Praying for recovery.

But analysts expect the financial nightmare to continue for at least the first half of the new year Investors said good riddance yesterday to one of the worst years on record and prayed that massive government rescue plans will pull the global economy out of its fierce tailspin later this year. But more pain is expected in the near term as bleak economic reports roll in, signalling more bankruptcies, bad debts and layoffs through at least early 2009, and more sleepless nights for everyone from central bankers to consumers struggling to pay off mortgages and credit card bills. "It has been a shocking year, hardly anything was spared in the market carnage," said Michael Heffernan, senior client adviser and strategist at Austock Group. The worst financial crisis in over 80 years, sparked by the meltdown of the risky US sub-prime mortgage market, made 2008 one of the worst ever for investors, wiping around $10 trillion off major stock markets. It also radically changed the landscape of global finance, bringing down big US investment banks Bear Stearns and Lehman Brothers and crippling the credit system that keeps the world economy humming. The US S&P 500 benchmark lost about 40 per cent. Its biggest yearly drop was in 1931 during the Great Depression, when it fell 47.1 per cent. Not a single sector was spared from global banks to automobiles to resources, and even corner shops. Victims of the crisis are still piling up, with announcements almost daily of fresh company losses, more layoffs, and slumping prices for assets from cars to homes. Tuesday brought more dismal economic news in the US, with single-family home prices down 18 per cent in October from a year earlier and consumer confidence plunging to a record low due to severe job cuts. "We are not going to be seeing anything fundamentally positive from the US for the time being," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. But with central banks cutting interest rates to spur growth, declining oil prices and governments pumping money into the system, Heffernan said there were some positive signs for this year. "The blood has been drained and we are now getting a transfusion," he said. World governments have pumped more than one trillion dollars into their economies to keep businesses afloat and save jobs, and more aid is expected this year in the form of fresh bail-outs, rate cuts and other measures to stave off an even deeper recession. Global credit markets are also showing some signs of improvement, but banks remain reluctant to lend to businesses and consumers, fearing a rash of bad loans as economies worsen. Mounting job losses are raising fears of social unrest in some countries, and piling pressure on governments to act quickly, even if it means huge deficits and debts that will have to be paid off somehow in the future. But government stimulus plans, corporate bail-outs and rate cuts also take time to be felt, and their full benefits are still being hotly debated by analysts and economists. Global growth, if any, could be very weak in 2009 as a whole, even if consumers are coaxed to start spending again. Investors are now looking to the arrival of a new US administration when Barack Obama is sworn in as president on January 20. He is expected to unveil a new government spending programme which sources say could range from $675- 775 billion over two years. This year will also see attempts by policymakers to overhaul outdated regulatory systems to head off future crises and give them more power to oversee increasingly complex financial products such as derivatives, which have complicated efforts to fix the latest financial mess. Outgoing US Treasury secretary Hank Paulson said the US government had to battle the financial crisis without the tools needed to do the job effectively, the Financial Times newspaper reported. In one of his last interviews before leaving office, Paulson said: "We've done all this without all of the authorities that a major nation like the US needs." He said even after Congress in October approved the $700 billion troubled asset relief programme, Washington still lacked key tools such as an adequate special bankruptcy regime for non-bank financial firms. "We're dealing with something that is really historic and we haven't had a playbook," Paulson told the FT.

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