RPT-GLOBAL MARKETS-Fannie, Freddie bailout spurs hunger for risk

* Stocks up, govt bonds down on US rescue of mortgage giants

* Yen suffers as risks reduced by prop to US housing market

* Global financial crisis still wears on, analysts say (Repeats to additional subscribers with no change to text) (Updates prices, adds European outlook)

By Kevin Plumberg

HONG KONG, Sept 8 (Reuters) - Asian stocks surged 4 percent on Monday after Washington took over Fannie Mae and Freddie Mac to salvage the U.S. housing market, spurring investors to buy back risky assets and sell safe havens such as government bonds.

European stock markets were expected to open sharply higher, with financial bookmakers expecting Britain's FTSE 100 .FTSE up 3.4 percent, Germany's DAX .GDAXI up 2.9 percent and France's CAC .FCHI up 4.3 percent.

Fund managers, who have been keeping their portfolios heavy with cash, devoured bank shares and ploughed into Asia-Pacific currencies other than yen after what could be the biggest U.S. government bailout ever eased some fears in credit markets.

Still, the potential heavy borrowing the U.S. government may need to fund the rescue package could ultimately hurt the U.S. dollar, some analysts said, a prospect that also sent Treasury bond yields higher.

"You do take some of default risk out of the market, so in that sense this is good for other financial assets. You have reduced systemic default risk," said Paul Schulte, regional strategist with Lehman Brothers in Hong Kong.