NEW YORK - A stocks rally following Donald Trump's US election win lost steam on Tuesday as traders looked to consolidate recent gains, sending major indices lower on both sides of the Atlantic.
The euro hit a one-year low and the pound fell against the dollar, which has been invigorated by expectations that Trump's trade policies could keep interest rates higher.
Wall Street's main indices all closed lower after having racked up huge gains in the days following Trump's victory and Republican gains in Congress.
"We got a significant run," Art Hogan from B. Riley Wealth Management told AFP. "After a run like that in such a short period of time, it's not surprising for markets to take a breather."
Leading European and Asian markets closed the day with hefty losses, with both Frankfurt and Paris falling more than two percent and Hong Kong finishing nearly three percent lower.
Chinese stocks were already under pressure after disappointment about Beijing's lack of extra measures to boost China's stuttering economy.
Trump's support for cryptocurrency pushed bitcoin to a record high of almost $90,000 at one point on Tuesday.
Trump's decision to pick China hawks for key positions in his cabinet has added to fears that the next few years could be bumpy for global markets.
"The latest moves from Trump's camp... are sending chills through the markets and casting a decidedly icy glow on US-China relations," noted independent analyst Stephen Innes.
Analysts are also expecting tariffs on European imports, hurting the region's top stock markets.
The dollar extended gains against its peers that started after news of Trump's election, which has sparked bets on a pick-up in inflation that could complicate the Federal Reserve's plans to lower US interest rates.
The latest reading of the US consumer price index due Wednesday will be closely watched as investors try to ascertain the central bank's plans for next month's monetary policy meeting.
"We assume the Trump administration will deliver on their key policy proposals with the degree and timing of these policies the bigger uncertainty," said National Australia Bank's Rodrigo Catril.
"Most of these policies (lower taxes, tariffs, immigration, deregulation, unfunded expansionary fiscal policy) can be regarded as pro-growth and or inflationary," he continued.
"This means, all else equal, a shallower Fed easing cycle and a stronger dollar," he added.