GLOBAL MARKETS-Global stocks fall on persistent fears, bonds up

                                
 * U.S. stocks tumble at open as financial fears simmer
                                
 * Dollar, yen fall; AIG rescue revives some risk appetite
                                
 * Markets remain choppy, underlying banking fears persist
                                
 * Crude rebounds as AIG rescue reassures oil markets
 (Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
                                
 By Herbert Lash
                                
 NEW YORK, Sept 17 (Reuters) - U.S. stocks plunged at the
open and government debt rallied in a renewed bid for safety on
Wednesday as investors worried the U.S. government's rescue of
insurer American International Group <AIG.N> wouldn't be enough
to stem further financial market turmoil.
                                
 The benchmark S&P 500 index shed more than 2 percent when
U.S. equities opened though it pared some losses after.
European shares, which initially got a boost from the news of
government help for AIG, tracked the weak start in U.S. markets
as a spike in inter-bank lending rates rattled investors who
fear credit constraints.
                                
 U.S. Treasury bonds rallied sharply in a scramble for
safe-haven investments, with the 30-year bond <US30YT=RR>
gaining more than one full point in price and its yield falling
to about 4 percent, down from 4.08 percent late on Tuesday.
                                
 The yen fell against the euro and moved well away from
recent four-month highs versus the dollar as the extension of a
lifeline to AIG alleviated some risk aversion.
                                
 Investors were still on tenterhooks as volatile equity
markets reflected a strong sense of unease about the health of
financial markets.
                                
 "The government's lifeline to AIG has temporarily boosted
risk appetite and we are seeing some unwinding of some of the
safe-haven positions that we have seen over the past week or
so," said Omer Esiner, a senior currency analyst at Ruesch
International in Washington.
                                
 "The dollar had benefited from safe-haven capital flows
into U.S. Treasuries and we are seeing a little bit of an
unwinding of that. The tentative increase in risk appetite is
hurting the dollar and the yen."
                                
 The U.S. dollar and yen fell on Wednesday as the
government's rescue of AIG revived risk appetite, encouraging
traders to unwind some safe-haven trades.
                                
 Oil and gold rebounded, in tandem with other commodities,
after the $85 billion U.S. government rescue of AIG gave energy
investors a bit of respite.
 (Reporting by Steven C. Johson, John Parry and Lucia Mutikani
in New York and Jane Merriman, Matthew Robinson and Agnieszka
Flak in London)
 (Writing by Herbert Lash)