* MSCI world equity index up 1.8 percent at 215.09
* Bank of America bailout, U.S. fiscal packages boost morale
* Yen, government bonds slip; oil firmer
By Natsuko Waki
LONDON, Jan 16 (Reuters) - World stocks rallied on Friday
from the previous day's one-month low while the yen tumbled as
U.S. steps to aid banks helped eclipse big fourth-quarter losses
from Citigroup and Bank of America.
Bank of America <BAC.N> will receive another $20 billion in
U.S. government cash and a guarantee against almost $100 billion
of potential losses on toxic assets after its acquisition of
Merrill Lynch.
The U.S. Congress also advanced legislation to provide
nearly $1.2 trillion in emergency spending to fight the
worsening economic recession triggered by the global credit
crunch.
Bank of America posted a Q4 loss of $1.79 billion, excluding
Merrill Lynch, while Citi <C.N> posted a Q4 net loss of $8.29
billion and said it would split into two operating units. Both
stocks, however, rose before the bell.
"The negative earnings-per-share numbers for both Citigroup
and Bank of America, and a horrific loss for Citigroup... are
worse than the market had expected, but this disappointment is
being overshadowed by the colossal bail-out deal for Bank of
America," said Martin Slaney, head of derivatives at GFT.
"The predilection being shown by the U.S. government to
continue to put up the cash and guarantees required to support
the too-big-to-fail players is being lapped up by the markets."
MSCI world equity index <.MIWD00000PUS> rose 1.8 percent,
after falling to a one-month low on Thursday. The FTSEurofirst
300 index of leading European shares rose 3 percent.
Despite the rise on Friday, the index is on course for its
biggest weekly fall since late November.
Emerging stocks <.MSCIEF> rose 1.8 percent.
U.S. crude oil <CLc1> rose 1 percent to $35.74 a barrel.
In the European government bond market, March German bund
futures <FGBLc1> fell 52 ticks.
The low-yielding yen, which tends to outperform in times of
risk aversion, weakened 0.9 percent to 90.58 per dollar <JPY=>.
The dollar <.DXY> fell 0.8 percent against a basket of major
currencies.
The euro gained 1.1 percent to $1.3270 <EUR=> having hit a
five-week low of $1.3025 on Thursday after the European Central
Bank cut interest rates to 2 percent.
The cost of protecting Ireland's debt against default rose
sharply after Ireland nationalised Anglo-Irish Bank <ANGL.I>.
Five-year credit default swaps on Ireland's sovereign debt
were quoted by traders as high as 250 basis points from 184 bps
on Monday, meaning it costs 250,000 euros to protect 10 million
euros of debt.
"At worst it's going to lead to fresh worries about how the
Irish economy survives this crisis and how they can service
their increasing debt burden," Deutsche Bank credit strategist
Jim Reid said in a research note.
(Additional reporting by Natalie Harrison; Editing by
Victoria Main)
