Euro zone shares at 2-week highs, awaiting ECB catalyst
* EuroSTOXX 50 up 1.1 pct, hits 2-week highs * ECB eyed for details of bond purchase plan * Positioning, sentiment likely to limit any disappointment By Toni Vorobyova LONDON, Sept 6 (Reuters) - Euro zone equities rose to two-week highs on Thursday, with investors looking to the European Central Bank to support risk appetite by detailing plans for a new bond-buying programme to help bring down borrowing costs for Spain and Italy. The onus is on ECB President Mario Draghi to back up his promise "to do whatever it takes" to preserve the euro at a 1230 GMT news conference following the bank's monthly meeting. Investors are looking for clues on the likely size and timing of the bond programme, on any specific cap on yields - seen as unlikely - and on whether the ECB will insist on a preferential, more senior status compared to the other bond holders in case of a default. "Draghi has made it clear that he is going to do whatever it takes," said Nancy Curtin, chief investment officer at Close Brothers Asset Management. "The reason markets are rallying is (that) it moves us back into a muddle-through scenario ... It removes the Armageddon risk from the break up of the euro zone but it doesn't completely solve the euro zone's problems." The EuroSTOXX 50 index of euro zone blue chips was up 1.1 percent at 2,469.50 points at 1006 GMT, after rising as high as 2,478.85, its strongest since Aug. 22. The broader, pan-European FTSEurofirst 300 added 0.8 percent at 1,083.97 points, recovering from a one-month intra-day low of 1,074.05 points set on Wednesday. Anticipation that ECB action might in time boost the region's struggling economy aided commodity prices and helped miners to perform strongly, with Antofagasta, Randgold Resources and Norsk Hydro among top gainers. Gold miners are a top pick for Curtin at Close Brothers, who for now remains more cautious about equities as a whole. "We might look to perhaps increase our equity weighting into the year end," she said. "If all this liquidity does come through, if there are some signs of perkier economic activity, and if there is a setback in markets, this could set up an interesting rally for the year end." ANY DISAPPOINTMENT MAY NOT LAST With EuroSTOXX 50 still up some 14 percent since Draghi made his pledge on July 26, and euro zone banks some 36 percent higher, the risk is that the ECB announcement could fall short of the markets' high expectations. With yields on two-year Spanish and Italian bonds hitting their lowest levels in around five months, the ECB's rhetoric alone has already achieved some of its goals and the central bank may be in no hurry to follow words with actions just yet. But strategists reckon any downside pullback if the ECB disappoints could be limited, given the expectations that it will eventually act, prospects for more stimulus from the U.S. Federal Reserve and positioning in the equity market where investors are relatively well hedged to the downside. Open interest on September EuroSTOXX 50 puts - options which enable investors to sell the index at a pre-set price and which are used as insurance against a market fall - has risen 15 percent over the past month, according to Eurex exchange data. Implied volatility on the euro zone blue chip index is up 17 percent over that time, in an unusual break of its negative correlation with the underlying cash equity market which has stayed broadly flat. At the same time, investors have continued to pull money out of European equity funds, according to EPFR data, leaving them relatively under-invested in the market. "The risks still tend to be on the upside, very few people are committed to the market," said Andy Ash, head of sales at Monument Securities. "The likelihood is that the market will be disappointed that they are not getting any more (information), but when it comes off people will look at the overall performance of the market this year and think oh dear, equity markets are now sizeably up on the year, I don't have any positions ... So in the next week one or two people will get long of the market." In the short-term, any disappointment could send EuroSTOXX 50 down to 2,315-2,310 area, according to Mike Turner, European equity options broker at London-based XBZ Ltd. "If the details are sketchy at best, that would constitute a disappointment," he said.