* European shares shed all 2009 gains; Nikkei drops 4.8 pct
* Losses seen at Citigroup, Sony, Toshiba
* Euro slides ahead of expected ECB rate cut this week
* Government bonds gain, 2-yr euro yields hit historic low
By Mike Peacock
LONDON, Jan 13 (Reuters) - Expectations of a bleak company
results season, from U.S. banks to Asian industry giants,
pummelled shares on Tuesday and bolstered government debt.
European shares fell 2.7 percent, wiping out all the gains
achieved since the end of 2008 and slipping for a fifth session
running [], while Japan's Nikkei <> shed 4.8 percent
after being closed on Monday for a public holiday.
The euro slid to a one-month low against the dollar as the
European Central Bank looked set to cut interest rates again
this week, while oil continued to drop on fears about reduced
energy demand as the world economy shrinks. []
The ECB is expected to cut rates by a half point to 2
percent on Thursday, according to a Reuters poll. <ECBWATCH>
Two-year euro zone government bond yields briefly fell to
their lowest since the launch of the euro in 1999, according to
Reuters charts, as a new wave of risk aversion took hold.
"It's a downturn in risky assets, another round of
profit-taking on equities," said Alain Bokobza, head of
pan-European equity and cross-asset research at Societe Generale
Asset Management.
Oil fell towards $36 a barrel to its lowest level in three
weeks as further signs the world economy was slowing sharply
dampened demand expectations. []
U.S. light crude for February delivery fell $1.15 to $36.44
a barrel. Prices have fallen by almost $15 in the past week.
MSCI's all-country world share index <.MIWD00000PUS> was
down about 1.5 percent, its fifth negative performance in a row.
BRACED FOR POOR RESULTS
Investors are braced for a dismal company reporting round.
U.S. banking giant Citigroup <C.N> could record a
fourth-quarter operating loss of over $10 billion, the Wall
Street Journal reported on Monday, while U.S. aluminium producer
Alcoa <AA.N> announced a fourth-quarter loss. []
Asia's export companies are also hurting as major overseas
markets such as the United States are mired in recession.
Japan's Sony Corp <6758.T> will likely suffer an annual
operating loss of about $1.1 billion, its first such loss in 14
years, a person with knowledge of the matter said. []
Toshiba Corp <6502.T> expects a loss of about $2.2 billion
according to Japanese media reports. Shares in both companies
shed nearly 9 percent in response.
Britain's biggest retailer Tesco Plc <TSCO.L> also felt the
impact of the downturn as it reported the smallest rise in
Christmas sales at UK stores open at least a year since the
early 1990s.
"We have to get through a very tough earnings season," said
Jonathan Lawlor, head of European research at Fox-Pitt, Kelton.
CREDIT WARNINGS
The euro fell as low as $1.3221, according to Reuters data,
its weakest level since mid-December while the yen edged up to
its highest against the dollar in nearly four weeks, as mounting
risk aversion also boosted the low-yielding Japanese currency.
The New Zealand dollar sank 3.4 percent to $0.5540, its
weakest since mid-December, after Standard & Poor's said it
could cut New Zealand's foreign currency rating. []
Spain on Monday became the third euro zone country since
Friday to be warned by S&P that its credit rating was under
threat from the global credit crisis.
Greece and Ireland have also been put on watch. Those
collective warnings were also hurting the euro.
"The market has become sensitive to bad news such as credit
outlook downgrading, especially with many investors now
considering where they should be repatriating funds from,
instead of investing to," said Masaki Fukui, a senior market
economist at Mizuho Corporate Bank in Japan.
Intra euro zone government bond yield spreads blew out to
their widest since the launch of the euro a decade ago as
investors piled into German Bunds, the safest and most liquid of
regional government debt.
Ten-year Portuguese, French, Belgian, Greek, Spanish and
Dutch bonds were all yielding their most against benchmark Bunds
since 1999, according to Reuters charts.
(Editing by Andy Bruce)
