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PARIS, Sept 17 (Reuters) - U.S. stock index futures fell early on Wednesday, pointing to a lower start on Wall Street as the Federal Reserve's $85 billion rescue deal for embroiled AIG failed to soothe fears over the global credit crisis.

By 0915 GMT, S&P 500 futures were down 0.2 percent, Dow Jones futures were down 0.4 percent and Nasdaq 100 futures were down 0.4 percent.

The U.S. Federal Reserve, which left interest rates unchanged on Tuesday, will lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.

The rescue comes just two days after U.S. authorities refused to bail out investment bank Lehman Brothers Holdings Inc <LEH.P>, forcing it to file for bankruptcy.

AIG shares traded in Frankfurt were up 24 percent.

"No doubt that the rescue of AIG is positive news," said Yann Lepape, chief global macro strategist at Oddo Securities, in Paris.

"It shows that the U.S. authorities are making the distinction between what situations represent systemic risks and what situations don't. Rescues are targeted to very big firms, while rate cuts or broad bailouts are out of the picture," he said.

"Fears of systemic risks are easing, but overall it doesn't change the gloomy economic backdrop and the looming sharp slowdown in U.S. consumer spending."

On Tuesday, the Fed disappointed investors who had bet that it would follow its injection of emergency funds with an interest rate cut.

Asian and European stocks as well as the dollar initially rallied on news that the global financial system would be spared the collapse of the U.S. insurance group that operates in 130 countries, but equities gave up some of their early gains, while cash remained tight in money markets.

Japan, Australia and India pumped $33 billion into money markets on Wednesday as AIG's rescue plan failed to ease the global funding squeeze.

Adding to the jitters, Reserve Primary Fund, a money-market mutual fund whose assets have tumbled 65 percent in recent weeks, fell below $1 a share in net asset value, because of its losses on debt issued by Lehman.

The Reserve Primary Fund had about $23 billion in assets on Tuesday, down from about $65 billion in assets as of Aug. 31, said fund spokesman Ming Lee Hatch. Investor redemptions will be delayed as long as seven days, the fund's owner, New York-based Reserve Management Corp., said Tuesday in a statement.

On a brighter side, Morgan Stanley posted a 3 percent decline in quarterly profit, but results beat expectations and the shares rose in extended trade on Wall Street. After Tuesday's closing bell, the stock rose more than 7 percent, while the bank's shares traded in Frankfurt were up 16 percent at 0915 GMT.

Also on the positive news front, Barclays agreed to buy several parts of Lehman for $1.75 billion.

On the macro front, housing starts in August, due at 1230 GMT, are expected to show an annual rate of 950,000 units, down from 965,000 in July, according to a Reuters poll of analysts. A record rate of foreclosures probably kept many U.S. home builders off the job, pushing the rate of groundbreaking for new homes to its lowest level in more than 17 years, analysts predict.

U.S. stocks rebounded on Tuesday, recovering a day after their biggest drop in seven years on growing optimism that U.S. authorities would finance a rescue AIG.

(Reporting by Blaise Robinson; editing by Elaine Hardcastle) Keywords: MARKETS STOCKS US EUROPE

tf.TFN-Europe_newsdesk@thomsonreuters.com

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