* U.S. government may end up with 40 pct stake in Citi-WSJ
* Dealers cut positions in gold, Treasuries, U.S. dollar
* MSCI Asia Pacific ex Japan stock index up from 3-mth low
(Updates prices, adds quote, comments and byline)
By Kevin Plumberg
HONG KONG, Feb 23 (Reuters) - Asian stocks rebounded and
the U.S. dollar tumbled on Monday after a report said the U.S.
government could end up owning as much as 40 percent of
Citigroup Inc, sparking relief among investors who cut their
safety trades.
U.S. equity futures rose 1 percent <SPc1> and gold declined
further below $1,000 an ounce after the Wall Street Journal,
citing people familiar with the situation, said Citi <C.N> was
in talks that could wind up saddling the government with a big
stake in the financial group, though it remained unclear if any
fresh cash would be given to the bank. []
The company's stock price plunged 44 percent last week.
The market implications a big public stake in a major
international bank has for equity dilution, for cross-border
capital flows and for risk taking in general were far from
clear.
"It is reasonable enough to expect markets to remain
volatile and my suspicion is the rise in risk appetite that we
are seeing now could peter out in the U.S. session as it will
not be taken very positively," said Stephen Roberts, an
economist with Nomura Securities in Sydney.
Still, the three havens that investors mainly bought last
week on uncertainty about the fate of U.S. banks -- U.S.
Treasuries, gold and the dollar -- dropped, as dealers sold
first and worried later about the consequences.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rebounded after hitting a 3-month low and was
up 1.4 percent on the day.
Japan's Nikkei share average <> was down 0.9 percent,
after cutting earlier losses. The index hit a four-month
closing low and the broader Topix <> posted a 25-year low
on Friday.
A gloomy mood remained in Japan though after SFCG <8597.T>,
a high-interest lender to smaller firms, went bankrupt, as
tight credit choked small and medium-sized businesses.
Hong Kong's Hang Seng index <> was one of the biggest
gainers in the region, climbing 1.9 percent, though shares of
HSBC <0005.HK> lagged the rest of the market ahead of its
results on March 2.
CLARITY, PLEASE
In addition to further details on any potential changes in
Citi's capital structure, investors wanted more clarity on the
U.S. government's plan to fix the banking industry. CNBC on
Friday said the White House planned to release this week some
details on a plan that was initially panned by global markets,
citing unnamed sources at the Treasury Department.
There is a growing view among investors that countless
fiscal stimulus packages around the world will inevitably do
some to support the global economy but confidence in the
banking system must be the foundation of a recovery.
While the Wall Street Journal report produced more
questions than answers, dealers wasted no time in cutting their
bets on the U.S. dollar and gold.
Sharada Selvanathan, currency strategist with BNP Paribas
in Hong Kong, doubted the rising trend in the dollar on the
back of safe haven flows was over. "Remember that when a bank
gets nationalised, it will be forced to handle business in a
more domestically oriented manner; this would mean that the
nationalised bank would have to pare back its business
offshore. Repatriation flows would prove to be dollar
positive," she said.
The euro rose around 1 percent to $1.2914 <EUR=>, while the
dollar slid 0.7 percent to 92.85 yen <JPY=>.
Gold in the spot market <XAU=> fell 1.1 percent to $985.90
an ounce after rising to the highest since March 2008 on
Friday, $1,005.40. The precious metal has risen 12 percent so
far this year, bolstered by a lingering aversion to risk.
The benchmark yield on the 10-year U.S. Treasury note
<US10YT=RR> ticked up to 2.81 percent from 2.79 percent late on
Friday in New York.
