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Stocks fall ahead of Wednesday's Fed policy decision

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Germany's Merz is elected chancellor on second try

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Investors worry about lack of U.S. trade deals

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Gold rallies, oil rebounds after Monday sell-off

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UK/India reach trade agreement after 3 year negotiation

By Sinéad Carew and Samuel Indyk

NEW YORK/LONDON, May 6 (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.

Spot gold rose 1.89% to $3,396.70 an ounce. U.S. gold

futures rose 2.49% to $3,393.60 an ounce.