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Gold backs down from record high after record run

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Fed's cautious tone provides dollar support

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Investor focus turns to details of Trump's reciprocal

tariffs

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Germany's upper house set to clear huge spending package

(Updates to late morning)

By Stephen Culp

NEW YORK, March 21 (Reuters) - U.S. stocks followed

their European counterparts lower and the dollar strengthened on

Friday with few catalysts to stoke investor risk appetite amid

lingering economic uncertainties and churning geopolitical

tension.

All three major U.S. stock indexes were lower in early

trading, with weakness in economically sensitive stocks, such as

transport, housing and materials

underperforming.

Gold was down sharply, retreating from its all-time high but

remained above the $3,000 per ounce level it breached for the

first time last week.

Chicago Federal Reserve President Austan Goolsbee said on

Friday that it was an open question whether U.S. President

Trump's whirlwind tariff actions would lead to persistent

inflation and the Fed needed more time to "sort through" the

manner in which the tariffs played out.

A spate of central bank policy meetings held investors'

focus for much of the week, with the U.S. Federal Reserve, the

Bank of Japan and the Bank of England all holding rates steady.

Caution appears to have been the common theme among monetary

policymakers, most of whom have adopted a "wait and see" stance

amid Trump's erratic approach to tariffs and trade, which has

fostered what Fed Chair Jerome Powell called "unusually

elevated" uncertainty.

"This week, we saw the Fed generally following the consumer

with expectations for higher inflation and lower growth," said

Mike Dickson, head of portfolio management at Horizon

Investments in Charlotte, North Carolina. "It's definitely

weighing on things."

Markets are awaiting clarification on the details of Trump's

reciprocal tariffs expected to go into effect on April 2.

Israeli airstrikes on Gaza and a huge blast from a Ukrainian

drone attack on a Russian military airfield also helped dampen

risk appetite and raise the appeal of safe-haven assets.

These geopolitical tensions "at a minimum are putting upward

pressure on uncertainty that is already quite prevalent on the

international stage with the tariffs", Dickson added.

Adding to the turmoil was Britain's Heathrow Airport being

shut due to a huge fire at a nearby electrical substation; the

ramifications of the detention of Turkish President Tayyip

Erdogan's main political rival; and Germany's massive fiscal

stimulus package which is on track to pass the country's

Bundesrat upper house of parliament on Friday.

On the economic front, with no major U.S. indicators on

Friday, investors turn their focus on the coming week, which

will include housing and industrial data, and is expected to

culminate on Thursday with the Commerce Department's third and

final take on fourth-quarter GDP and its broad-ranging Personal

Consumption Expenditures due on Friday.

DOLLAR GAINS

The Dow Jones Industrial Average fell 223.38 points,

or 0.52%, to 41,733.07, the S&P 500 fell 23.48 points, or

0.41%, to 5,639.41 and the Nasdaq Composite fell 51.15

points, or 0.28%, to 17,641.63.

European shares slipped in the wake of central bank

statements citing wariness in the face of global economic

uncertainties.

Even so, the STOXX Euro 600 remained on track for a weekly

gain, in a continuation of its outperformance year-to-date.

MSCI's gauge of stocks across the globe fell

4.08 points, or 0.48%, to 839.39.

The pan-European STOXX 600 index fell 0.62%, while

Europe's broad FTSEurofirst 300 index fell 13.36

points, or 0.61%.

Emerging market stocks fell 10.24 points, or

0.90%, to 1,130.45. MSCI's broadest index of Asia-Pacific shares

outside Japan closed lower by 0.83%, to 588.44,

while Japan's Nikkei fell 74.82 points, or 0.20%, to

37,677.06.

The dollar gained ground against the euro, and was on course

for its first weekly gain this month as the approaching tariff

deadline prompted caution.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.19% to 103.99, with the euro down 0.22% at

$1.0827.

Against the Japanese yen, the dollar strengthened

0.06% to 148.86.

U.S. 10-year Treasuries dipped but remained range-bound as

investors juggled the possible impact of tariffs with the

likelihood that the Fed will leave its policy rate unchanged for

the time being.

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

0.6 basis points to 4.239%, from 4.233% late on Thursday.

The 30-year bond yield rose 2.2 basis points to

4.5784% from 4.556% late on Thursday.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

fell 2.6 basis points to 3.931%, from 3.957% late on Thursday.

Crude oil prices edged higher and appeared set to notch a

second straight weekly gain as new U.S. sanctions on Iran and

the latest OPEC+ output plan raised expectations of tighter

supply.

U.S. crude rose 0.32% to $68.29 a barrel and Brent

rose to $72.07 per barrel, up 0.1% on the day.

Gold paused for a breather after a record run driven by

safe-haven demand.

Spot gold fell 0.94% to $3,015.75 an ounce. U.S. gold

futures fell 1.29% to $3,000.90 an ounce.