Updates to midday US trading

By Caroline Valetkevitch

NEW YORK, March 6 (Reuters) - The euro touched a four-month high against the U.S. dollar on Thursday after the European Central Bank cut interest rates again as expected, while stock indexes fell sharply as investors weighed the impact of U.S. President Donald Trump's tariffs.

The global bond market selloff continued, a day after the 10-year German Bund yield saw its biggest rise since the 1990s.

U.S. President Donald Trump on Thursday said Mexico won't be required to pay tariffs on any goods that fall under the United States-Mexico-Canada Agreement on trade until April 2, but made no mention of a reprieve for Canada despite his Commerce Secretary saying a comparable exemption was likely.

Trump had imposed 25% U.S. tariffs on imports from Mexico and Canada on Tuesday along with fresh duties on Chinese goods, adding to worries about the impact on inflation and growth.

Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut, said investors are speculating over what could happen, and that is causing a lot of market volatility.

"They fear the consequences of the actions being taken, but we don't know what those consequences are yet," he said.

Adding to the negative tone, an index of chipmakers .SOX was down 4% after a sales forecast from Marvell MRVL.O failed to excite investors.

The Dow Jones Industrial Average .DJI fell 344.50 points, or 0.80%, to 42,662.21, the S&P 500 .SPX fell 78.80 points, or 1.35%, to 5,763.60 and the Nasdaq Composite .IXIC fell 323.94 points, or 1.74%, to 18,229.72.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 5.07 points, or 0.59%, to 853.64. The pan-European STOXX 600 .STOXX index rose 0.13%.

Earlier, China's blue-chip index .CSI300 rose another 1.4% while Hong Kong's Hang Seng Index .HSI surged over 3%, touching its highest in three years and cementing a major world market-topping 20% 2025 surge..SS

The single European currency EUR=EBS rose 0.5% to $1.0848, after earlier hitting a four-month high of $1.0854. The euro has gained 4.5% so far this week, set for its biggest weekly jump since May 2009.

The European Central Bank also said monetary policy was becoming less restrictive, which traders took to mean another cut in April might not be a given.

Ten-year German Bund yields DE10YT=RR were up 6 basis points at 2.847%, having jumped as high as 2.929% on Wednesday.

German lawmakers are expected to debate a 500-billion-euro infrastructure fund and sweeping changes to state borrowing rules to fund defence from March 13.

Japan's 10-year government bond yield, had hit a near 16-year high, while the yield on benchmark U.S. 10-year notes US10YT=RR rose 4.4 basis points to 4.311%, from 4.267% late on Wednesday.

Investors also weighed the latest batch of economic data for signs of cracks in the economy ahead of Friday's government payrolls report.

Weekly initial jobless claims fell by 21,000 to a seasonally adjusted 221,000, according to the Labor Department, below expectations of economists polled by Reuters of 235,000.

Also in focus were comments by European leaders, who said they would stand by Ukraine and spend more on defense in a world upended by Trump's reversal of U.S. policies. Trump's suspension of military aid to Kyiv this week fanned fears the region can no longer rely on U.S. protection in place since World War Two.

U.S. crude CLc1 fell 0.65% to $65.86 a barrel and Brent LCOc1 fell to $68.97 per barrel, down 0.46% on the day.

(Reporting by Caroline Valetkevitch; Additional reporting by Marc Jones and Amanda Cooper; editing by Chizu Nomiyama, Mark Heinrich and David Evans)

((caroline.valetkevitch@thomsonreuters.com))