(Updates prices after U.S. stock market close)

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Stocks fall on lack of tariff deals before Fed policy

decision

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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

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Germany's Merz is elected chancellor on second try

By Sinéad Carew and Samuel Indyk

NEW YORK/LONDON, May 6 (Reuters) - MSCI's global

equities gauge fell on Tuesday, while the dollar declined as

investors grew frustrated with the lack of U.S. trade deals and

waited for a Federal Reserve update, while oil futures rebounded

from Monday's sell-off.

However, U.S. Treasury yields fell to their lowest levels

for the day in afternoon trading after a well-subscribed 10-year

notes auction showed demand for government bonds.

In currencies, the dollar lost ground against multiple

currencies while the euro rose after German conservative leader

Friedrich Merz was elected chancellor by parliament in a second

voting round, hours after a shock defeat.

Investors focused broadly on trade tensions between the U.S.

and the rest of the world, particularly with China, the world's

second biggest economy.

Last week, Beijing said it was evaluating an offer from

Washington to hold talks. But U.S. Treasury Secretary Scott

Bessent said on Tuesday that while President Donald Trump's

administration was negotiating with 17 major trading partners,

it had not yet engaged with China.

Bessent said the U.S. could announce trade deals as early as

this week, but did not say with which countries.

"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.

And he added that "China and the trade policy with respect

to China is a very controlling factor into where this market is

headed. It's hard to tell if they're going to reach some kind of

deal or if it's going to be an all-out trade war."

Meanwhile, on Tuesday, Britain and India clinched a

long-coveted free trade pact after U.S. tariff turmoil forced

them to hasten efforts to increase their trade in whisky, cars

and food.

On Wall Street, the Dow Jones Industrial Average fell

389.83 points, or 0.95%, to 40,829.00, the S&P 500 fell

43.47 points, or 0.77%, to 5,606.91, and the Nasdaq Composite

fell 154.58 points, or 0.87%, to 17,689.66.

MSCI's gauge of stocks across the globe fell

3.38 points, or 0.40%, to 842.83. Earlier, the pan-European

STOXX 600 index closed down 0.18%. Germany's DAX index

ended down 0.4% after falling about 2% earlier.

Investors are waiting for the Fed to make its next policy

announcement on Wednesday after the conclusion of a two-day

meeting. The central bank is widely expected to keep rates

steady but investors will look for signals on future rate cuts.

In bonds, U.S. Treasury prices rose as a well-received

auction of the benchmark 10-year note suggested demand for U.S.

government bonds remained intact, boosting other maturities

across the curve as well.

The yield on benchmark U.S. 10-year notes fell

3.5 basis points to 4.308%, from 4.343% late on Monday, while

the 30-year bond yield fell 1.8 basis points to

4.8112%.

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.

"The bulk of today's early price action lacked

conviction," said Vail Hartman, U.S. rates strategist, at BMO

Capital in New York. "It wasn't until the strong reception to

the 10-year-auction that we saw a more durable breakout lower in

yields."

In currencies, Trump's trade policies have fuelled

significant waves of dollar selling since April.

On Tuesday, the dollar index, which measures the

greenback against a basket of currencies including the yen and

the euro, fell 0.62% to 99.19.

The euro was up 0.57% at $1.1378 while against the

Japanese yen, the dollar weakened 0.91% to 142.39.

Sterling strengthened 0.64% to $1.3376 while the

Canadian dollar strengthened 0.43% versus the greenback

to C$1.38 per dollar.

"The market is getting nervous that we're starting to eat

away at the schedule since the 90-day tariff reprieve without

anything meaningful being announced," said Eugene Epstein, head

of structuring for North America at Moneycorp, referring to

Trump's April 9 announcement of a 90-day pause on some tariffs

to give room for trade negotiations.

In energy, oil gained 3% on signs of higher demand in Europe

and China, lower production in the U.S., tensions in the Middle

East. Also buyers emerged the day after prices fell to a

four-year low on concerns about an OPEC+ decision to boost

output.

U.S. crude settled up 3.43% or $1.96 at $59.09 a

barrel while Brent settled at $62.15 per barrel, up

3.19%, or $1.92.

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 2.64% to $3,421.49 an ounce. U.S. gold

futures rose 3.34% to $3,421.90 an ounce.