* Global stocks extend fall on doubts over U.S. rescue plan
* MSCI world equity index down 0.4 pct at 314.54
* Eyes on Paulson, Bernanke testimony at 1330 GMT
By Ian Chua
LONDON, Sept 23 (Reuters) - Global stocks fell on Tuesday
while demand for safe-haven government bonds grew as investors
awaited details of Washington's $700 billion bailout plan from
U.S. Treasury Secretary Henry Paulson's testimony to the Senate
Banking Committee.
But the dollar found traction having tumbled to a six-week
low versus the euro on Monday as the Bush administration and
Congress haggled over details of the rescue package.
Initial exuberance about the plan to buy up toxic mortgage
debt has given way to concerns about how the U.S. government
would fund it and whether the package would be enough to boost
the world's biggest economy, which is facing a recession.
"The bailout plans are coming under severe pressure now and
there are more concerns surfacing then questions being answered.
What're we going to need is a little more clarity," said James
Hughes, market analyst at CMC Markets in London.
"Something needs to be said, which is going to calm markets
down a little bit and that should start to stabilise things a
little bit."
Nervous investors were also eyeing crude oil, which soared
nearly 16 percent in its biggest one-day gain ever on Monday due
to the expiry of the front-month futures contract and weakness
in the dollar.
November crude oil futures <CLc1> fell $2.51 to $106.85.
The FTSEurofirst 300 <> index of top European shares
shed 1.2 percent in morning trade, adding to Monday's 2.1
percent slide, while Germany's DAX <> fell 0.5 percent.
This followed a decline of 2.1 percent for Asian equities
excluding Japan <.MIAPJ0000PUS>. Japanese financial markets were
closed for a holiday on Tuesday.
MSCI's world equity index <.MIWD00000PUS> shed 0.4 percent.
Government bonds benefited from weakness in equities,
pushing yields lower. The 10-year Bund yield <EU10YT=RR> slipped
3.2 basis points to 4.219 percent, while the benchmark 10-year
U.S. Treasury note yield <US10YT=RR> eased 5 basis points to
3.80 percent.
DOLLAR STEADIER
The dollar edged up 0.4 percent versus the Japanese currency
to 105.80 yen <JPY=> while the euro fell 0.6 percent to $1.4704
<EUR=>. But analysts say the dollar's outlook remained negative.
"While this bailout package does remove some of the systemic
risk from the U.S. financial system, it's also clear that the
potential rise in U.S. debt ratios and the effect on their
fiscal balance will hurt the dollar in the medium term," Dankse
Bank currency strategist Kasper Kirkegaard.
More bad news on the euro zone economy was revealed with a
closely watched survey showing services sector in Germany, the
region's biggest economy, edged into contraction in September
for the first time since January and manufacturing industry
slumped to its weakest performance in over five years.
However, all eyes are on Paulson and Federal Reserve
Chairman Ben Bernanke who will testify before the Senate Banking
Committee at 1330 GMT.
"The focus for the market will be on further details that
Paulson offers, if any, about the structure of the proposed fund
to purchase 'troubled assets'," said analysts at Barclays
Capital.
Major central banks around the world have been pumping cash
to improve interbank money markets, which practically seized up
last week following the collapse of Lehman Brothers.
There have been signs of improved liquidity conditions, with
the overnight U.S. dollar borrowing rate stable around 2.0
percent <USDOND=> -- on a par with the Fed funds rate.
However, many market participants remain shellshocked after
the last two extraordinary weeks in which Fannie Mae <FNM.N> and
Freddie Mac <FRE.N> were effectively nationalised, Washington
bailed out insurer American International Group <AIG.N> and Bank
of America <BAC.N> bought Merrill Lynch <MER.N>.
(Editing by Mike Peacock)
