* MSCI world equity index down 0.3 percent at 323.87
* European stocks defy falls in Asia
* Yen rises broadly; dollar hits one-year peak
By Natsuko Waki
LONDON, Sept 9 (Reuters) - Europe halted a slide in world
stocks on Tuesday, keeping alive some momentum triggered by the
bailout of U.S. mortgage firms Fannie Mae and Freddie Mac, while
persistent economic worries boosted the yen and the dollar.
World stocks posted their biggest gains on Monday since the
rescue of Bear Stearns in March after Washington seized control
of two mortgage firms, whose losses have weighed on the domestic
housing market and threatened to damage the financial system.
Optimism faded somewhat in Asia, while in Europe stocks
extended gains with UK equities rising more than 1 percent --
after the market was severely disrupted on Monday with trading
on the London Stock Exchange halted for several hours.
Investors view the bailout of two U.S. Government-Sponsored
Enterprises (GSEs) as positive, while doubts remain as to how it
would solve underlying credit problems faced by many banks and
stem the flow of data pointing to a deep economic slowdown.
"There's still a lot of concern in the market on financials
.... so risk appetite hasn't been boosted by this GSE
announcement," said Patrick Jacq, rates strategist at BNP
Paribas in Paris.
"It's good news because ... the key issue has been
addressed, but isn't enough to (fully) restore confidence ...
clearly this isn't the end of the crisis."
The MSCI main world equity index <.MIWD00000PUS> fell 0.3
percent, having hit a 2-year low last week.
Asian stocks <.MIAP00000PUS> fell 2.4 percent, emerging
stocks <.MSCIEF> lost 1.5 percent while the FTSEurofirst 300
index <> managed to rise 0.7 percent.
Evidence suggesting Britain is flirting with recession
mounted. Data showed retail sales down, house prices crumbling
and companies more reluctant to hire staff than at any time in
almost 15 years.
The dollar, boosted in recent weeks by signs of faltering
growth outside the United States, hit a one-year high against
major currencies <.DXY>.
"It seems the market came to the conclusion that what has
driven FX markets in the past several weeks/months -- the
narrowing in the expectations gap between the United States and
the rest of the world -- has not materially changed," Royal Bank
of Canada said in a note to clients.
The low-yielding yen rose half a percent to 107.67 per
dollar <JPY=>, a sign of investors avoiding risk.
As optimism faded, a key U.S. subprime mortgage index nearly
erased a 4 point gain made on Monday with rising consumer debt,
delinquencies and unemployment weighing on sentiment. The top
"AAA" slice of the ABX index ended slightly up on the day.
Emerging sovereign bond spreads <11EMJ> widened 3 basis
points.
The December Bund future <FGBLc1> was steady on the day.
U.S. light crude <CLc1> fell 0.6 percent to $105.62 a barrel
while gold <XAU=> slipped to $799.70 an ounce.
(Additional reporting by Jamie McGeever; Editing by Ruth
Pitchford)
