* Asian shares sink 5 pct; biggest fall since Nov.
* Japanese bond futures soar to four-month highs
* Oil prices fall almost $1 a barrel
* Focus on ECB; magnitude of expected rate cut questioned
(Updates with latest Asian prices, quotes, background)
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 a
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 is an another blow to major economies
that are facing the toughest conditions in decades as evidenced
by the latest data out of the United States, Germany and Japan.
The European Central Bank is expected to slash interest
rates later in the day, though uncertainty about how deep a cut
to expect helped send the euro to multi-week lows on Wednesday.
"A continued flow of bad economic data is pointing to
steeper global recession, 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 percent as of 0515 GMT, heading to
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 boosting spending, but the
actions have yet to fully convince investors.
Among the latest factors worrying investors were data on
Wednesday showing 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 4.5 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 <>, Australia
<> and Hong Kong <> fell 4-5 percent each.
The worsening global economy is putting corporate earnings
under fire and leading some to file for bankruptcy, a step
taken by 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 90 cents to $36.39.
BANKING CRISIS RETURNS
Woes at global financial firms also look set to continue.
Citigroup <C.N> shares tumbled 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. []
Meanwhile, HSBC <HSBA.L> <0005.HK> shares sank nearly 6
percent in Asian trade to a 10-year low as analysts said it may
halve its dividend and raise up to $30 billion in a rights
issue.
Investors are also having to contend 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. Some economists
expect no move at all. []
Meanwhile, traditional safe-haven assets such as government
bonds and the Japanese yen gained amid the risk aversion.
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 140.04, up 0.39
point on the day.
The benchmark 10-year JGB yield fell 3.5 basis points to
1.225 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 0.1 percent from late U.S. trade to
89.00 yen <JPY=>.
(Additional reporting by Jungyoun Park in SEOUL and Simone
Giuliani in SYDNEY; Editing by Dhara Ranasinghe)
