(Corrects U.S. interest rate in paragraph 7 to a range of zero to 0.25 percent instead of 0.5 percent)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 11 (Reuters) - Much investor focus will be on Europe this week with eyes on interest rates, retail earnings and the demand for bonds.
Concerns about corporate fraud, meanwhile, are rising as the global economy deteriorates and scandals are revealed in India and on Wall Street.
As legendary investor Warren Buffett put it: "You only learn who has been swimming naked when the tide goes out."
The key event for many investors this week will be the rate setting meeting of the European Central Bank on Thursday, with a Reuters poll showing a majority of economists expecting a half-point cut to 2.00 percent.
Among major monetary authorities, however, the ECB has been one of the most reluctant to make sharp cuts in interest rates in part because of a strong, pre-euro tradition in Germany's powerful Bundesbank to focus on fighting any sign of inflation.
"It is dominated by northern Europeans," said Gary Dugan, chief investment officer of Merrill Lynch's wealth management arm. "They want to appear very Bundesbank-like."
But with U.S. rates now at a range of zero to 0.25 percent, Britain and Canada at 1.5 percent and Japan at 0.10 percent, the current ECB rate of 2.50 percent does stand out, even after a record 75 basis point easing last month.
And the euro zone economy is increasingly suffering. Euro zone economic sentiment hit an all-time low in December and exports in Germany, the largest economy, posted a record drop.
Dugan reckons the ECB will have to cut by 50 basis points soon followed by another 50 in April.
For investors, the ECB's decision this week will be a signpost to just how dangerous the authorities see the threat of a deepening recession.
SHOP 'TIL YOU DROP
Another sign, meanwhile, will come from Europe's retailers, many of whom have trading and earnings reports this week. Among them are Carrefour, Delhaize, Ahold and Bang & Olufsen
Fund managers such as AXA Investment Managers are expecting that consumers fearing for their jobs will have made life hard for the retailers.
"The overall theme of Q4 has been the crisis, the crisis, the crisis," said senior strategist Franz Wenzel. "Our hunch is that retailers will post a total sales decline something like 5 percent (from a year earlier)."
The earnings season is getting under way on Wall Street, too. Among those reporting this week are IBM, Intel and ALCOA Big banks come a week later.
Analyst expectations for the quarter have plummeted.
Thomson Reuters estimates that the Q4 growth rate for S&P 500 companies is now for a fall of around 1.2 percent. Six months ago, the market expectation for Q4 was a rise of 59.3 percent.
The estimated earnings growth rate for those companies reporting from the euro zone's STOXX 600 for Q4 2008 currently stands at 20.5 percent. Six months ago, this was estimated at 57.3 percent.
BOND WORRIES
Investors are also likely to spend some time looking at bond issuances this week. The price of government bonds has generally soared over the past year hand in hand with falling equities as investors have sought relative safety.
But demand for 10-year bonds issued by Germany last week was very poor, attracting buyers for only two-thirds of the 6 billion euros ($8.21 billion) of paper on offer. U.S. and Japanese bond sales were also subdued.
Later auctions of French and Spanish bonds were more encouraging for investors, but the German sale was still a concern given that there is an expected glut of euro zone government borrowing ahead, as there is elsewhere.
This week sees auctions in Britain, The Netherlands, Japan, Germany, Italy and Spain.
Emerging market investors, meanwhile, will be looking to see what impact this developed market glut is having on their universe.
A successful Philippines sale of $1.5 billion in bonds last week could encourage other Asian borrowers. A Turkish auction also went well, although a majority of buyers were local banks. Peru and Chile are also planning bond sales in the coming weeks.
Emerging market debt is relatively cheap currently after a big sell-off last year. The yield spread over U.S. Treasuries is around 650 basis points, compared with around 240 basis points a year ago
CAVEAT EMPTOR
The latest headache for investors, meanwhile, may be the resurgence of concerns about corporate governance.
In much the same way that Enron, Parmalat and others collapsed under massive fraud after the dot.com bubble burst, so the post-credit crunch sell-off is now throwing out its own scandals.
The latest was the revelation last week of a $1 billion fraud at Indian IT firm Satyam Computer Services, an admission that called into question the future of the company.
It came on the heels of the alleged $50 billion securities fraud by Wall Street pioneer Bernard Madoff. A wide range of companies, including Fortis, HSBC, Man Group, and Nomura, may have had large exposure.
While the two events do not mean that fraud is about to be revealed in every corner of the world, such scandals do make investors more cautious -- as do moves by governments to impose tougher regulations in their wake. (Editing by Jason Neely and Peter Blackburn)