(Updates and recasts throughout, changes dateline, byline, previous LONDON)
* Wall St falls as energy, materials shares drag
* Commodities slide sharply
* US-German 5-year bond yield spread widest since 1999
By David Gaffen
NEW YORK, Nov 12 (Reuters) - Government bond yields in Europe and the United States fell on Thursday, driven lower by signals of more monetary policy stimulus out of Europe, while stocks fell, led by sectors most influenced by weak global demand trends.
The dollar had been rallying against the euro after a typically dovish address from ECB head Mario Draghi, suggesting additional efforts to boost growth in Europe. But the currency markets shifted after St. Louis Fed President James Bullard, generally a more hawkish member of the U.S. Central Bank, suggested industrial nations may be headed into an era of permanently low rates.
"Should we find ourselves in a persistent state of low nominal interest rates and low inflation, some of our fundamental assumptions about how U.S. monetary policy works may have to be altered," Bullard said in prepared remarks.
That drove buying in the U.S. Treasury market, where yields have been steadily rising in anticipation of a Fed rate increase coming in December. The divergence in monetary policy has also pushed the dollar higher of late.
Bullard's comments come on a day when numerous Federal Reserve members are scheduled, particularly New York Fed President William Dudley.
The dollar's recent gains have helped push crude oil to lows not seen since late August and copper to a six-year low. Oil was down again Thursday, with U.S. crude CLc1 dropping more than 1 percent to $42.43 a barrel, and Brent crude LCOc1 slipping to $45.33 a barrel, off by 1 percent.
Weak global demand has sapped interest in commodities markets. The U.S. stock market was also weak, led down by energy and materials shares, directly affected by global demand.
The MSCI All-World Index .MIWD00000PUS lost 0.6 percent, with the heaviest losses in European shares. The pan-European FTSEuroFirst 300 .FTEU3 was down 1.4 percent at 1,487 points.
The Dow Jones industrial average .DJI fell 141.27 points, or 0.8 percent, to 17,560.95, the S&P 500 .SPX lost 11.54 points, or 0.56 percent, to 2,063.46 and the Nasdaq Composite .IXIC dropped 14.48 points, or 0.29 percent, to 5,052.54.
Copper futures in London hit a 6-year low of $4,851 a tonne CMCU3 and platinum hit its lowest since late 2008 at $868.75 an ounce XPT= .
In an address to the European Parliament, Draghi said inflation dynamics had somewhat weakened and that a "sustained normalisation" of inflation could take longer to achieve than thought.
"Although the debate at the ECB seems to be far from over, the fact that Draghi made these comments in a high-profile setting suggest that he is confident that the majority of the ECB council will support him," said Holger Schmieding, chief economist at Berenberg Bank in London.
German 10-year yields fell 1 basis point to 0.60 percent DE10YT=TWEB , having opened the day higher. All other euro zone yields were down 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.
The dollar index .DXY , which tracks the currency against a basket of six major peers, edged up 0.1 percent to 99.15, moving back towards a seven-month peak of 99.504 scaled on Tuesday.
The biggest move across major Asian markets was in the Australian dollar, which jumped more than 1 percent to $0.7150 AUD= after figures showed the country's economy created 58,600 jobs last month.
(editing by John Stonestreet and Nick Zieminski)