Bank fears resurface and suck down Asia stocks

By Kevin Plumberg

HONG KONG (Reuters) - Asian stocks fell by up to 5 percent on Tuesday as prospects of a deep global recession and the biggest job cut plan in history at Citigroup doused expectations for a financial sector recovery in 2009.

Major European stock market futures shed as much as 0.6 percent in early trade, following losses in Asia and U.S. markets. S&P 500 futures were down 0.8 percent.

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

HSBC (0005.HK) also laid off an additional 500 staff in Asia after announcing 1,100 job cuts in September.

China Construction Bank (0939.HK) saw its shares tumble nearly 10 percent as investors gave a resounding thumbs down to Bank of America's deal (BAC.N) to boost its stake in China's third-biggest bank at a significant discount to the current share price.

"Investors find it hard to invest in the financial sector unless signs emerge that the global economy has started to improve," said Kazuhiro Takahashi, general manager of the equity marketing department at Daiwa Securities SMBC in Tokyo.

Rising unemployment is a painful reminder of how the brutal trend of slashing away risk in investor and institutional portfolios, which has been a key factor in erasing about $7 trillion (4.6 trillion pounds) from global equity market cap so far this year, has far-reaching consequences beyond just financial markets.

Meanwhile, the South Korean won was on track for a sixth straight day of losses against the U.S. dollar, which held broadly firm as investors continued to seek safety in the world's foremost reserve currency.