(Updates prices to U.S. afternoon, adds oil settlement)

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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

awaited a Federal Reserve update, while oil futures rebounded

from Monday's sell-off.

U.S. Treasury yields rose early, then reversed course to hit

their lowest level for the session in afternoon trading

following a well-subscribed 10-year notes auction.

In currencies, the dollar lost ground against multiple

currencies while 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.

"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."

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, at 2:48 p.m. the Dow Jones Industrial

Average fell 299.33 points, or 0.73%, to 40,919.50, the

S&P 500 fell 28.31 points, or 0.50%, to 5,622.07 and the

Nasdaq Composite fell 107.89 points, or 0.60%, to

17,736.35.

MSCI's gauge of stocks across the globe fell

2.13 points, or 0.25%, to 844.08. 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 fixed income, the yield on benchmark U.S. 10-year notes

fell 2.9 basis points to 4.314%, from 4.343% late on

Monday while the 30-year bond yield fell 1 basis

point to 4.8193%.

The 2-year note yield, which typically moves

in step with expectations for Fed interest rate policies, fell 5

basis points to 3.791%, from 3.841% late on Monday.

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 0.52% to 99.30.

The euro was up 0.43% at $1.1363 while against

the Japanese yen, the dollar weakened 0.86% to 142.48.

Sterling was up 0.58% at $1.3368 after its deal

with India. The Canadian dollar strengthened 0.35%

versus the greenback to C$1.38 per dollar while against the

Swiss franc, the dollar weakened 0.07% to 0.822.

"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 commodities, oil gained more than 3%, 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 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 2.49% to $3,416.09 an ounce. U.S. gold

futures rose 3.1% to $3,414.10 an ounce.