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 In an address to the European Parliament Draghi said inflation
dynamics had somewhat weakened and that a "sustained normalization"
of inflation could take longer to achieve than thought.
"At our December monetary policy meeting, we will re-examine the
degree of monetary policy accommodation," Draghi said.
Stocks reversed earlier losses, although high-profile corporate
profit warnings eventually weighed on sentiment, while the euro sank
half a percent below $1.07 and the gap between 5-year U.S. and euro
zone bond yields hit its highest since 1999.
"It now seems likely that the present stimulus program could be
extended beyond September 2016 and the specter of negative rates
could well be imminent," said Brenda Kelly, head analyst at London
Capital Group.
"As we have come to expect from the head of the ECB, Draghi is
leaning towards pro-action rather than reaction," she said.
 In see-saw trading the pan-European FTSEuroFirst 300 <.FTEU3> was
down 0.3 percent at 1,489 points, having opened even lower then
snapping back on Draghi's comments.
Germany's DAX <.GDAXI> was also down 0.3 percent at 10,877 points
and France's CAC 40 <.FCHI> and Britain's FTSE 100 <.FTSE> were both
down 0.5 percent.
The talk of the stock market was British engine-maker Rolls-Royce
<RR.L>, which issued its fourth profit warning in just over a year.
Its shares plunged around 20 percent.
U.S. stock futures pointed to a slightly higher open on Wall Street
<ESc1>.
Earlier in Asia, stocks shrugged off the overnight fall on Wall
Street as oil bounced back from its lowest in over two months and a
bumper Australian employment report sent out encouraging signals on
the region's economy.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> was up 0.9 percent, while Japan's Nikkei ended flat
on the day <.N225>.
The biggest move across major Asian markets was the Australian
dollar, which jumped more than 1 percent to $0.7150 <AUD=> after
figures showed that the country's economy created 58,600 jobs last
month.
MIND THE YIELD GAP
In bond markets German and other European yields fell on the back of
Draghi's remarks, which trumped ECB executive board member Benoit
Coeure's more cautious comments earlier that the debate on more
stimulus next month was still open.
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German 10-year yields fell 2 basis point to 0.59 percent
<DE10YT=TWEB>, having initially risen 1 bp. All other euro zone
yields were 1-4 bps lower on the day.
Expectations for ECB easing are in sharp contrast to those for U.S.
monetary policy. Most investors are betting that last Friday's
stellar U.S. employment report has set the seal on the Federal
Reserve raising rates at its meeting next month.
Illustrating that divergence, the gap between U.S. <US5YT=RR> and
German five-year yields <DE5YT=RR> rose to 181 basis points, the
highest since 1999.
"If we have learned something about Mr. Draghi it is that he does
not like to disappoint markets. He will not want to see a negative
reaction after his decision in December," said KBC strategist Piet
Lammens.
The euro fell more than half a cent to as low as $1.0691 <EUR=>, and
hit a three-month low against sterling at 70.41 pence <EURGBP=D4>.
At 0430 ET the single currency had recovered a good chunk of these
losses.
The dollar index <.DXY>, which tracks the currency against a basket
of six major peers, edged up 0.1 percent to 99.03, moving back
towards a seven-month peak of 99.504 scaled on Tuesday.
The dollar edged up to 123 yen <JPY=> against its Japanese
counterpart, back within sight of this week's 2-1/2-month high of
123.60.
U.S. crude futures <CLc1> were higher in Europe, bouncing back from
a 3 percent slide overnight on worries about higher crude
inventories. They were last up about 0.4 percent at $43.09 a barrel.
Brent crude <LCOc1> added 0.3 percent to $45.94 though was still not
far from its lowest levels since August.
(Reporting by Jamie McGeever; editing by John Stonestreet)
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