* MSCI world equity index up 0.4 percent at 215.33
* UK bank rescue package boosts Europe shares
* Government bonds, dollar fall
By Natsuko Waki
LONDON, Jan 19 (Reuters) - World stocks rose on Monday while government bonds fell after Britain launched a multi-billion rescue plan for its troubled banks and the incoming U.S. administration planned more measures to help the economy.
The UK government will allow banks to insure against steep losses and guarantee their debt to stop the credit crunch pushing the economy into a deep slump. The plan raises the government's stake in Royal Bank of Scotland, which said it lost over 20 billion pounds last year, and also lays the framework for the Bank of England to boost money supply.
Barclays, whose shares fell 25 percent on Friday, confirmed it expected to report full-year profit above the consensus estimate.
The senior advisor of U.S. President-elect Barack Obama, who is set to take office on Tuesday following a national holiday on Monday, said there would be changes to make the second half of the country's $700 billion bank rescue scheme more effective.
The measures on both sides of the Atlantic come as the credit crunch, well into its second year, squeezes corporate profits, hits consumer spending and pushes many major economies into recession.
"Clearly everybody has been forced to accept that the global economy is in dire straits, but it is the variety of solutions that are being offered up that are dictating the markets at present," Chris Hossain, senior manager at ODL Securities.
"Soothing words from Barclays, and further government intervention within the banking system appear to have been taken relatively well." The MSCI world equity index rose 0.4 percent, above a one-month low set last week. The FTSEurofirst 300 index of leading European shares rose 0.9 percent.
Emerging stocks rose 0.2 percent.
U.S. crude oil fell 1.1 percent to $36.10 a barrel, pressured by concerns about weakening oil demand.
Safer government bonds fell across the board as stocks and other risky assets outperformed. The March bund future fell 54 ticks.
The dollar fell 0.4 percent to 90.61 yen while it was down 0.3 percent against a basket of major currencies.
Sterling was down 0.8 percent at $1.4720.
"There are still heavy losses being announced by the banking sector and the market fears the government taking major stakes in banks," Ian Stannard, senior FX strategist at BNP Paribas.
"Sterling is going to come under pressure on the back of this, though in the medium-term the government announcement should be positive for sterling as it helps stabilise credit and lending markets."