GLOBAL MARKETS-Stocks attempt rebound from Evergrande-led selloff

* European shares rise 0.6%

* Hang Seng flat; yuan recoups a little

* Nikkei drops 2% following market holiday on Monday

SINGAPORE/LONDON, Sept 21 (Reuters) - World stocks stabilised on Tuesday and oil prices recovered from the previous day’s heavy selling, as investors grew more confident that contagion from the distress of debt-saddled Chinese developer Evergrande would be limited.

The STOXX index of Europe’s biggest shares rose 0.6% while Wall Street futures rebounded 1% after the S&P 500 and Nasdaq suffered their biggest daily percentage drops since May on Monday.

German and U.S. government bonds, in heavy demand amid the stock market selloff of Monday, saw yields slip 2-3 basis points respectively.

Investors pointed to the broadly positive market backdrop with central bank money-printing and the recovery in the world economy post-pandemic as reasons to stay bullish.

“Accommodative monetary and fiscal policies and macro recovery are still suggesting a buy-the-dip strategy,” said Angelo Meda, head of equities at Banor SIM in Milan.

Some caution still lingered however, given the simmering worries over the spillover from an Evergrande debt default, as well as a raft of central bank meetings including Wednesday’s Federal Reserve statement that may bring the bank a step closer to tapering.

MSCI’s index of world stocks was flat, having plunged 1.6% on Monday. S&P 500 futures were almost 1% higher but the index stands around 4% below record highs hit in early-September

Asian shares sold off earlier on Tuesday with Hong Kong’s Hang Seng down 0.1% by late afternoon, while Japan’s Nikkei returned from a market holiday with a drop of 2%.

China’s yuan steadied in offshore trade, recouping a little of the losses that sent it to a three-week low on Monday. Evergrande shares fell 4% as focus now shifts to Thursday when the company is due to make bond interest payments.

An all-staff letter from chairman Hui Ka Yuan promised the firm would fulfil its responsibilities and “walk out of its darkest moment”.

Struggling for cash, the developer owes $305 billion and markets worry a messy failure could reverberate through China’s property sector and everything exposed to it - primarily banks and then the broader economy.

While Chinese mainland markets are closed for a public holiday, there was little evidence of that yet. Major Chinese state media made no mention of Evergrande’s troubles.

Australian stocks rose 0.35% as miners BHP and Rio Tinto attempted to bounce back from nine-month troughs hit on Monday amid demand fears.

Copper hovered near one-month lows however, due to fears about demand for the metal widely used in construction.

Cryptocurrencies too found a floor, with bitcoin bouncing off 1-1/2-month lows..

FED WATCH

Evergrande aside, other market tests loom, with central banks spanning the United States, Britain, Japan, Norway, South Africa, Sweden and Switzerland meeting this week.

Nerves ahead of the Fed kept the dollar from moving much lower, though it notched small losses against the euro and the Aussie, with the euro at $1.1730.

Ten-year U.S. Treasury yields crept up to 1.3279% even if many analysts now reckon details of the Fed’s taper timeline may not be announced until November.

“Central banks rightly need to think about the ways they withdraw from these historically high levels of monetary accommodation, but the task is being made much more difficult by Evergrande and by fiscal blockages in the U.S,” GSFM investment strategist Stephen Miller said.

He was referring to Congressional wrangling over passing a spending package and lifting the Treasury’s borrowing limit.

Central banks will likely be watching gas price moves, with sharp price increases possibly exacerbating inflation risks and hurting the economic recovery. European gas prices, up some 280% this year, slipped a touch after an 11% jump on Monday

Brent crude prices meanwhile rose by more than 1%, ending days of losses sparked by the Chinese property developer’s troubles..