US STOCKS-Futures drop on contagion worry, Wachovia

(Updates with news Citigroup to buy Wachovia operations)

NEW YORK, Sept 29 (Reuters) - U.S. stock index futures fell on Monday as part of a global sell-off on fears that fallout from the U.S. mortgage crisis was spreading, threatening the stability of some European banks.

News that Citigroup (C.N), the largest U.S. bank, will buy the banking operations of embattled Wachovia Corp WB.N added to jitters even though congressional leaders said they had a tentative deal in Washington on a $700 billion bailout to mop up bad mortgage debts on the banks' books.

Investors had fretted about the fate of Wachovia, pushing the stock down more than 60 percent before the bell before federal banking regulators announced the Citigroup purchase of Wachovia. Worries about Wachovia followed the collapse of Washington Mutual WM.N last week.

S&P 500 futures SPc1 slid 20 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 tumbled 157 points and Nasdaq 100 NDc1 dropped 30 points.

In Britain, the government nationalized troubled British mortgage lender Bradford & Bingley BB.L .

In other developments, three European governments nationalized banking and insurance group Fortis (FOR.BR) (FOR.AS). Worries about the financial sector also drove losses across Asia. (Reporting by Ellis Mnyandu; Editing by Kenneth Barry)