* World stocks slip on economy worries
* European shares down 0.5 percent after early gains
* Wall Street futures pointing down
* Dollar at 1-1/2 year highs
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 21 (Reuters) - World stocks stumbled in the
attempt to put in gains for the third day in a row on Tuesday as
Wall Street futures turned down on economic fears.
European stock markets had been in positive territory as
investors bet governments would succeed in ending the credit
crisis and in controlling the global economic downturn.
But fears about the deteriorating global economy after tech
bellwether Texas Instruments <TXB.N> warned of slowing sales
turned things down.
The dollar, meanwhile, hit a 1-1/2 year high against major
currencies, including the euro.
Sentiment in Europe and Asia was boosted overnight by
comments from U.S. Federal Reserve Chairman Ben Bernanke, who
backed government spending as a fresh measure to boost the U.S.
economy.
Interbank lending rates were also fixed lower, fuelling a
belief that government rescue plans were beginning to free up
frozen money markets.
MSCI's all-country world stock index <.MIWD00000PUS>, a
broad measure of global stock market performance, was flat to
lower after gaining for two days in a row.
Although, close to 12 percent above five year lows hit on
Oct. 10, the index remains down 39 percent year-to-date.
"The market wants some kind of concrete economic steps,
jointly if necessary, and Bernanke's comments have raised hopes
that something will be forthcoming," said Hiroaki Osakabe, a
fund manager at Chibagin Asset Management in Japan.
European shares rose in early trade with investors cheered
by Bernanke and French government moves to bolster its banks.
France announced plans late on Monday to lend 10.5 billion
euros ($14.12 billion) to the country's top six banks before the
year end to prop up their capital reserves.
But later, the FTSEurofirst 300 <> index of top
European shares was down about 0.3 percent.
Earlier, the Nikkei average <> rose 3.3 percent or
300.66 points to 9,306.25. The broader Topix <> rose 3.2
percent to 956.64.
DOLLAR FIRMS, BONDS WEAKER
The dollar rose to a 1-1/2 year high versus a basket of
currencies, fuelled by ongoing demand from banks for their
funding needs.
The dollar index, which measures the U.S. currency's value
against a basket of six currencies rose to 83.774 <.DXY> -- its
highest since at least March 2007.
The euro traded at $1.3190, around 1-1/2 year lows.
"General dollar strength is continuing, which is pushing the
euro and sterling lower," said Stephen Koukoulas, currency
strategist at TD Securities.
On fixed income markets, euro zone government bond yields
were down with the two year yield <EU2YT=RR> losing 6 basis
points to 2.888 percent and the 10-year <EU10YT=RR> losing 5
basis points at 3.959 percent.
(Editing by Ron Askew)
