* World shares turn down, shine fades from Obama stimulus
* Fed stands pat on rates, holds back from buying Treasuries
* Yen buoyed as global worries at fore
* Kiwi hits 6-yr low after rates slashed to record low
(adds quotes, updates prices)
By Veronica Brown
LONDON, Jan 29 (Reuters) - World shares fell on Thursday,
while the low-yielding Japanese yen rose as hopes for the
approval of a $825 billion U.S. stimulus package failed to cut
much sway with European investors.
European shares stumbled after gains in U.S. and Asian
stocks overnight, snapping a three-day winning run.
Government bonds also fell, taking U.S. benchmark yields to
a six-week peak after the Federal Reserve shied away for now
from buying Treasuries as part of its aggressive policy easing
to relieve credit market strains.
It stood pat on interest rates -- keeping borrowing costs at
between 0-0.25 percent and said they could stay unusually low
for some time.
President Barack Obama's $825 billion stimulus package
cleared its first congressional hurdle in Congress
[] but analysts said the package still had a
potentially bumpy road ahead.
"The optimism that has been developing over the course of
the past week is now starting to fade," said Ian Stannard,
senior FX strategist at BNP Paribas in London.
In a reminder of ailing global financial health, the
European Central Bank (ECB) said it could cut interest rates to
new record lows as economic data continued to sour.
Europe's FTSEurofirst 300 Index fell 1.4 percent <>
with banks leading the losses, while world stocks as measured by
MSCI's all-country index lost 0.3 percent <.MIWD00000PUS>. U.S.
stock market futures were also pointing to a lower Wall Street
open.
"I doubt we will have a real chance to see banks in a
sustainable recovery soon. They will continue to be extremely
fragile," said Heino Ruland, strategist at FrankfurtFinanz.
"The world economy is tumbling with a sort of speed we've
never seen. (Investors are) very shaky."
YEN GAINS
In currency markets the low-yielding Japanese yen rose
reflecting deep wariness over risk despite the Obama package
clearing its first hurdle.
Yen strength pulled the euro down 0.7 percent to 117.89 yen
<EURJPY=>, while the dollar fell 0.6 percent to 89.81 yen
<JPY=>.
The dollar was steady against a basket of major currencies
<.DXY>, while the euro was down 0.1 percent on the day at
$1.3121 <EUR=>.
New Zealand's dollar fell as low as $0.5127 <NZD=D4>, the
lowest since December 2002 according to Reuters data, after its
central bank slashed interest rates by 150 basis points to a
record low of 3.5 percent to boost an economy deep in recession
[].
European government bonds fell, while the yield on benchmark
U.S. 10-year Treasuries hit a 6-week high after the Federal
Reserve shied away from buying longer-dated debt and as the
market grappled with a heavy supply schedule.
March Bund futures <FGBLH9> were 53 ticks lower at 122.53,
with 10-year cash yields <EU10YT=RR> 4.8 basis points higher at
3.282 percent.
U.S. 10-year Treasuries <US10YT=RR> dipped, with the yield
reaching a peak of 2.700 percent in Asian trade.
(Additional reporting by Phakamisa Ndzamela and Rebekah
Curtis)
(Reporting by Veronica Brown; Editing by Ian Jones)
