Global stocks dive on bleak earnings vista
LONDON (Reuters) - Expectations of a dismal company results season, from U.S. banks to Asian industry giants, pummeled shares on Tuesday and buoyed government debt.
European shares fell 2.4 percent, all but wiping out the gains achieved since the end of 2008 and slipping for a fifth session running .EU, while Japan's Nikkei .N225 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.
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 at Societe Generale Asset Management.
U.S. stock index futures pointed to a lower open on Wall Street.
Oil fell toward $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 1.6 percent, its fifth negative performance in a row.
BRACED FOR POOR RESULTS
Investors are braced for a bleak 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. aluminum 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.
Two of Europe's top retailers also bore the scars of recession -- Britain's Tesco (TSCO.L) reported its weakest UK Christmas sales growth since the early 1990s and Germany's Metro (MEOG.DE) posted slower fourth-quarter sales growth.
"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.
S&P has also warned Spain, Greece and Ireland in recent days that their credit ratings were under threat from the global credit crisis, another factor 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 biggest premiums over benchmark Bunds since 1999, according to Reuters charts.
(Editing by Ruth Pitchford)
