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Trump, Brexit uncertainty hit stocks and dollar, gold jumps

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., January 13, 2017. REUTERS/Lucas Jackson

By Sinead Carew

NEW YORK (Reuters) - U.S. stocks and the dollar fell while gold and government bonds rose on Tuesday as investors fled for safety after President-elect Donald Trump said the U.S. currency was too strong and they also questioned if his campaign promises would be fulfilled.

Meanwhile sterling jumped as Prime Minister Theresa May said Britain would quit the European Union single market when the country leaves the EU.

Wall Street was weighed down by the financial sector, and U.S. Treasury prices gained on concerns about protectionist trade policies from Trump who has talked about slamming hefty taxes on importers of goods such as cars.

Ahead of Trump's Jan. 20 inauguration, investors worried whether he would follow through on pro-business pledges such as tax cuts, infrastructure spending and lighter regulation.

Investors were starting to fear he would pick a lot of different fights rather than succeeding on a few issues, said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

"You're getting some give-back to the areas that have really done well with the Trump election," he said. "There's a little less confidence that if you try to change everything that anything specific will change. It's causing people to question which of the things they've counted on will actually pass."

The S&P 500 bank sector had soared about 25 percent since the Nov. 8 vote on hopes Trump's policies would boost the previously beaten-down sector. It fell 3.4 percent Tuesday.

The Dow Jones Industrial Average (.DJI) fell 58.96 points, or 0.3 percent, to close at 19,826.77, the S&P 500 (.SPX) dropped 6.76 points, or nearly 0.3 percent, to 2,267.88 and the Nasdaq Composite (.IXIC) declined 35.39 points, or 0.63 percent, to 5,538.73.

Investors fled the dollar after Trump said U.S. companies could not compete with China "because our currency is too strong. And it's killing us," in remarks published on the Wall Street Journal's website on Monday.

The dollar was down 0.84 percent against a basket of major currencies (.DXY), while the euro 1 percent to $1.07 (EUR=).

The pound rose as high as $1.2416 (GBP=D4) after May said Britain would seek maximum access to the European single market through a new trade agreement. Sterling was last up 2.98 percent, its biggest gain on record, according to Thomson Reuters Matching data which goes back to 1998. [nL1N1F71OQ]

"The key event was May's speech," said Vassili Serebriakov, foreign exchange strategist at Credit Agricole. "I think it was a case of sell the rumor, buy the fact - buy sterling on the speech after selling on the rhetoric, which gave some concessions to the soft Brexit camp and prompted a relief rally in sterling."

Benchmark 10-year U.S. Treasury notes gained 14/32 in price to yield 2.33 percent, down from 2.38 percent late on Friday. The yield earlier fell to 2.305 percent, the lowest since Nov. 30.

Gold (XAU=) was up 1 percent at $1,215.5 an ounce to hit its highest since Nov. 22, for its seventh consecutive day of gains.

Oil prices were mixed after the dollar decline and Saudi Arabian comments offset forecasts U.S. and Russian producers would boost crude output later this year. Brent crude (LCOc1), the international benchmark, traded down 0.7 percent at $55.49 a barrel, while U.S. crude (CLc1) was up 0.2 percent at $52.48. [O/R]

(Additional reporting by Karen Brettell and Dion Rabouin in New York, Nigel Stephenson and Patrick Graham in London, Shinichi Saoshiro in Tokyo and Nallur Sethuraman in Bengaluru; Editing by Dan Grebler and James Dalgleish)