GLOBAL MARKETS - Dollar up, stocks dip on Fannie and Freddie plan

By Kevin Plumberg

HONG KONG (Reuters) - The U.S. dollar rose and government bonds slipped on Monday after Washington gave its backing to troubled mortgage firms Fannie Mae and Freddie Mac, but shares dropped on concern the global credit crisis is worse than previously thought.

Shares in global banking giant HSBC Holdings fell 2.2 percent, and shares of Mitsubishi UFJ Financial Group, Japan's biggest bank, as investors took the bailout as a sign the financial sector is in greater trouble than first thought because of the year-old credit crisis.

European shares were expected to open as much as 1.1 percent higher, according to financial bookmakers.

The U.S. plan was an attempt to reassure investors after Fannie Mae and Freddie Mac stock plummeted more than 40 percent last week on spiralling fears both companies, which are pillars of the housing market, were under capitalised and the credit crisis toppled a fifth U.S. bank.

Both companies, which are shareholder-owned but also government-sponsored, said they are adequately capitalized, but welcomed the measures and said they would help confidence.

"Steps to shore them up is a positive but the fact that they are having difficulties in the first place is just symptomatic of a difficult environment out there. And that makes it hard to get too positive," said Greg Goodsell, equity strategist with ABN AMRO in Sydney.

Japan's Nikkei share average finished 0.2 percent lower, led by Softbank Corp, which owns 41 percent of Yahoo Japan. Yahoo Inc rejected a takeover proposal from Microsoft Corp and investor Carl Icahn.

Shares in Asia-Pacific companies outside of Japan fell 1.1 percent on the day, according to an MSCI index.