Shares, dollar sag on Japan gloom, bank concerns

Global shares weakened on Monday in tandem with the dollar, pressured by signs of a deepening recession in Japan and concerns about the banking sector around the world. Ireland's weekend announcement that it would take stakes in its three main banks for 5.5 billion euros further underlined the global scope of the worst financial crisis in 80 years.

The MSCI world equity index slipped 0.15 percent as investors moved to take profit after recent share gains, which put the index on track for its first monthly gain in December after six successive months of losses.

"Most people have squared off positions and such movement as you're likely to see is on the downside," said Justin Urquhart Stewart, investment director at Seven Investment Management.

The FTSEurofirst 300 index of leading European shares fell 1.4 percent, led by falls in banks such as BNP Paribas.

Emerging stocks fell over 1.5 percent.

Japanese exports plunged at a record annual pace of nearly 27 percent in November, hit by the fall in global demand as well as the yen's 20 percent rise against the dollar this year.

Bank of Japan Governor Masaaki Shirakawa warned that economic conditions were becoming more severe as the United States was entering a recession that could be the longest since World War Two.

The euro rose over 1 percent against the dollar amid lingering uncertainty over the economic impact of the U.S. car industry's expected restructuring. The U.S. government moved on Friday to throw its automakers a $17.4 billion lifeline.

Against a basket of major currencies, the greenback slipped 0.65 percent, on track for its biggest monthly loss since 1985.

Demand for U.S. Treasuries waned, helping emerging market spreads narrow 7 basis points.

Oil prices fell slightly as concerns about demand lingered. Promises by OPEC producers to keep to the cartel's agreement to cut back production failed to lift prices convincingly, with U.S. light crude for delivery in February down 0.2 percent at $42.20 a barrel.

The March bund futures were up 6 ticks to 124.40.