* Global share prices down on bank industry concerns
* Bleak U.S. retail sales data lifts government debt
* Dollar benefits from safe-haven flow
* Apple's Steve Jobs to take medical leave of absence
By Daniel Bases
NEW YORK, Jan 14 (Reuters) - Grim U.S. retail sales data
and concerns that banks need even more money to save them from
collapse drove U.S. and European equities to six-week lows on
Wednesday and led to buying of safe-haven government debt.
The Treasuries purchases supported the U.S. dollar. Crude
oil prices settled down 1.32 percent due to a surprising rise
in U.S. energy inventories, the result of slowing economic
demand.
European government bond yields hit their highest levels
since the introduction of the euro currency, which was undercut
by expectations for a half-percentage point interest rate
reduction on Thursday by the European Central Bank, to 2.0
percent.
Bank stocks were hit particularly hard by news that
Citigroup Inc <C.N>, the one-stop financial behemoth catering
to institutional and retail investors that ushered in a
decade-long era of mega-banks, agreed to merge its Smith Barney
brokerage unit with Morgan Stanley's wealth management arm.
"You'd think the news on banks is baked in, but there's
still a lot of headwinds," said Rich Parker, head of trading at
Stanford Group in New York.
Citigroup is expected to shed more assets in a rush to
raise capital while isolating bad debts from the rest of the
bank. Investors expect a big fourth-quarter loss will be
announced on Jan. 22.
Citigroup's stock fell 23.2 percent to $4.53 while Morgan
Stanley <MS.N> lost 8.9 percent to $17.19.
In Europe, British bank Barclays <BARC.L> said it was
cutting more UK-based jobs in its retail and commercial banking
business. Its shares fell 14.4 percent.
HSBC <HSBA.L>, Europe's biggest bank, fell 8 percent after
Morgan Stanley analysts said it is likely to halve its dividend
and may need to raise up to $30 billion in a rights issue.
"The write-downs are starting to really scare people
outside of the banking area as well. Is there a balance sheet
out there that you can really trust? By all indications it
seems the recession is going to be a historically long one,"
said Parker."
The latest U.S. retail sales data added to fears on the
economy.
U.S. retail sales to fell a more-than-expected 2.7 percent
in December, the latest in a series of data suggesting the
year-long U.S. recession was deepening and could be the longest
since the Great Depression of the 1930s.
Data showed Germany's economy grew at its slowest pace in
three years in 2008, with the economy contracting between 1.5
to 2.0 percent in the final three months.
STOCKS FALL, UNDERMINING RECENT RALLY
The plunge in banking and financial stocks pulled major
stock indexes lower, undermining the year-end rally that lifted
them more than 20 percent from their November lows.
Another sign of economic woe came on Wednesday when Nortel
Networks Corp <NT.TO><NT.N>, North America's biggest maker of
telephone equipment, sought bankruptcy protection.
At the close in New York trade, the Dow Jones industrial
average <> fell 248.42 points, or 2.94 percent, to
8,200.14. The Standard & Poor's 500 Index <.SPX> lost 29.17
points, or 3.35 percent, at 842.62. The Nasdaq Composite Index
<> dropped 56.82 points, or 3.67 percent, at 1,489.64.
After the close, iPod maker Apple Inc <AAPL.O> said its
chief executive, Steve Jobs, is taking a medical leave of
absence. Apple's shares closed down 2.71 percent ahead of the
news.
In Europe, the FTSEurofirst 300 <> index of top
European shares finished down 4.3 percent at 804.17 points, its
lowest close since Dec. 29. The UK's FTSE 100 <>;
France's CAC 40 <> and Germany's DAX index <.GDAX>, all
closed at six-week lows.
Stocks in Japan bucked the downtrend and the benchmark
Nikkei edged up 24.54 points to 8,438.45 <>.
But in a sign of long-term problems for the market, the
Tokyo Stock Exchange said foreign investors, long a key source
of market energy in Japan, were net sellers of shares in 2008
for the first time in eight years.
The U.S. retail sales data and bank woes helped lift
government bonds and the U.S. dollar.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
27/32, its yield at 2.2059 percent. In Europe, the two-year
Schatz yield yield hit 1.455 percent, the first time since the
introduction of the euro currency.
The U.S. dollar gained 0.10 percent to 84.348 against a
basket of major trading-partner currencies <.DXY>.
"The retail sales number was not only negative for the U.S.
economy, but also negative for risk sentiment. Consequently, it
served to extend the dollar's gains as well as bolster demand
for the yen," said Michael Woolfolk, senior currency strategist
at The Bank of New York Mellon in New York.
Against the Japanese yen, the dollar <JPY=> was down 0.06
percent at 89.08 from a previous session close of 89.130. The
euro fell 0.14 percent to $1.3176 from the previous session
close of $1.3195.
In energy and commodities trading, U.S. light sweet crude
oil <CLc1> fell 1.32 percent to $37.28 per barrel and spot gold
prices <XAU=> fell 1.21 percent, to $811.20.
(Additional reporting by Ellis Mnyandu, Wanfeng Zhou in New
York; Lucia Mutikani in Washington; Natsuko Waki, George
Matlock and Brian Gorman in London; Elaine Lies in Tokyo;
Editing by Leslie Adler)
