* Europe stocks, U.S. stock futures up on Wells Fargo deal
despite steep U.S. job loss
* MSCI world equity index down 0.4 percent at 283.20
* Washington's vote on bailout bill eyed
By Natsuko Waki
LONDON, Oct 3 (Reuters) - European stocks rose and Wall
Street was set for a firmer as a move by Wells Fargo <WFC.N> to
buy Wachovia <WB.N> lifted investor spirits even as data showed
steep job losses in the U.S. economy.
The U.S. economy lost 159,000 non-farm jobs last month, its
sharpest decline in 5-1/2 years. Employment contracted for a
ninth straight month, even before the labour market experienced
the full shock from September's series of bank troubles.
However, world stocks edged away from an earlier three-year
low while government bonds pared gains as the two U.S. banks
unveiled the deal.
"The employment figures were weak in every important
dimension. We've seen weaker data in history, but these look
pretty decisively to be the beginning of something worse," said
Pierre Ellis, senior economist at Decision Economics in New
York.
The U.S. House of Representatives is to vote on a $700
billion bailout bill later in the day, with calls echoing around
the world for passage of the bill which would allow the U.S.
Treasury to buy illiquid debt from U.S. banks.
Justin Wiggs, equities trader at Stifel Nicolaus Capital
Markets in Baltimore said: "Realistically, the focus is on the
Wells Fargo-Wachovia deal ... All indications suggest (the
bailout bill) is gaining speed in the House, which is important,
because if it doesn't pass, it could get ugly."
The FTSEurofirst 300 index <> was up 0.4 percent on
the day while MSCI main world equity index <.MIWD00000PUS> came
off its low earlier, still trading down 0.4 percent.
According to Standard & Poor's, all 52 world equity markets
declined in September, resulting in a $4.1 trillion loss. Since
January, world equity markets have lost $10.5 trillion.
The dollar <.DXY>, on track for its biggest weekly gain in
16 years, held near a one-year high against a basket of major
currencies.
Investors boosted their bets the Federal Reserve would cut
interest rates later in October <FEDWATCH>. The majority of them
expect a half point cut, while there is a 14 percent chance of
an aggressive 75 basis point rate cut.
"The current Fed is still a bit worried that easy policy
will cause a surprising re-acceleration at a too high rate of
inflation. But those concerns are probably easing significantly
with these data and other markedly poorer economic data," Ellis
said.
The December Bund future <FGBLc1> was up 50 ticks. Earlier,
two-year euro zone government bond yield <EU2YT=RR> hit a 6-1/2
month low of 3.25 percent, 100 basis points below the benchmark
interest rate.
Emerging stocks <.MSCIEF> lost 2.1 percent, hitting a
two-year low.
U.S. light crude <CLc1> rose 0.4 percent to $94.39 a barrel
while gold <XAU=> rose to $840.80 an ounce.
(Editing by Mike Peacock)
