By Riva Gold 

Stocks and currency markets steadied Thursday while bond yields continued to rise ahead of a monetary policy update from the European Central Bank.

The Stoxx Europe 600 reversed early gains to trade down 0.1% midmorning, while futures pointed to a less than 0.1% opening loss for the S&P 500.

The euro rose 0.3% against the dollar to $1.0665 while the WSJ Dollar Index edged down 0.2% following its biggest daily gain of the year.

The ECB is widely expected to leave its policy mix unchanged midday after extending its program of quantitative easing in December, but President Mario Draghi's press conference will be closely watched for hints at when the program will end.

Eurozone economic activity touched a five-year high in December while German inflation figures have come in stronger, prompting calls from German policy makers to wind down bond purchases. Still, most market participants expect Mr. Draghi to reiterate that the ECB intends to maintain its presence in fixed-income markets for now and reiterate support for the economy where needed.

"There's absolutely no argument for Draghi to change anything," said Franck Dixmier, Global Head of Fixed Income at Allianz Global Investors. "It's really too early."

Elsewhere, the dollar and bond yields had risen Wednesday after robust inflation data and a speech by Federal Reserve Chairwoman Janet Yellen raised expectations for higher U.S. interest rates.

Ms. Yellen warned that waiting too long to raise interest rates could invite a "nasty surprise" of inflation. The dollar rose sharply after her speech following a steep decline at the start of the week, while U.S. Treasury yields and S&P 500 financials moved higher as investors interpreted the comments as signaling more rate increases in 2017.

"With only two hikes totally priced in, there's a kind of fragility here, " said Mr. Dixmier. "Higher inflation pressure means the Fed will have to act."

The yield on the 10-year Treasury note rose to 2.427% Thursday from 2.391% previously. 10-year German bund yields climbed to 0.308% from 0.272%. Yields move inversely to prices.

Back in stock markets, the Stoxx Europe 600 edged down despite gains in the basic resources sector. Shares of BHP Billiton rose 0.5% after the company along with Vale and their Brazilian iron-ore joint venture agreed on a plan with federal prosecutors for negotiating a settlement of a civil claim linked to a dam failure that killed 19 people.

Shares of Zodiac Aerospace were up nearly 22% after French aerospace supplier Safran said it had agreed to buy the beleaguered cabin-interiors specialist. Shares of Safran were up 1.8%.

The oil and gas sector declined after oil prices fell sharply in the previous session as the dollar strengthened and concerns rose about rising U.S. shale production. Brent crude rose 0.5% early Thursday to $54.21 a barrel.

Earlier, shares in Japan rose 0.9% as a weaker yen lifted the export-heavy index. The dollar later gave up gains against the yen to trade down 0.1% at Yen114.5630.

Shares of Toshiba fell sharply following a local news report that the company's nuclear power-related losses could top expectations. Toshiba said the report isn't based on what it has announced.

Shares elsewhere in Asia edged lower, with Hong Kong's Hang Seng down 0.2% and the Shanghai Composite Index off 0.4%.

-Kosaku Narioka contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

January 19, 2017 05:36 ET (10:36 GMT)

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