* MSCI world index up 1.3 pct, Europe, U.S. futures rise
* Yen, government bonds rise as econ concerns linger
* Oil falls after 9-percent bounce
By Natsuko Waki
LONDON, Nov 25 (Reuters) - Expectations of a stronger open
on Wall Street helped world stocks reverse earlier losses on
Tuesday while government bonds and the low-yielding yen rose,
highlighting persistent concerns about a global slowdown.
Washington's announcement late on Sunday that it would
shoulder most losses on about $306 billion of Citi's risky
assets and inject new capital boosted world stocks by 6.6
percent on Monday. Wall Street is set to open firmer on Tuesday
after scoring the best two-day gain since the aftermath of the
1987 stock market crash.
"Lots of stocks were oversold and as happened after previous
sell-offs, there's been a bit of a bounce," said Colin McLean,
managing director of SVM Asset Management in Edinburgh.
However, top global miner BHP Billiton <BLT.L> walked away
from its hostile offer for rival Rio Tinto <RIO.L> and major
insurer AXA <AXAF.PA> cut its 2008 underlying profit outlook,
reminding investors of a tough environment facing corporates.
"The equity market rally we saw seems to be pretty much a
fleeting affair, consequently Treasuries remained underpinned,"
said Nick Stamenkovic, bond strategist at RIA Capital Markets.
The FTSEurofirst 300 index of leading European shares
<> rose 1 percent, after rallying nearly 9 percent on
Monday -- its second biggest one-day percentage rise on record.
Shares in Rio Tinto <RIO.L> fell 35 percent, while AXA
shares fell 6 percent.
MSCI world equity index <.MIWD00000PUS> rose 1.1 percent.
U.S. stock futures were up around 0.8 percent <SPc1>. Emerging
stocks <.MSCIEF> rose 2.7 percent.
The December bund futures <FGBLc1> rose 15 ticks while U.S.
Treasury prices rose, pushing the benchmark 10-year yield
<US10YT=RR> lower to 3.22 percent.
The yen rose nearly 1 percent to 96.19 per dollar <JPY=>
while the dollar <.DXY> rose 0.5 percent against a basket of
major currencies.
U.S. crude oil <CLc1> fell 3 percent to $52.85 a barrel
after rising more than 9 percent on Monday.
U.S. data due later includes the second estimate for
third-quarter growth. The U.S. economy is expected to have
contracted 0.5 percent in the three months ending September.
Interest rate futures <FEDWATCH> are fully pricing in the
Federal Reserve to cut interest rates by half a point to 0.5
percent in December.
"Although we expect the Fed to lower its Fed fund target
rate to zero in January next year, the market has not fully
priced in the Fed's zero interest rate policy," JP Morgan said
in a note to clients.
"Therefore, any negative surprises from the U.S. releases
should heighten speculation for more aggressive Fed cuts."
(Additional reporting by Simon Falush and Ian Chua; Editing
by Victoria Main)
