GLOBAL MARKETS-Stocks stabilise ahead of Fed, bank earnings

                                
 (Changes dateline to LONDON, updates with European markets)
                                
 By Mike Dolan
                                
 LONDON, March 18 (Reuters) - World stocks stabilised on
Tuesday, recouping some of the heavy losses incurred since last
week's near collapse and fire sale of investment bank Bear
Stearns <BSC.N>, as the Federal Reserve prepared its next move.
                                
 With the Fed widely expected to slash U.S. interest rates by
up to a full point to 2 percent on Tuesday, the Dow Jones
Industrial Average <.DJI> actually closed higher on Monday and
European banking stocks <.SX7P> that had been hammered on Monday
also bounced.
                                
 But plummeting U.S. rates, which sent three-year U.S.
Treasury bill rates briefly below 1 percent to their lowest in
50 years on Monday, continued to weigh on the dollar <.DXY>.
                                
 The euro <EUR=> rose about a quarter of a percent to $1.5772
even though it remained below Monday's record of $1.5904.
                                
 "Anything less than 100 basis points of cuts will disappoint
the market," said David Pais, currency strategist at Citi. "It's
hard to see what will give the dollar a boost at the moment."
                                
 Critical to market sentiment before the Fed meets will be
first-quarter earnings from two of Wall St's biggest investment
houses Lehman Brothers <LEH.N> and Goldman Sachs <GS.N>, where
details of further debt writedowns are expected.
                                
 Lehman results are due at 1200 GMT and Goldman at 1230 GMT.
                                
 Lehman shares fell almost 20 percent on Monday as investors
feared wider contagion from the Bear Stearns collapse and
fretted about what other firms might face similar difficulties.
                                
 "Bank results will be crucial, it will be interesting to see
how much balance sheet contraction there will be with existing
capital already eaten into by writedowns." Pais at Citi said.

                                
 UNEASY CALM
                                
 The FTSEurofirst 300 index <.FTEU3> of leading shares gained
1.7 percent to 1,220.90 points in early Tuesday trade, clawing
back some of Monday's 4.4 percent losses that dragged it to its
lowest close in 2-1/2 years.
                                
 HSBC <HSBA.L>, UBS <UBSN.VX> and Banco Santander <SAN.MC>
rose 1.8-4.2 percent.
                                
 "The slump we had yesterday calls for a rebound, but I doubt
it's sustainable simply due to the ... uncertainty in the
financial sector and the response to what the Fed will do
today," said FrankfurtFinanz strategist Heino Ruland.
                                
 Most Asian stock markets closed higher, with MSCI's measure
of Asian stocks outside Japan <.MIASJ0000PUS> rising more than
one percent. Hong Kong's main index <.HSI> climbed 1.4 percent
and Japan's Nikkei 225 <.N225> closed up 1.5 percent.
 "The Fed is doing everything they can to try to bring
stability to financial markets. But the last few rate cuts
haven't worked, so who knows?" said Lucinda Chan, division
director at Macquarie Equities in Australia.
                                
 U.S. crude futures <CLc1> rose more than one percent to
$106.76 a barrel, gaining back some of the 4 percent they lost
on Monday, though well off a peak $111.80 hit that session.
                                
 But other commodities remained weak after the Reuters
Jefferies CRB Index <.CRB>, which tracks commodities futures,
fell about 5 percent on Monday, its sharpest one-day slide in
almost 40 years.
                                
 Gold <XAU=> was quoted at $1,007.20 per ounce, up on the day
but well off the record $1,030.80 it hit on Monday.
 (Additional reporting by Rafael Nam in Hong Kong and Simon
Falush and Amanda Cooper in London, editing by Mike Peacock)