GLOBAL MARKETS-World stocks, dollar take breather

                                
 By Natsuko Waki
                                
 LONDON, March 11 (Reuters) - World stocks edged higher from
1-1/2 month lows on Tuesday while the dollar stabilised near
record lows as investors paused to assess the impact of expected
U.S. interest rate cuts next week on battered financial markets.
                                
 Money markets remained tight as renewed concerns about the
credit crisis and the health of banks and hedge funds push up
the cost of funds, while gold and oil eased after rallying to 
all-time high in recent sessions.
                                
 The Federal Reserve is expected to cut interest rates by a
3/4 percentage point to 2.25 percent next week.
                                
 Along with Friday's measures to inject $200 billion of
liquidity to ease money market strains, expectations for Fed
action have given temporary relief to investors after a sell-off
in risky assets over the past week.
                                
 "The market has stabilised a little bit but it's fairly
temporary as there's nothing really positive out there. We're
seeing consolidation after some big moves over short periods of
time," said Derek Halpenny, senior currency economist BTM-UFJ.
                                
 The FTSEurofirst 300 index <.FTEU3> was up slightly on the
day, while MSCI main world equity index <.MIWD00000PUS> was up
0.1 percent after hitting its weakest since mid-January earlier.
                                
 Emerging sovereign spreads <11EMJ> tightened to 300 basis
points while emerging stocks <.MSCIEF> were up 0.4 percent.
                                
 The iTraxx Crossover index <ITCRS5EA=GFI>, which gauges the
cost of corporate bond insurance in Europe, was steady at 632
basis points -- near recent record levels.
                                
 
                                
 FRAGILE SENTIMENT
                                
 The dollar <.DXY> was steady on the day at 72.933 against a
basket of six major currencies.
                                
 The U.S. currency has come under pressure in recent sessions
as weak domestic data cemented expectations of Fed rate cuts.
                                
 Interest rate futures are pricing in a chance that the Fed
would lower the cost of borrowing to as low as 1.75 percent
later this year, from 3.0 percent now.
                                
 "To the extent that the policy measures are being inspired
by concerns that banks have insufficient capital then it seems
unlikely that the U.S. dollar would be out of the woods by any
stretch of the imagination and surely risk appetite will remain
fragile," UBS said in a note to clients.
                                
 The June Bund future <FGBLM8> fell 10 ticks, while the June
Japanese Government Bond future hit a 2-1/2 year high <2JGBM8>
before easing later.
                                
 U.S. light crude <CLc1> was down 0.1 percent after rising to
all-time highs above $108 a barrel on Monday. Gold <XAU=> fell
in tandem to $973.40 an ounce.
 (Additional reporting by Veronica Brown, editing by Mike
Peacock)