(Updates)
* Meltdown fears abate as European shares gain
* U.S. futures point to higher Wall Street open
* Dollar gains against yen, euro
By Jeremy Gaunt, European Investment Correspondent
LONDON, Sept 30 (Reuters) - World stocks were at near
three-year lows on Tuesday but fears of a major market meltdown
failed to carry through from Wall Street to Europe as confidence
in bank rescue packages persisted.
The U.S. Congress's rejection of a bank rescue plan tore
nearly 9 percent off the broad S&P 500 <.SPX> on Monday but
European shares and many Asian stock markets clawed back from
early losses on hopes the U.S. plan would eventually go through.
U.S. stock index futures also pointed to a higher opening,
suggesting belief that Monday's selloff was over-done.
"It's certainly my working assumption that there (will be)
some sort of agreement reached in the U.S. and based on that I
would expect the market to recover quite strongly from
yesterday's sell-off," said Darren Winder, equity strategist at
Cazenove.
Angst over the battered financial sector continued,
nonetheless, with Belgian-French financial services group Dexia
<DEXI.BR> getting a 6.4 billion euro ($9.18 billion) capital
boost from public shareholders to help it fight the global
credit crisis.
Ireland also offered to guarantee all bank deposits for two
years to improve banks' access to funds on international
markets. It also guarantees covered bonds, senior debt and dated
subordinated debt.
Money markets remained on life support with benchmark rates
continuing to climb, albeit distorted by the final day of the
third quarter.
European stocks fell as much as 2 percent in early trading
and Japan's Nikkei closed 4.12 percent lower after the deep
losses on Wall Street in the wake of Congress's failure to agree
a $700 billion plan to buy up toxic debt from the financial
industry.
Globally, MSCI's main world stock index <.MIWD00000PUS>, a
benchmark for many leading investors, was down 0.7 percent,
adding to a 6.84 percent loss on Monday that saw the index's
market capitalisation plunge $1.73 trillion.
But the FTSEurofirst 300 index of top European shares
<> recovered to gain 0.6 percent.
"No one really expected a no vote (in Washington), but it's
encouraging that they're clearly going to vote on this again,"
said one equities trader in Europe.
Earlier, the Nikkei average hit a three-year closing low,
shedding 483.75 points to 11,259.86, the lowest finish since
June 2005. It earlier lost nearly 5 percent.
Other Asian stocks recovered, however. Hong Kong's Hang Seng
index <> closed 0.8 percent higher, while South Korea's
KOSPI <> pared losses to end down 0.6 percent. Both had
fallen more than 5 percent early in the day.
SEEKING SAFETY
The dollar jumped 1 percent against the yen <JPY=> as shock
at the failure of the bailout proposal gave way to cautious
optimism that a deal may yet be reached.
"We're seeing dollar/yen bounce around as optimism ebbs and
flows about the U.S. bailout package, but we're not getting a
trend," Standard Bank currency analyst Steve Barrow said.
The dollar was up 1.1 percent against the yen <JPY=> to
105.19, according to Reuters data. The euro fell 0.6 percent
<EUR=> to $1.4416 and by 0.1 percent against the yen <EURJPY=>
to 150.27.
Euro zone government bond prices eased, sending yields
slightly higher.
Oil <CLc1> recovered to trade above $99 a barrel after
slumping almost 10 percent in the previous session.
(Additional reporting by Jessica Mortimer and Blaise Robinson;
Editing by Ron Askew)
