US stocks slide as Fed convenes; euro gains as Germany passes debt reform
NEW YORK :Wall Street ended sharply lower and gold surged to record highs on Tuesday as the U.S. Federal Reserve convened for its two-day monetary policy meeting while economic uncertainty mounted.
In the Middle East, a round of Israeli missile attacks on the Gaza Strip killed over 400 people, feeding investor jitters about that region.
But other geopolitical tensions eased after the Kremlin announced Russian President Vladimir Putin had agreed to a proposal from U.S. President Donald Trump to stop targeting Ukrainian energy targets for the next 30 days.
A vote by Germany's parliament to overhaul government spending caused the euro to gain against the dollar, boosted European stocks and sent German shares to near-record highs.
"The truth is Europe has lagged significantly in terms of economic growth and productivity," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "With President Trump in the White House, Europe might be realizing that they might need to do some things more on their own to stimulate their economy."
All three major U.S. stock indexes posted steep losses, with weakness in tech-related megacap stocks dragging the tech-laden Nasdaq down 1.7 per cent.
"The word of the year in 2025 has clearly been uncertainty," Detrick added. "And we have seen rotation out of the United States and into other areas around the globe."
"So today is almost a microcosm of the whole year."
The U.S. Federal Reserve has gathered for its two-day monetary policy meeting, which is expected to culminate in the central bank leaving its key interest rate unchanged until further inflation progress is made and the effects of Trump's erratic tariff policies are known.
A strong rebound in single-family housing starts and robust industrial output data provided some reassurance that the U.S. economy was not in danger of imminent recession.
The Dow Jones Industrial Average fell 260.32 points, or 0.62 per cent, to 41,581.31, the S&P 500 fell 60.46 points, or 1.07 per cent, to 5,614.66 and the Nasdaq Composite fell 304.55 points, or 1.71 per cent, to 17,504.12.
European shares edged higher and German stocks hovered near record highs as the German parliament approved a debt reform package to boost Europe's biggest economy.
So far this year, European stocks have outperformed their global counterparts.
Europe's broad FTSEurofirst 300 index rose 12.49 points, or 0.57 per cent.
MSCI's gauge of stocks across the globe fell 3.64 points, or 0.43 per cent, to 839.86.
The pan-European STOXX 600 index rose 0.61 per cent, while Emerging market stocks rose 14.14 points, or 1.25 per cent, to 1,145.58. MSCI's broadest index of Asia-Pacific shares outside Japan closed higher by 1.2 per cent, to 595.37, while Japan's Nikkei rose 448.90 points, or 1.20 per cent, to 37,845.42.
Treasury yields fell as traders bet Fed Chair Jerome Powell will adopt a relatively dovish tone when he speaks at the conclusion of the central bank's policy meeting on Wednesday.
The yield on benchmark U.S. 10-year notes fell 1.9 basis points to 4.287 per cent, from 4.306 per cent late on Monday.The 30-year bond yield fell 1 basis point to 4.589 per cent from 4.599 per cent late on Monday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.1 basis points to 4.042 per cent, from 4.053 per cent late on Monday.
The dollar weakened while the euro gained ground in the wake of Germany's debt overhaul.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,fell 0.22 per cent to 103.23, with the euro up 0.23 per cent at $1.0947.
Against the Japanese yen, the dollar strengthened 0.06 per cent to 149.3.
The Mexican peso strengthened 0.13 per cent versus the dollar at 19.933. The Canadian dollar weakened 0.01 per cent versus the greenback to C$1.43 per dollar.
In cryptocurrencies, bitcoin fell 1.99 per cent to $82,306.09. Ethereum declined 1.55 per cent to $1,905.74.
Crude oil prices turned lower after Russia-Ukraine peace talks helped counter concerns over instability in the Middle East.
U.S. crude fell 1.01 per cent to settle at $66.90 per barrel, while Brent settled at $70.56 per barrel, down 0.72 per cent on the day.
Gold prices touched a record high as the safe-haven metal benefited from a flare-up of geopolitical tensions and lingering uncertainties about Trump's tariff plans.
Spot gold rose 1.14 per cent to $3,035.56 an ounce.
