CORRECTED: Rates, earnings and bonds

By Jeremy Gaunt, European Investment Correspondent

LONDON (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