(Updates with afternoon trading)
* Euro falls as ECB's president rings cautious note
* Hopes of milder U.S. tariffs support market sentiment
* Wall Street treads water ahead of tariff announcement
* Oil slumps as rising U.S. supply weighs
By Lewis Krauskopf
NEW YORK, March 8 (Reuters) - The euro dropped on Thursday as the European Central Bank signalled caution on inflation and protectionism, while a gauge of global stocks edged higher as investors awaited more clarity on U.S. President Donald Trump's plan to impose import tariffs.
While the ECB took a small step toward weaning the euro zone economy off protracted stimulus by dropping its easing bias, ECB President Mario Draghi said monetary policy would remain "reactive" and that underlying inflation was subdued.
The euro was down 0.81 percent to $1.2311, while the dollar index rose 0.58 percent.
"They toned down the easing bias but there is still a willingness to ease and the tone of Draghi's comments was still dovish, stressing that there is still not a convincing uptrend in inflation," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Draghi also addressed the U.S. tariff plans, saying: "If you put tariffs against (those) who are your allies, one wonders who the enemies are."
MSCI's gauge of stocks across the globe gained 0.11 percent as the pan-European FTSEurofirst 300 index rose 1.02 percent.
Wall Street indexes were little changed ahead of White House announcement about the tariffs. Earlier, Trump said he was willing to strike a deal that could exempt Canada and Mexico from the tariffs.
"As has been in the past, what President Trump says and what finally actually materializes are two different things," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"It might be just wise to sit on the sidelines before we get some more clarity."
The Dow Jones Industrial Average fell 75.2 points, or 0.3 percent, to 24,726.16, the S&P 500 lost 2.68 points, or 0.10 percent, to 2,724.12 and the Nasdaq Composite dropped 1.99 points, or 0.03 percent, to 7,394.66.
Markets have been roiled over the past week by Trump's plans to impose a 25 percent tariff on steel imports and 10 percent on aluminum that have sparked fears of a global trade war.
“It’s a news environment where people aren’t really sure what is going to happen," said Willie Delwiche, investment strategist at Baird in Milwaukee.
"That’s the big thing that’s different this year versus last year: you’re seeing more of this volatility as people try to sort out some new regimes that are out there,” Delwiche said.
The U.S. healthcare sector was rattled as health insurer Cigna Corp said it would buy pharmacy benefits manager Express Scripts Holding Co for about $54 billion. Express Scripts shares jumped 8.6 percent while Cigna dropped 10.9 percent.
Benchmark 10-year notes last rose 6/32 in price to yield 2.8607 percent, from 2.883 percent late on Wednesday.
Oil prices fell and were setting up for a second consecutive weekly drop as the dollar strengthened and concerns over rising U.S. crude production continued to mount on signs of an inventory build at a key U.S. storage hub.
U.S. crude fell 1.73 percent to $60.09 per barrel and Brent was at $63.50, down 1.31 percent.
Spot gold dropped 0.3 percent to $1,321.56 an ounce.
Additional reporting by Sruthi Shankar in Bengaluru, Dhara Ranasinghe, Tommy Wilkes and Marc Jones in London; Editing by Bernadette Baum and Lisa Shumaker