GLOBAL MARKETS-Fannie/Freddie rescue plan propels stocks, dollar

* Freddie/Fannie plan lifts European stocks

* Wall Street set for strong open

* Plan lifts dollar vs major currencies

By Jeremy Gaunt, European Investment Correspondent

LONDON, July 14 (Reuters) - A U.S. rescue plan for troubled mortgage agencies Fannie Mae and Freddie Mac propelled European shares sharply higher on Monday, lifted the dollar and set up Wall Street for a strong start.

Government bonds were slightly weaker as risk appetite grew while Asian shares failed to benefit from the improved sentiment.

The U.S. Treasury and Federal Reserve called on Sunday for sweeping measures to lend money and buy equity if necessary in Freddie Mac (FNM.N) and Fannie Mae (FRE.N), government-sponsored enterprises (GSE) owned by shareholders.

The plan is an attempt to calm investors after stocks of both plummeted more than 40 percent last week on fears the companies, the cornerstones of the U.S. housing market, were under-capitalised.

There is heightened danger in failure because of the huge role played by the two GSEs in the financial system.

Fannie and Freddie own or guarantee $5 trillion of debt, close to half the value of all U.S. mortgages. Foreign central banks, mostly in Asia, hold $979 billion of the bonds and mortgage-backed bonds sold by the agencies.

"The ramifications of all this seem to suggest that the United States realised they cannot tolerate further pressure on the U.S. housing sector," said Nomura rate strategist Charles Diebel.

Five-year debt spreads between Fannie/Freddie and U.S. Treasuries were holding at about 80 basis points after shrinking almost 30 basis points on Friday in the biggest one-day move ever.

Typically, Fannie/Freddie debt would trade fewer than 10 basis points over Treasuries. Some investors have said the likely government bail out make the GSEs' debt attractive.

The Frankfurt-listed shares of Fannie (FNM.F) and Freddie (FRE.F) were up as much as 33 percent.