate at 0.5% and the limit for its bond-buying stimulus program at 375 billion pounds ($601.4 billion), as widely expected. "Even if the [Monetary Policy] Committee pauses for the next couple of months, we still think that more quantitative easing is likely before long," said Vicky Redwood, Chief U.K. Economist at Capital Economics. "If we are right in expecting the economic stagnation to persist throughout this year, and tensions in the euro zone to re-emerge before long, then growth concerns are once again likely to trump near-term inflation worries." In stocks, U.K. retailer Marks & Spencer slumped after reporting that like-for-like U.K. sales fell 1.8% during the third quarter, with many analysts disappointed by sales in the non-food division. Shares in rival Tesco rose after its trading update impressed. Tesco reported a stronger-than-expected rise in Christmas sales, indicating a return to growth a year after its first profit warning in more than 20 years. ArcelorMittal rose after announcing late Wednesday it will raise gross proceeds of $4 billion from its combined offering of shares and convertible notes as it aims to use the proceeds to reduce net debt. U.S. stock futures edged higher, suggesting a positive start on Wall Street, and ahead of initial jobless claims figures and wholesale inventories data. Brent crude oil prices jumped almost $1 a barrel after reports emerged that Saudi Arabia cut its oil production by nearly 5% in December, a person familiar with the matter told the Wall Street Journal.

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