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Bund yields edge higher again after biggest jump since

1990s

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Euro hits new 4-month high after ECB news

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U.S. stocks sharply lower in afternoon trading

(Updates to late US afternoon)

By Caroline Valetkevitch

NEW YORK, March 6 (Reuters) -

Stock indexes fell sharply in volatile trading Thursday as

investors took in the latest announcements from U.S. President

Donald Trump on tariffs, while the U.S. dollar eased as

investors turned risk-averse.

The global bond market selloff continued, a day after the

10-year German Bund yield saw its biggest rise since the 1990s.

Trading was choppy was investors assessed the latest

comments from Trump on tariffs.

Trump on Thursday exempted goods from both Canada and Mexico

under a North American trade pact for a month from the 25%

tariffs that he had imposed earlier this week, the latest twist

in fast-shifting trade policy that has whipsawed financial

markets and business leaders.

He had imposed 25% U.S. tariffs on imports from Mexico and

Canada on Tuesday along with fresh duties on Chinese goods,

adding to worries about the impact on inflation and growth.

"Trump has been very confusing about these tariffs. One day

they're on and the next day they're off for a month," said Tim

Ghriskey, senior portfolio strategist at Ingalls & Snyder in New

York.

"He did warn us that there was going to be some pain

initially here, and the market doesn't like pain," he said.

Adding to the negative tone, an index of chipmakers

fell after a sales forecast from Marvell ( MRVL ) failed to

excite investors.

The Dow Jones Industrial Average fell 467.34 points,

or 1.09%, to 42,538.76, the S&P 500 fell 106.64 points,

or 1.83%, to 5,735.99 and the Nasdaq Composite fell

486.84 points, or 2.62%, to 18,065.89.

MSCI's gauge of stocks across the globe

fell 8.70 points, or 1.01%, to 850.01. The pan-European STOXX

600 index fell 0.03%.

Against the Japanese yen, the dollar weakened

0.77% to 147.74.

The single European currency was up 0.07% at

$1.0797, after earlier hitting a four-month high of $1.0854. The

euro was track for its biggest weekly jump since May 2009.

The European Central Bank cut interest rates as expected and

also said monetary policy was becoming less restrictive, which

traders took to mean another cut in April might not be a given.

Ten-year German Bund yields were last up 10

basis points at 2.884%, having jumped as high as 2.929% on

Wednesday.

German lawmakers are expected to debate a 500-billion-euro

infrastructure fund and sweeping changes to state borrowing

rules to fund defence from March 13.

Japan's 10-year government bond yield, had hit a near

16-year high, while the yield on benchmark U.S. 10-year notes

rose 1.7 basis points to 4.284%, from 4.267% late on

Wednesday.

Investors also assessed the latest batch of economic data

for signs of cracks in the economy ahead of Friday's monthly

U.S. payrolls report.

Weekly initial U.S. jobless claims fell by 21,000 to a

seasonally adjusted 221,000, according to the Labor Department,

below expectations of economists polled by Reuters of 235,000.

Also in focus were comments by European leaders, who said

they would stand by Ukraine and spend more on defense in a world

upended by Trump's reversal of U.S. policies. Trump's suspension

of military aid to Kyiv this week fanned fears the region can no

longer rely on U.S. protection in place since World War Two.