LONDON: European equities rebounded Thursday as the European Central Bank said there were "no limits" to the stimulus measures it might take to boost the eurozone economy.
After plunging by 3.5 percent Wednesday, London, Frankfurt and Paris were modestly higher in early afternoon deals,
ECB chief Mario Draghi said the bank is "determined" to do what it takes to steer eurozone inflation back up towards its target of 2.0 percent.
"We have the power, willingness and determination to act. There are no limits how far we are willing to deploy our policy instruments," Draghi told a news conference after the eurozone's central bank held its key interest rates unchanged at its first policy meeting of the year.
That stance was expected as inflation is stuck at low levels in Europe and both the ECB and the Bank of England will probably keep borrowing costs at very low levels for a while longer.
"The ongoing decline in the price of crude oil, weakening outlook for growth in emerging economies and further softening of inflation expectations have all increased downside risks to the outlook for inflation in the eurozone," noted Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
US stocks also opened slightly higher Thursday on the possibility of more ECB stimulus and as Wall Street weighed another fall in Chinese equities.
In Asia the trading day began brightly but volatility returned with a vengeance ahead of the close, resulting in sharp losses for Chinese and Japanese stocks.
- Oil extends losses -
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World financial markets have taken a hammering this year, chiefly hit by crashing oil prices and worries about the Chinese economy, a crucial driver of global growth.
Shanghai's main stock index slumped by more than three percent Thursday, despite a huge injection of cash into financial markets by the People's Bank of China (PBoC).
"The PBoC is trying to put liquidity back in the financial system after capital outflows and ahead of the lunar New Year holidays," said William Wong, head of sales trading at Shenwan Hongyuan Group.
"Sentiment is volatile and it will take some time to restore investor confidence."
Extending the trend for January, oil prices wallowed at 12-year lows, with crude under pressure from a worldwide glut, weak demand and strong dollar.
On currency markets Thursday, the euro fell against the dollar in early afternoon following Draghi's remarks, while the greenback strengthened against the yen.
In oil-rich Russia, the ruble plummeted to new record lows against the dollar, tumbling at one point by more than 4.0 percent.
The ruble -- which has already been battered over the past 18 months by low energy prices and Western sanctions over Ukraine -- also weakened against the euro.
- Key figures around 1500 GMT -
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London - FTSE 100: UP 0.42 percent at 5,697
Frankfurt - DAX 30: UP 0.57 percent at 9,445
Paris - CAC 40: UP 0.51 percent at 4,146
EURO STOXX 50: UP 0.63 percent at 2,900.75
Shanghai - Composite: DOWN 3.2 percent at 2,880.48 (close)
Tokyo - Nikkei 225: DOWN 2.4 percent at 16,017.26 (close)
New York - Dow: UP 0.70 percent at 15,877
Euro/dollar: DOWN at $1.0835 from $1.0890 Wednesday
Dollar/yen: UP at 117.04 yen from 116.92 yen
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