By Sinéad Carew and Samuel Indyk
NEW YORK/LONDON (Reuters) -A global equities index was lower on Tuesday, while the dollar declined as investors waited impatiently for clarity on U.S. trade policies and oil futures rebounded from Monday’s sell-off.
The MSCI global index regained some lost ground after German conservative leader Friedrich Merz was elected chancellor by parliament there in a second round of voting after a shock defeat in his first attempt earlier in the day.
Germany’s DAX, after falling about 2% earlier, regained some lost ground after the vote but still fell 0.5%.
Investor attention remained more broadly on trade tensions between the U.S. and the rest of the world, and in particular China, its biggest trade partner.
Beijing last week said that it was evaluating an offer from Washington to hold talks over tariffs. U.S. President Donald Trump said on Sunday that Washington is meeting many countries, including China, and that his priority with China is to get a fair deal.
But without any details of deals, investor patience waned.
“It’s gone from pretty much balance between people who are worried and people who think this will work quickly because it’s just a negotiation. It tips every few days a little bit more negative,” said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
“When deals are hinted at but not actually announced … the market slips back to a more negative pessimistic tone. It’s not just that they’re hinted at and not announced. It’s that they’re hinted at but, with no details.”
Meanwhile, Britain and India clinched a long-coveted free trade pact on Tuesday after tariff turmoil sparked by Trump forced the two sides to hasten efforts to increase their trade in whisky, cars and food.
On Wall Street, at 11:25 a.m. the Dow Jones Industrial Average fell 143.66 points, or 0.35%, to 41,075.17, the S&P 500 fell 17.40 points, or 0.31%, to 5,632.98 and the Nasdaq Composite fell 83.59 points, or 0.47%, to 17,760.40.
MSCI’s gauge of stocks across the globe was down 0.39 points, or 0.16%, to 844.82.
The Federal Reserve begins its two-day policy meeting on Tuesday, where the central bank is widely expected to keep rates steady but investors will be keen to hear the central bank’s comments on how it will navigate trade uncertainty.
“The Fed remains caught between a rock and a hard place,” said Christian Scherrmann, DWS chief U.S. economist. “We think they will opt for a slightly more hawkish tone, but more in the direction of an extended pause than a potential hike.”
In fixed income, U.S. Treasury yields were mixed in subdued trade before the Federal Open Market Committee starts its two-day policy meeting, with investors also keen to get a read on demand at the benchmark 10-year note auction later in the day.
The yield on benchmark U.S. 10-year notes rose 1.2 basis points to 4.355%, from 4.343% late on Monday while the 30-year bond yield rose 3.5 basis points to 4.8643%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.6 basis points to 3.795%, from 3.841% late on Monday.
In currencies, Trump’s erratic trade policies have been fuelling significant waves of dollar selling since April as investors shifted away from U.S. assets, pushing the euro, yen and Swiss franc higher.
On Tuesday, the dollar index, which measures the greenback against a basket of currencies, including the yen and the euro, fell 0.38% to 99.43.
The euro was up 0.27% at $1.1346. And against the Japanese yen, the dollar weakened 0.6% to 142.84.
The Canadian dollar strengthened 0.35% versus the greenback to C$1.38 per dollar but against the Swiss franc, the dollar strengthened 0.22% to 0.824 on the day.
Sterling was up 0.56% at $1.3366.
Britain’s deal with India highlighted concerns that U.S. trading partners will look elsewhere.
“That’s a big concern for the dollar that trade will start to reroute itself away from the U.S,” said Meckler.
“It’s negative for stocks and negative for the dollar and somewhat negative for bonds if the U.S. Treasury bonds no longer seen as the safe haven for the world.”
In commodities, oil gained around 4%, rebounding on technical factors and bargain hunting after a decision by OPEC+ to boost output had sent prices tumbling on Monday, although concerns about a market surplus persisted.
U.S. crude rose 4.31% to $59.59 a barrel and Brent rose to $62.62 per barrel, up 3.97% on the day.
Gold prices rose to a two-week high, supported by post-holiday buying from China and concerns over potential U.S. tariffs on pharmaceutical imports, while investors waited for the Fed policy meeting. [GOL/]
Spot gold rose 1.89% to $3,396.70 an ounce. U.S. gold futures rose 2.49% to $3,393.60 an ounce.
(Reporting by Sinéad Carew in New York, Sam Indyk in London; Editing by Kate Mayberry, Sharon Singleton, David Evans and Aurora Ellis)
