* Japan's stocks turn down, end at lowest in three months
* Dollar gains on euro, sterling; oil slips below $46
* Many Asian markets closed for Lunar New Year
(Updates prices, adds Treasuries, European outlook)
By Charlotte Cooper
TOKYO, Jan 26 (Reuters) - Japan's stocks closed at their
lowest in almost three months on Monday, while the dollar
gained against the euro and sterling as investors shunned risk,
and oil prices fell on forecasts of a deepening global
downturn.
In Europe, financial spread betters expected Britain's FTSE
100 <> to open 14 to 28 points lower and Germany's DAX
<> to open 4 to 44 points down, after Japan's stock
market made a late reversal on nerves about upcoming earnings.
Many Asian markets were closed for the Lunar New Year, with
Australia and India also shut for national holidays, making
activity thin.
Benchmark U.S. 10-year Treasuries firmed slightly, while
30-year bonds pared losses after falling late last week on
worries about hefty borrowing to fund Washington's stimulus
plans.
U.S. President Barack Obama's top economic adviser,
Lawrence Summers, did not rule out that more money may be
needed to stabilise the U.S. financial system, as Obama sought
at the weekend to build public support for an $825 billion
economic recovery plan. []
The Federal Open Markets Committee (FOMC) meets on Tuesday
and Wednesday, with the market awaiting signs of how the Fed
will help the broader U.S. economy now its main monetary tool,
the fed funds rate, is set to remain in a range of zero to 0.25
percent. []
"What investors are concerned about most is the health of
the UK and European banking sectors and that is hitting
European currencies and lifting the dollar, while hopes for the
Obama administration helping the U.S. economy persist," said
Yasutoshi Nagai, senior economist at Daiwa Securities SMBC.
Japan's Nikkei average <> fell to close 0.8 percent
down, weighed by dismal earnings outlooks, including a profit
warning by construction machinery maker Komatsu <6301.T>.
But losses were kept in check as investors snapped up
battered shipping firms on the view they had been oversold and
the view Chinese imports might be picking up.
DOLLAR GAINS
The dollar moved back near a 23-year high against sterling
and a six-week high against the euro as fears about the global
recession and banking sector problems persisted.
Sterling shed 1.39 percent to $1.3608 <GBP=D4> and more
than 1 percent against the yen <GBPJPY=R>, not far from last
week's record low.
The euro lost 0.4 percent to $1.2928 <EUR=EBS>, holding
above a six-week low of $1.2764 set last week on the EBS
platform, when dismal British and euro zone data led investors
to shift from European currencies to the U.S. currency.
The dollar gave up the morning's gains against the yen to
stand at 88.78 yen <JPY>.
The 10-year U.S. Treasuries were yielding 2.608 percent
<US10YT=RR>, down almost 1 basis point from last week.
The 30-year bond rose about 3/32 in price to yield 3.316
percent, down 0.5 basis point from late New York on Friday.
Caught in a tug of war between supply worries and concerns
about the economy, the debt market is also waiting for U.S.
fourth quarter data due on Friday.
Oil fell, cutting into a 14-percent three-day gain as
traders brushed aside the latest evidence of OPEC's production
cuts to focus on forecasts for a deepening global economic
downturn.
An International Monetary Fund official said at the weekend
the Fund would cut its 2009 global growth forecast to between 1
percent and 1.5 percent. [].
U.S. light crude for March delivery <CLc1> fell 68 cents to
$45.79 a barrel by 0650 GMT. The contract rose 6.4 percent on
Friday.
Gold inched down to hover below $900, pausing from a rally
late last week, when it rose 5 percent on strong investment
demand. By 0650 GMT, spot gold <XAU=> was down about 0.5
percent at $893.80 an ounce against New York's notional close
of $898.10.
(Additional reporting by Elaine Lies and Rika Otsuka)
(Editing by Tomasz Janowski)
