By Veronica Brown LONDON (Reuters) - The Japanese yen strengthened broadly on Monday as slumping Chinese and European manufacturing activity kept investors on edge and dragged world share prices down. Yen strength also weighed heavily on currencies of countries where central banks are expected to slash interest rates later this week including the euro, sterling and Australian dollar. The Bank of Japan, meanwhile, whose key interest rates are a mere 0.3 percent, said it will hold an emergency meeting on Tuesday to discuss changes in the use of corporate debt for collateral banks put up to access central bank funds. With economies already slowing sharply around the world sensitivity to output figures was high. Manufacturing activity in the euro area, which has already entered recession, hit a record low in November. Economic powerhouse China also saw its manufacturing industry slump in November as new orders, especially from abroad, tumbled. Resulting risk aversion took global share prices, as measured by MSCI's all country index, down 1 percent on the day .MIWD00000PUS, while yen gains against major rival currencies accelerated sharply. "The data is just so terribly poor that it's going to be difficult for any kind of period of sustained uptrend in confidence," said Derek Halpenny, European Head of Global Currency Research at BTM UFJ in London. "Until we're through the deterioration in the data then the likelihood is that risk aversion will remain elevated and we'll see renewed interest in lower yielding currencies," he added. By 6:50 a.m EST, the dollar was down 1.7 percent against the yen at 93.88 yen and the euro was down 1.9 percent versus the Japanese unit at 118.93 yen. The euro fell 0.2 percent against the dollar to $1.2667, while sterling was off 2.2 percent against the greenback at $1.5045. Sterling's losses were exacerbated after British figures showing manufacturing activity had shrunk at a record pace. RATES FOCUS The Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand are all expected to cut rates by at least half a percentage point, diminishing the yield advantage of their currencies over the ultra-low yielding yen. Analysts expect those four major central banks to cut rates aggressively to counter the threat of deflation and prevent the global financial market crisis from spilling over into further economic weakness. Yen crosses reflected those expectations, with sterling/yen, Australian dollar/yen and New Zealand dollar/yen all down more than 3 percent on the day. Analysts expect the RBA to cut its benchmark cash rate by 75 basis points to 4.50 percent on Tuesday. But data on Monday showing Australian inflation slowing much faster than earlier thought and manufacturing activity at record lows in November bolstered the case for a steeper cut in rates. The RBNZ is expected to lop a full 1.5 percentage points off its key rate to 5 percent, which would match the magnitude of the Bank of England's surprise cut last month. Economists polled by Reuters expect the BoE to follow that up with a more modest 50 basis point cut to 2.5 percent on Thursday, but futures traders are pricing in a more aggressive 100 basis point reduction. The ECB is expected to cut by half a percentage point on Thursday to 2.75 percent but the weakness of recent economic and inflation indicators is building the pressure for a deeper cut. The euro zone manufacturing sector, for example, contracted sharply in November, data showed on Monday. "Polls show economists are expecting the ECB to cut by 50 basis points but marketwise, there would be disappointment if the ECB did 50 basis points," said Steve Barrow, head of currency strategy at Standard Bank in London. Financial markets in the United States should return to normal liquidity and trading conditions on Monday following last week's Thanksgiving holiday. Investors will be keeping an eye on the November jobs report on Friday. Later on Monday the Institute for Supply Management releases its November manufacturing index. (Reporting by Veronica Brown and Swaha Pattanaik; editing by Toby Chopra)

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