GLOBAL MARKETS-Citi relief boosts shares, weighs on gov bonds

                                
* MSCI world equity index up 1 pct at 194.32
                                
 * Citi relief, RBS expectations ease risk aversion
                                
 * Government bonds weaker; dollar weaker vs majors
                                
 
                                
 By Natsuko Waki
                                
 LONDON, Feb 23 (Reuters) - World stocks rose from last
week's three-month lows and government bonds fell on Monday as
expectations grew that the U.S. government will increase its
stake in Citigroup <C.N>, instead of fully nationalising the
bank.
                                
 A source told Reuters that Citigroup is in talks that could
result in the U.S. government increasing its stake in the bank.
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 The Wall Street Journal said the government could own as
much as 40 percent of the bank's common equity by converting
preferred shares it holds into common stocks. The plan would not
cost further taxpayer money. The government currently owns a
stake of nearly 8 percent. 
                                
 The news calmed fears over the bank's future and the
prospect of a full nationalisation of the stricken lender, which
not only depresses stocks but adds to the fiscal burden of the
biggest world economy.
                                
 Shares in Britain's partly-nationalised Royal Bank of
Scotland <RBS.L> jumped nearly 20 percent as it is expected to
announce a restructuring to create a non-core division into
which unwanted assets will be placed.
                                
 "Banks remain in focus, they are pivotal in terms of the
market," said Jeremy Batstone-Carr, analyst at Charles Stanley.
"Efforts to ring-fence toxic assets at RBS and the fact there
appears to be no all-out nationalisation of Citi is steadying
the ship."
MSCI world equity index <.MIWD00000PUS> rose 1 percent after
hitting its lowest since late November on Friday while the
FTSEurofirst 300 index of leading European shares <.FTEU3> also
rose 1 percent. 
                                
 Emerging stocks <.MSCIEF> rose 2 percent and U.S. crude oil
<CLc1> steadied at $40.02 a barrel. The March bund futures
<FGBLc1> fell 44 ticks.
                                
 The dollar <.DXY> fell 0.4 percent against a basket of major
currencies while the euro rose 0.6 percent to $1.2924 <EUR=>. 
                                
 "We doubt that the dollar sell-off overnight will be
sustained and the currency is likely to remain a beneficiary as
risk aversion rises once again," Calyon said in a note to
clients.
                                
 The low-yielding yen was down around 0.7 percent at 93.81
per dollar <JPY=>. Gold fell to $983.65 an ounce <XAU=>.
 (Additional reporting by Simon Falush; editing by David Stamp)