For a table on asset market gains and losses for 2009, click
on []
By Jeremy Gaunt, European Investment Correspondent
LONDON, Dec 31 (Reuters) - World stocks headed towards their
best annual performance on record on Thursday, albeit a year
after suffering their worst.
Wall Street looked set to open with modest gains.
The dollar, meanwhile, was struggling on the last trading
day of the year, falling against a basket of currencies as it
has done throughout a year of recovering investor risk appetite.
MSCI's all-country stock index <.MIWD00000PUS>, the broadest
gauge of world equities, was up about half a percent on the day
for an annual gain of more than 32 percent.
If sustained, this would be the index's best yearly
performance since its inception in 1988, just pipping the 31.6
percent gained in 2003 in the rally triggered when the invasion
of Iraq failed to meet the gloomiest fears.
Investors reaching for the champagne to celebrate 2009,
however, might well feel restrained by the fact that the gains
follow an unprecedented decline of 43.5 percent in 2008. The
index is still about 30 percent below its October 2007 all-time
high.
And it has got this far with quite a bit of help.
"The story of 2009 has been the massive and unprecedented
amounts of liquidity that governments have pumped into the
market," Nicholas-Applegate Capital Management said in a note.
"The liquidity supplied by government has acted as a floor
to credit and given investors confidence to move from non-risky
to riskier assets."
That said, 2009's equity gains have been remarkable,
particularly after hitting lows in March. MSCI's emerging market
index <.MSCIEF>, for example, is up nearly 110 percent since
early March.
Many indexes have now recaptured most or all of the losses
suffered after the collapse of Lehman Brothers in September
2008.
On Thursday, European shares were up about 0.2 percent
<> for a more than 25 percent annual gain.
Many commodities, too, have had a robust year as the world
economy showed signs of recovery. The standout was copper
<MCU3>, which has risen more than 141 percent for the year.
DOLLAR FALLS
One of the "victims" of recovering risk appetite this year
has been the dollar, which has suffered as money has flowed into
high-yielding asset elsewhere.
On Thursday, it was down half a percent against a basket of
major competitors <.DXY>. The dollar has weakened about 4.5
percent against the basket over this year although there has
been some recent strength.
Trade was extremely light, with Tokyo and several European
countries on holiday and many banks on skeleton staff ahead of
the New Year holidays.
"We're probably seeing some sort of rebalancing. The dollar
has had a strong month and people are just taking profits," said
Geoffrey Yu, currency strategist at UBS in London.
Euro zone government bond markets were closed.
(Additional reporting by Jessica Mortimer, editing by Mike
Peacock/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
Hub click on http://blogs.reuters.com/hedgehub)
