Sawt Falasteen - Stocks slide, dollar mixed before rate calls

Meanwhile, the dollar wobbled against rival currencies as investors positioned themselves ahead of the US Federal Reserve announcement on Wednesday and the European Central Bank's on Thursday.

"Last week saw risk appetite revive on better earnings from tech giants, but a host of worries about interest rates, further bank crises, the US debt ceiling and of course pre-Fed nerves have conspired to prompt a reversal in equity markets," said Chris Beauchamp, chief market analyst at online trading platform IG.

"European and US indices are down sharply, as investors’ nerves get the better of them," he added.

Australia's central bank on Tuesday delivered a surprise interest rate hike to an 11-year high, dashing hopes it would hold them steady as inflation shows signs of slowing.

The US central bank is widely expected to raise its benchmark lending rate for a tenth and possibly final time in the current cycle -- by another quarter-point, despite greater uncertainty about the banking sector after another US regional lender went under.

Regulators on Monday announced the seizure of First Republic and that it had been sold to JPMorgan Chase, making it the second biggest bank by assets to collapse in US history.

The takeover of First Republic came after the collapse of three US midsized lenders in March, including Silicon Valley Bank (SVB) and Signature Bank -- which rattled markets and raised contagion worries.

SVB's failure came after it took on too much interest rate risk, among other issues.

If JPMorgan Chase's buyout of First Republic was supposed to draw a line on the banking crisis it has yet to calm the nerves of investors.

Shares in leading US banks, including JPMorgan Chase, were down in late morning trading in New York on Tuesday. Meanwhile those in regional banks suffered huge declines.

Shares of PacWest Bancorp sank around 35 percent, while Comerica lost 13.6 percent.

The blue-chip Dow and the broader S&P500 indices were both down 1.7 percent in late morning trading. The tech-heavy Nasdaq Composite was off 1.5 percent.

- Oil prices tumble -

The uncertainty has seen lending conditions tighten in the United States, and the latest data shows they are also tightening in the eurozone, where the ECB is seen as making a quarter or half-point hike.

Consumer prices rose from a rate of 6.9 percent in March to 7.0 percent in June in the eurozone, data showed Tuesday, which could further encourage the European Central Bank to raise interest rates once more, according to analysts.

Frankfurt stocks closed down 1.2 percent and Paris 1.5 percent, after a long holiday weekend for markets across Europe. London dropped 1.3 percent.

Oil prices tumbled, with the main international contract, Brent North Sea, under $76 per barrel.

"The post-OEPC+ gains have now been wiped out which suggests traders are now of the belief that the economic outlook has deteriorated to the extent that the output cut won't create the deficit that was feared when some were calling for $100 oil," said Oanda analyst Craig Erlam.

Multiple members of the OPEC+ exporters' alliance unexpectedly slashed production by a total of more than one million barrels per day at the beginning of April. Brent jumped back above $80 per barrel, but never made it to $90.

- Key figures around 1530 GMT -

New York - Dow: DOWN 1.7 percent at 33,484.23 points

London - FTSE 100: DOWN 1.3 percent at 7,773.03 (close)

Frankfurt - DAX: DOWN 1.2 percent at 15,726.94 (close)

Paris - CAC 40: DOWN 1.5 percent at 7,383.20 (close)

EURO STOXX 50: DOWN 1.5 percent at 4,294.85 (close)

Tokyo - Nikkei 225: UP 0.1 percent at 29,157.95 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 19,933.81 (close)

Shanghai - Composite: Closed for holiday

Euro/dollar: UP at $1.0984 from $1.0978 on Monday

Pound/dollar: DOWN at $1.2458 from $1.2498

Dollar/yen: DOWN at 136.51 yen from 137.45 yen

Euro/pound: UP at 88.17 pence from 87.80 pence

West Texas Intermediate: DOWN 4.7 percent at $72.08 per barrel

Brent North Sea crude: DOWN 4.5 percent at $75.72 per barrel

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