GLOBAL MARKETS-World stocks pare losses after surprise Fed cut

LONDON Jan 22 (Reuters) - World stocks pared losses further on Tuesday while safe-haven government bonds retreated from early highs after a surprise inter-meeting 75 basis point interest rate cut by the U.S. Federal Reserve.

MSCI's main world stock index .MIWD00000PUS was down just 0.4 percent by 1334 GMT, after falling nearly 3 percent earlier in the session. European shares .FTEU3 climbed 1.5 percent, while U.S. stock index futures SPc1DJc1 cut early losses.

March Bund futures FGBLH8 fell following the hefty U.S. rate cut, which took the fed funds rate to 3.5 percent.

"It's certainly a surprise move. The Fed has clearly emphasised the downside risks to growth and felt it needed to counteract this with an immediate 75 basis point move," said Matthew Sharratt at Bank of America.

"We cannot discount the Fed will have to move further. Whether this will be enough to fend off the headwinds the U.S. we will have to see," he said.

Worries that a U.S. recession will hurt global growth and fallout from a global credit squeeze had sent global stocks sharply lower earlier for a second session this week. (Reporting by Ian Chua, editing by Mike Peacock)