European shares back to earth after Draghi bombshell

European stock markets were flat on Wednesday after posting their best results in five months a day earlier thanks to a strong policy speech from European Central Bank chief Mario Draghi that flagged a potential return to bond-buying and lower interest rates.

Draghi's speech sank the euro and drove major euro zone bond yields back below zero, slashing effective market borrowing costs, giving a boost to companies worried by sagging growth and driving the pan-European STOXX 600 index almost 2% higher. It was flat compared to Tuesday's close by 0709 GMT, although interest rate sensitive banking stocks outperformed with a 0.7% rise.

Clydesdale and Yorkshire Banking Group bucked that trend to gain 2.8% after the British lender pledged to make an additional 50 million pounds ($62.75 million) in savings from its takeover of rival Virgin Money. Also keeping markets afloat was news that China and the United States are rekindling trade talks ahead of a meeting next week between Presidents Donald Trump and Xi Jinping at the G-20 summit in Japan, sparking hopes that the tensions between the two sides would abate.

Draghi's speech has also further upped the stakes for a Federal Reserve policy meeting that will be Wednesday's main market event, already expected to point the way to interest rate cuts for the second half of this year.