TOKYO/NEW YORK - CITIGROUP and Bank of America faced new doubts over their ability to fund their massive losses as their shares sank, while US and Japanese data pointed to a deepening global recession.

The European Central Bank is expected to cut interest rates for the fourth month running as the outlook for the 16-country euro zone continues to worsen, with biggest member Germany braced for the worst year for its economy since World War Two.

Asian equities followed European and US markets in a slide to multi-week lows. Once-mighty Citigroup tumbled 23 per cent amid fears banks will need even more public funds to save them from collapse.

'You'd think the news on banks is baked in, but there's still a lot of headwinds,' said Mr Rich Parker, head of trading at Stanford Group in New York.

Shares in Citigroup, once the world's biggest bank but now only No. 3 in the United States, fell below $5 for the first time since a government rescue in November amid uncertainty about whether it can recover from punishing losses on toxic debts.

Massive loss
More bad news was expected from Citigroup on Friday, when it plans to report quarterly results, six days ahead of schedule, and analysts are looking for a fifth straight multibillion-dollar loss. The bank was also widely expected to provide details of a comprehensive downsizing designed to ensure its survival.

Bank of America Corp is close to receiving billions of dollars of support from the US government, a source familiar with the matter said, as it tries to digest Merrill Lynch & Co Inc, the investment bank and brokerage it bought on Jan 1.

Merrill has billions in troubled assets - ranging from commercial real estate to subprime mortgages - that suffered during a brutal fourth quarter.

Citigroup has already been propped up with $45 billion (S$67.32 billion) in government funds from the Troubled Asset Relief Programme (TARP), while Bank of America and Merrill have received $25 billion.

'The large banks in the US are not lending, and they're desperate to conserve capital,' said Mr Dan Alpert at Westwood Capital in New York. 'Banks only remain going concerns because the federal government is topping up their equity'.

And there is no relief in sight warned Mr Jamie Dimon, chief executive of rival JPMorgan Chase & Co.

'The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,' he told the Financial Times. 'In terms of our sector, we expect consumer loans and credit cards to continue to get worse.'

The crisis finally caught up with Canada too, where Nortel Networks Corp, North America's biggest telephone equipment maker, filed for bankruptcy.

Stalled investment
The financial crisis began in 2007, when bank lending dried up in the face huge losses in the US housing market. Since then the global economy has deteriorated relentlessly and by late 2008 most developed countries were officially in recession.

Data on Thursday showed core Japanese machinery orders fell a record 16.2 per cent in November to a two-decade low, in a sign the global crisis has stalled capital investment, while wholesale inflation hit a four-year low, pointing to the risk of deflation.

The global slowdown has hit Japanese factories hard, with big firms such as car maker Toyota Motor Corp and electronics firm Sony Corp slashing production and cutting jobs as export orders dry up.

Nissan Motor Co the country's third largest car maker, is set to post an annual operating loss, a company source said. It had previously forecast a profit.

The Japanese numbers followed US data showing sales at retailers last month slumped 2.7 per cent from November as a deteriorating economy made consumers slash spending during the key holiday period. Compared with a year earlier, sales plunged a record 9.8 percent in December. -- THOMSON REUTERS