-- European stocks recover partially from earlier falls -- Italian, Spanish bonds get more ECB support -- FOMC rescue hopes weaken dollar -- U.S. Treasury futures fall By David Cottle Of DOW JONES NEWSWIRES LONDON (Dow Jones)--European stocks cut their losses Tuesday after earlier sharp falls, helped by hopes that the Federal Open Market Committee will take measures to support the U.S. economy and markets. Meanwhile, Italian and Spanish bonds were helped for the second successive day by European Central Bank buying, traders said, while, on the currency markets, both the dollar and the euro made new record lows against the Swiss franc. By 1140 GMT, London's FTSE 100 index was down 0.2% and Frankfurt's DAX had shed 1.7% but the CAC-40 in Paris was up 0.3%. Wall Street stocks seemed poised to open mixed, with September Dow Jones Industrial Average futures down 2.5% but September S&P 500 futures up 1.5%. Earlier, London's FTSE 100 fell below the psychologically-important 5000 level for the first since July 2010. Since the beginning of August, the index has fallen approximately 13%. In valuation terms, stocks are now cheaper than they've been for years, said Louise Cooper, market commentator at BGC Partners in London. However, she was concerned that, even now, there seemed to be a conspicuous lack of bargain hunters. With frantic volatility now approaching the levels seen when Lehman Brothers imploded, who can blame investors for not piling in, she asked. Elsewhere, September 10-year U.S. Treasury note futures and German bund futures were down. However, Italian and Spanish 10-year bonds yields fell further after the ECB bought both countries' bonds for the second day running. The Spanish 10-year yield fell 17 basis points and dropped below 5% for the first time this year, while Italian 10-year yields dropped 19 basis points to 5.11%. In the European foreign exchanges, haven demand for the Swiss franc propelled both the dollar and the euro to new record lows against it; the euro bought only CHF1.0475 at the low point, the dollar CHF0.7359. As well as watching the tumult in equities, investor attention was shifting towards the Federal Open Market Committee's policy announcement due Tuesday evening. "Markets are wondering what the Fed is going to do for us," said Marc Ostwald, strategist at Monument Securities. "They need to think of something to sooth the animal spirits in the market." Despite the FTSE's clear weakness, neither sterling nor gilts were obviously affected by the serious street rioting that disrupted London and other U.K. cities Monday night. Spot gold hit another all-time record high at $1779.10 a troy ounce but Nymex crude oil for September delivery remained under threat from worries about a new global slowdown. -By David Cottle, Dow Jones Newswires; +44-20-7842-9436; david.cottle@dowjones.com

Source