* World stocks rise for third trading day in a row
* European shares up 0.8 percent, Japan 3.3 percent
* Wall Street futures pointing down
* Dollar at 1-1/2 year high
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 21 (Reuters) - World stocks climbed for the
third day in a row on Tuesday as European and Asian investors
bet governments would succeed in ending the credit crisis and in
controlling the global economic downturn.
Wall Street, however, looked set for a poor start, but the
dollar hit a 1-1/2 year high against major currencies.
Sentiment in Europe and Asia was boosted overnight by
comments from U.S. Federal Reserve Chairman Ben Bernanke, who
backed government spending as a fresh measure to boost the U.S.
economy.
Interbank lending rates were also fixed lower, fuelling a
belief that government rescue plans were beginning to free up
frozen money markets.
MSCI's all-country world stock index <.MIWD00000PUS>, a
broad measure of global stock market performance, rose for the
third trading day in a row and was nearly 12 percent above five
year lows hit on Oct. 10.
It remains down 39 percent year-to-date, however.
"The market wants some kind of concrete economic steps,
jointly if necessary, and Bernanke's comments have raised hopes
that something will be forthcoming," said Hiroaki Osakabe, a
fund manager at Chibagin Asset Management in Japan.
European shares rose in early trade, also extending their
winning streak to a third day, with investors cheered by
Bernanke and French government moves to bolster its banks.
France announced plans late on Monday to lend 10.5 billion
euros ($14.12 billion) to the country's top six banks before the
year end to prop up their capital reserves.
The FTSEurofirst 300 <> index of top European shares
was up about 0.8 percent with banks among the top gainers.
BNP Paribas <BNPP.PA> jumped 9.3 percent, Societe Generale
<SOGN.PA> soared 10.4 perent and Credit Agricole <CAGR.PA> rose
11.9 percent.
Earlier, the Nikkei average <> rose 3.3 percent or
300.66 points to 9,306.25. The broader Topix <> rose 3.2
percent to 956.64.
DOLLAR FIRMS, BONDS WEAKER
The dollar rose to a 1-1/2 year high versus a basket of
currencies, fuelled by ongoing demand from banks for their
funding needs.
The dollar index, which measures the U.S. currency's value
against a basket of six currencies rose to 83.588 <.DXY> -- its
highest since March 2007.
The euro traded at $1.3217, around 1-1/2 year lows.
"General dollar strength is continuing, which is pushing the
euro and sterling lower," said Stephen Koukoulas, currency
strategist at TD Securities.
On fixed income markets, euro zone government bond yields
were down with the two year yield <EU2YT=RR> losing 4 basis
points to 2.899 percent and the 10-year <EU10YT=RR> at 3.993
percent.
(Editing by Victoria Main)
