* Asian shares sink 5 pct; biggest fall since Nov.
* Japanese bond futures soar to four-month highs
* Oil prices fall $1 a barrel
* Focus on ECB; magnitude of expected rate cut questioned
(Updates with latest prices, European shares outlook)
By Rafael Nam
HONG KONG, Jan 15 (Reuters) - Asian shares hit a six-week
low on Thursday and safe-haven Japanese bond futures rose to
their highest since Lehman Brothers collapsed in September as
the U.S. banking crisis deepened, sparking fears of prolonged
financial turmoil.
Bank of America Corp <BAC.N> and Citigroup Inc <C.N> shares
plunged on Wednesday as investors questioned whether the firms
have enough capital to cover losses from toxic assets.
[]
The market turbulence -- with European shares also set to
fall at the open -- is another blow to major economies and many
consumers who are facing the toughest conditions in decades, as
evidenced by more gloomy data out of the United States, Germany
and Japan.
The European Central Bank is expected to slash interest
rates later in the day in a bid to stimulate growth, though
uncertainty about how deep the cut will be helped send the euro
to multi-week lows on Wednesday.
"A continued flow of bad economic data is pointing to a
steeper global recession and worsening concerns about corporate
earnings," said Lee Sun-yeob, a market analyst at Goodmorning
Shinhan Securities in Seoul.
"Increasingly bearish prospects for global banks' results
are also pressuring sentiment."
The MSCI index of Asia-Pacific shares excluding Japan
<.MIAPJ0000PUS> dropped 5.2 percent as of 0705 GMT, heading for
its biggest percentage daily fall since mid-November.
The last time worries about Citigroup's fate undermined
global equity markets was in November, when the U.S. government
stepped in to prop up the lender with government funds.
The MSCI index on Thursday hit its lowest since Dec. 8,
down almost 9 percent for the year. The deep falls over the
past week and a half are rapidly denting a rally that still has
shares up about 17 percent since hitting five-year lows in
November.
Policymakers worldwide have responded since late last year
by slashing interest rates and announcing massive government
spending plans, but the actions have yet to fully convince
investors.
Data on Wednesday showed December U.S. retail sales tumbled
and Germany's economic growth slipped to a three-year low in
2008. [] []
In Japan, core machinery orders fell by a record amount in
November, data showed on Thursday. []
"The problems are global and there isn't any real good news
around," said Martin Angel, a dealer at Patersons Securities
Ltd. in Australia. "You are just not going to escape it."
Japan's Nikkei average <> dropped 4.9 percent, with
Nissan Motor Co <7201.T> slipping 3.4 percent on news it will
post an annual operating loss because of sliding sales and a
soaring yen. []
Benchmark stock markets in South Korea <> dropped 6
percent, while Australia <>, Hong Kong <> and Taiwan
<> fell 4-5 percent each.
The worsening global economy is putting corporate earnings
under fire and pushing some firms to file for bankruptcy, a
step taken by Canadian telephone equipment maker Nortel
Networks Corp <NT.TO> <NT.N> on Wednesday. []
Oil prices also dropped on concerns about weakening global
demand, with U.S. crude futures <CLc1> down $1.00 to $36.28.
BANKING CRISIS RETURNS
Woes at global financial firms looked set to continue,
reinforcing the concerns about the economic downturn.
Citigroup <C.N> shares tumbled 23 percent to below $5 on
Wednesday on worries about its plan to shrink by about
one-third, while Bank of America Corp <BAC.N> is close to
receiving billions of dollars of support from the U.S.
government as it tries to digest its purchase of Merrill Lynch.
[]
HSBC <0005.HK> shares sank 5.4 percent in Asian trade,
hitting a 10-year low at one point, as analysts said it may
halve its dividend and raise up to $30 billion in a rights
issue.
Investors are having to contend as well with potential
credit ratings actions for countries facing deteriorating
finances.
Standard & Poor's cut its rating on Greece's sovereign
rating on Wednesday citing a rising public deficit. That
contributed to the euro's fall to one-month lows against the
dollar and a six-week trough versus the yen.
The euro dipped 0.1 percent to $1.3173 <EUR=>, having hit a
one-month low of $1.3093 on EBS the previous day.
The ECB meets later in the day with expectations varying
from a quarter-point reduction of the current 2.5 percent
benchmark rate to a half-point move or more. []
Risk aversion sent some investors into traditionally safe
but low-yielding assets such as government bonds and pushed the
Japanese yen higher, which put more pressure on stocks in
Tokyo.
March 10-year Japanese government bond futures rose to
140.19 <2JGBv1>, the highest for a lead contract since Sept.
16, in the wake of the collapse of Lehman Brothers. After
trimming some gains, the contract stood at 140.05, up 0.40
point on the day.
The benchmark 10-year JGB yield fell 5 basis points to
1.210 percent <JP10YTN=JBTC>.
The yen, after initially dipping on the weak Japanese
machinery data, recovered. Japan's currency tends to gain in
volatile times as investors unwind trades in which they borrow
the low-yielding yen to invest in riskier assets.
The dollar slipped 0.2 percent from late U.S. trade to
88.88 yen <JPY=>.
