GLOBAL MARKETS-Stocks fall, haunted by economy fears; bonds up

                                
 (Recasts, adds European markets; updates prices, quotes)
                                
 By Louise Heavens
                                
 SINGAPORE, Jan 28 (Reuters) - Shares in Asia fell 3 percent
on Monday as concerns over the health of the global economy
returned to haunt stock markets, sending investors to seek safe
haven government bonds.
                                
 The yen rose against other currencies as investors shunned
riskier bets and unwound currency carry trades, while oil
drifted back down below $90 a barrel with traders saying
Friday's $1.30 surge might have been overdone after Wall Street
ended the week on a down note following two days of sharp
gains. [.N]
                                
 Europe's stock markets were tipped to fall, with financial
bookmakers predicting Britain's FTSE 100, Germany's Dax
<.GDAXI> and France's CAC-40 <.FCHI> to open around 2 percent
lower.
                                
 Investors resumed selling after last week's nerve-wracking
rollercoaster, which saw global equity markets toppled by
growing despair over the U.S. economy earlier in the week and
then lifted by a $150 billion stimulus plan agreed by U.S.
legislators and the White House. [ID:nN24261782]
                                
 "The sell-off is hitting all sectors regardless of each
company's earnings and outlook," said Kim Joong-hyun, an
analyst at Goodmorning Shinhan Securities. "Although last
week's U.S. rate cut has calmed down panic selling, a recovery
from the economic woes and the financial sector's debt problems
should take a long time."
                                
 Seoul's KOSPI index <.KS11> shed almost 4 percent. Foreign
investors continued their selling spree for the 18th straight
session, dumping 268 billion won ($283 million) in net value on
the main board.
                                
 Japan's Nikkei benchmark <.N225> ended down 4 percent.
Goldman Sachs said Japan's economy may be already in recession,
due partly to weaker exports and sluggish consumption.
                                
 Australia's market <.AXJO> was shut for a public holiday.
Hong Kong's Hang Seng <.HSI> slid 3 percent, while MSCI's index
of Asia-Pacific stocks excluding Japan <.MIAPJ0000PUS> fell 3.4
percent by 0700 GMT, taking year to date losses back above 12
percent.
                                
 Shanghai <.SSEC> suffered the worst losses, falling 7
percent, dented by heavy snow across central and eastern China,
which is seriously disrupting food and energy supplies.
                                
 DAVOS DOWNER
                                
 Traders were eyeing this week's Federal Reserve meeting, at
which the bank is set to cut U.S. interest rates again, having
slashed them in an emergency move last week.
                                
 World business leaders gathered in Davos for last week's
meeting said on Saturday the worst might yet be to come in a
financial crisis driven by continuing fears of bank losses and
uncertainty over U.S. emergency stimulus measures.
                                
 Banks said there were few cures for a financial system
faced with hundreds of billions of dollars in investments which
have turned bad.
                                
 "It will be a while before you see a return of normalcy in
banking and markets," Merrill Lynch <MER.N> CEO John Thain
said. [ID:nL26541130]
                                
 French bank Societe Generale's <SOGN.VX> trading scandal
remained in focus.
                                
 On Sunday, the bank defended its handling of the world's
biggest trading scandal, but admitted its risk systems had
failed to detect a 50-billion-euro market bet by a lone trader.
For a list of stories, click on [ID:nL24876433]
                                
 For now, some investors sought safety in government bonds.
                                
 Japan's March 10-year futures <2JGBv1> rose 0.72 of a point
to 138.08, while the benchmark 10-year bond yield
<JP10YTN=JBTC> fell to 1.405 percent.
                                
 In the currency markets investors were looking to equity
markets, seeking clues on whether to tiptoe back to risky carry
trades, in which the low-yielding yen is used as a source of
cheap funds to buy higher-yielding currencies.
                                
 The dollar fell to 106.12 yen <JPY=>, while the
high-yielding Australian dollar fell 0.8 percent against the
yen <AUDJPY=R>.
                                
 Sterling fell against the yen and the dollar after a senior
Bank of England official said interest rates need to be cut to
prevent a sharp slowdown in British growth [ID:nL27361969]
                                
 U.S. crude <CLc1> fell 87 cents to $89.83 a barrel.
                                
 Gold and platinum traded near record highs supply fears
lingered after South Africa's mines halted production due to a
power crisis.
                                
 Spot gold <XAU=> rose to $917 an ounce from $918.00/919.00
an ounce late in New York on Friday, when the metal rallied to
record high of $923.40 an ounce.
 (Additional reporting by Yuko Saeki in Tokyo; Editing by
Lincoln Feast)