Banks and economy hit stocks, oil slides

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Global shares fell again on Tuesday, battered by growing prospects of a deep global recession and one of the biggest job cut plans in history at Citigroup.

Wall Street looked set to open with relatively deep losses.

The dollar was higher against the euro but lost versus the yen. Oil fell below $55 a barrel for a 19 percent loss this month.

Despite relatively stable conditions in short-term credit markets, banks were struggling to contain climbing losses on bad loans, with Citi, the second-largest U.S. bank, reducing its workforce by 15 percent in a dramatic move to restore itself to health.

HSBC also laid off an additional 500 staff in Asia after announcing 1,100 job cuts in September.

The state of the global economy remained the main concern.

"Analysts are no longer wondering if we are in a recession. The question now is how long and how painful will this economic contraction be," said David Evans, analyst at BetOnMarkets.com.

British inflation came in below expectations, reflecting the global decline in demand.

Chief executives of General Motors, Ford and Chrysler and the president of the United Auto Workers union were to testify in Congress later on a hotly debated bailout plan.

The pan-European FTSEurofirst stock index was down 1.7 percent, having failed to maintain early gains.

Global stocks as measured by MSCI were also down 1 percent for an 11 percent loss this month and a nearly 48 percent decline in the year-to-date.

MSCI's benchmark emerging market stock index was down 3.2 percent, reflecting concern about the impact on traditionally volatile sectors from the global downturn.

Japan's Nikkei average slipped 2.3 percent, with exporters such as Sony Corp battered.

"There's no question that the economies of both the United States and Japan are doing poorly and will do worse, so the downside risk is quite high," said Toshihiko Murai, general manager of equities at Nozomi Securities.

The benchmark Nikkei shed 194.17 points to 8,328.41. The broader Topix lost 1.8 percent to 835.44.