By Jeremy Gaunt, European Investment Correspondent
LONDON, March 1 (Reuters) - Two months into 2009 and equity investors are having a worse time than they did last year, with global stocks at six-year lows and little respite in sight.
So it is hard to imagine that this week's central bank interest rate decisions in Britain and the euro zone or the release of key U.S. jobs data will do much to persuade investors to start buying again.
Sentiment is essentially being swamped -- some might say drowned -- by the deteriorating world economy and continuing angst about the precarious state of the global financial system.
As Reuters polls showed last week it has left investors in a state of high risk aversion and sitting squarely on the sidelines.
"The combination of doubt about the economic recovery, further earnings downgrades and looming nationalisation of some large U.S. banks (has) proved a toxic mix for markets," wrote Joost van Leenders, an asset allocator at Fortis Investments.
And new problems just keep piling on. Troubles in eastern and central Europe have now risen high up the agenda amid deep concern among policy makers about a spillover into the euro zone banking system.
In numerical terms, global stocks are actually on track for a worse year than 2008. As measured by MSCI, they have fallen nearly 18 percent so far this year, compared with around 8 percent for the same period a year ago.
It has all rather dampened earlier hopes that the worst of the financial and economic crisis has passed and that the much-touted green shoots of recovery are about to sprout.
Banking health remains the main concern. The blue chip Dow Jones industrial average, for example, was at 12-year lows last week on concerns about the possible nationalisation of giant Citigroup.
The U.S. deal on Friday to boost its stake in the bank fell short of that but the potential still rattled investors.
VAMPIRES? That said, many professional investors appear to be keeping their nerve, with increasing numbers saying they are seeing value in oversold markets.
The Reuters polls last week showed hardly any change between January and February in the portfolio stances of major global investment houses. Indeed, there was a very slight increase in exposure to stocks.
This would suggest that while investors are generally sticking to the sidelines, they are not being particularly spooked by the continuing stream of bad news.
Deeper into the Reuters data, however, were some stark regional differences. European investors, for example, were by far the most bearish, hanging on to more than twice the amount of cash than they normally do.
One reason for this may be the rising fear that collapsing economies in so-called emerging Europe -- the Czech Republic, Poland, Hungary and so on -- will add unbearable strains on the international banks that have expanded into the region.
The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) stepped in jointly at the end of last week with a two-year plan to lend up to 25 billion euros ($31.7 billion) to shore up banks and businesses in eastern and central Europe.
Ripples from this and the weekend meeting of European Union leaders on the issue will likely be a focus on financial markets this week. But the issue already has been around for some time.
Data from financial services specialist State Street show cross-border equity flows into the euro zone at record lows so far this year.
The broad DJ STOXX 600 euro zone stock index lost 12 percent in the first two months of the year.
"The travails in the east, like the vampires of folklore, are sucking the lifeblood from European markets and investor sentiment," State Street said.
RATES AND JOBS
While all this is keeping investors on the back foot, central banks are still pumping money into the financial system and taking monetary policy to record lows.
This week both the Bank of England and the European Central Bank are expected to cut rates by half a percentage point. That would take the ECB down to 1.5 percent and the BoE to just 0.5 percent.
Both are then expected to launch into so-called quantitative easing, essentially using unconventional measures such as buying assets to get money where it is needed to rescue their economies.
These kinds of moves comfort investors in the sense that they show policymakers taking action. But they also underline the severity of the situation.
The new month, in the meantime, brings with it a new raft of economic data, including the key U.S. jobs report on Friday.
Few investors are expecting much succour from the report, which not only shows the state of joblessness in the world's largest economy but also has implications for consumer spending and saving.
The number of U.S. workers already on jobless benefits is at a record high. Friday's report is expected to show around 600,000 jobs were lost in February.
It is said in some parts of Britain that if March enters like a lion it will leave like a lamb. Investors must be hoping so. (Editing by Ruth Pitchford) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog click on http://blogs.reuters.com/hedgehub)