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Bitcoin extends staggering rally; eyes $90K

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Tariff worries weigh on euro and yuan

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China exposure drags European stocks lower

(Updated at 2:26 p.m. ET/1926 GMT)

By Chuck Mikolajczak

NEW YORK, Nov 12 (Reuters) - A gauge of global stocks

fell on Tuesday after five straight sessions of gains while the

dollar hit its highest level in over four months as investors

assess the impact of U.S. President-elect Donald Trump's likely

policies on growth and inflation.

Investors have flocked into assets expected to benefit from

Trump policies for his second term in office, after he pledged

to impose high tariffs on imports from key trading partners, as

well as lower taxes and loosen government regulations.

The S&P 500 has surged recently, partly driven by a

jump in shares of banks, which are likely to benefit

from a reduced regulatory burden. Domestically focused small-cap

stocks have jumped on expectations for less competition from

tariffs and lower tax rates, with the Russell 2000

vaulting to a three-year high on Monday.

Bitcoin, the world's biggest cryptocurrency, has shot up

about 30% since the Nov. 5 election, rocketing toward the

$90,000 mark. Trump is seen as a proponent of cryptocurrencies,

promising during his campaign to make the United States the

"crypto capital of the planet."

U.S. stocks have rallied since the election, with each of

Wall Street's three major indexes closing at record levels on

Monday.

But concerns that Trump's policies could rekindle inflation

after a long battle to reduce price pressures following the

COVID-19 pandemic have pushed U.S. Treasury yields and the

dollar higher. Markets will get the latest inflation reading on

Wednesday in the consumer price index (CPI) for October.

"The 10-year Treasury yield is kind of creating a headwind

against the equity rally," said Jack Ablin, chief investment

officer at Cresset Capital in Chicago. "There's sort of these

conflicting signals where investors are celebrating all of these

growth initiatives but the bond market is pushing back."

The Dow Jones Industrial Average fell 250.15 points,

or 0.56%, to 44,042.98, the S&P 500 fell 5.53 points, or

0.09%, to 5,995.82, and the Nasdaq Composite rose 0.02

points, or 0.00%, to 19,298.79.

Shares of Home Depot ( HD ) shed 0.1%, giving up earlier

gains, after the home improvement retailer reported quarterly

results.

In Europe, shares closed lower, weighed down by names with a

large exposure to China, with news that Trump was expected to

select U.S. Senator Marco Rubio as his secretary of state. Rubio

is seen as the most hawkish option on Trump's list of

candidates.

MSCI's gauge of stocks across the globe

fell 5.26 points, or 0.61%, to 857.84. The STOXX 600

index lost 1.98%, while Europe's broad FTSE EuroFirst 300 index

closed down 40.36 points, or 1.99%, as both suffered

their biggest daily percentage drops since early August.

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

12.2 basis points to 4.43%, from 4.308% late on Friday; the bond

market was closed on Monday for a federal holiday.

Aside from the CPI data, several Federal Reserve officials

are speaking this week following the central bank's policy

decision last week to cut interest rates by 25 basis points.

Richmond Fed President Thomas Barkin said that with

inflation close to the Federal Reserve's 2% target, the labor

market resilient and the U.S. central bank in the process of

lowering borrowing costs, policymakers are ready to respond if

inflation pressures rise or the job market weakens.

Minneapolis Federal Reserve Bank President Neel Kashkari

said the economy is "in a good place" and he feels U.S. monetary

policy is currently "modestly restrictive," with short-term

borrowing costs continuing to slow inflation and the economy,

but not by a lot.

The dollar index, which measures the greenback

against a basket of currencies, rose 0.54% to 105.99, with the

euro down 0.36% at $1.0616. The greenback has risen in

four of five sessions since the election to reach 106.17, its

highest level since May 1.

Against the Japanese yen, the dollar strengthened

0.66% to 154.72. Sterling fell 1.01% to $1.2739.

The dollar strengthened 0.22% to 7.243 versus the

offshore Chinese yuan.

The greenback is expected to continue to strengthen against

China's currency and those sensitive to its economy as a result

of Trump's trade policies and because of expectations of higher

U.S. Treasury yields. Markets have been scaling back

expectations for more rate cuts from the Federal Reserve,

currently pricing in a 58.7% chance of a 25-basis-point cut at

its December meeting, down from 77.3% a week ago, according to

CME's FedWatch Tool.

U.S. crude rose 0.28% to $68.23 a barrel and Brent

rose to $71.99 per barrel, up 0.22% on the day, holding

near a two-week low after OPEC's latest downward revision for

demand growth.