Page last updated at 21:29 GMT, Thursday, 31 December 2009

Stock markets recover in 2009

Stock markets around the world staged a recovery in 2009 since March, when most of them hit their lows for the year.

It was a year in which governments and central banks around the world took extraordinary measures to get their economies growing.

FTSE in 2009

In London, the FTSE saw its biggest annual gain since 1997, rising 22% over the course of the year. Germany's Dax rose 23% while France's Cac added 22.%.

Standing back and looking at the post-war equity markets, and the US in particular, we seem to be a fair way into a long-term bear market - 10 years, to be exact
Jamie Robertson, Business presenter, BBC World News

Analysts said the advances were driven by the recovering global economy.

"The global financial system stabilised, helping avert a depression, as most asset classes began to feel the effects of extraordinary and coordinated policy intervention by the second quarter... The world economy is back from the brink," said Geoffrey Yu, an analyst at UBS.

It is worth bearing in mind, though, that over the past decade the FTSE, the Dax and the Cac have all fallen more than 20%.

S&P 500 in 2009

US share prices also performed well. Despite a drop of about 1% of all Wall Street indexes during the last trading hour on New Year's Eve, the broad-based S&P 500 index was up nearly 25%, the strongest performance since 2003, while the Dow Jones gained 20%. The technology-driven Nasdaq index doubled those gains, rallying 45%.

However, those advances pale in comparison with China's stock market rally. The Shanghai Composite jumped 80% this year.

Shanghai Composite in 2009

"The [Shanghai] index could move higher next year, backed up by the improving economic recovery, stable economic policy and optimism towards listed firms' earnings," said Xu Yinhui, senior analyst at Guotai Junan Securities in Shanghai.

Hong Kong's Hang Seng index rose 52%, while Japan's Nikkei closed a comparatively modest 19% higher. The Japanese economy is still dogged by deflation, as well as fears that it may return to recession.

As far as 2010 goes, experts say those percentage gains are not likely to be repeated. Governments are expected to withdraw economic support and there are concerns that businesses and consumer may struggle without it.

Kirby Daley, senior strategist at Newedge Group in Hong Kong, says the stimulus steps masked the extent of the problems in 2009.

"One thing is certain for 2010: if growth is extended by just more stimulus, we'll simply be putting off the problems and inevitable pain until 2011 or later," he said.

Oil rig
Oil prices recovered in 2009

Commodities were also part of the rally. New York crude ended the year at about $79 a barrel - an increase of about 78% and the biggest annual climb in 10 years.

The gold price continually touched new highs in 2009 as the US dollar tumbled - peaking at $1,226.10 an ounce in early December - a rise of about 25% this year.

Analysts say the outlook for 2010 depends very much on whether US interest rates start to rise, which could lift the dollar and consequently knock gold.

A weak dollar makes commodities - such as gold and oil - cheaper for foreign investors, thereby stimulating demand and pushing prices higher.

The BBC's business editor Robert Peston says: "If we are in for a period of slow steady recovery, in which interest rates rise, gold is greatly overvalued. But if the dollar and sterling were to plunge - well, gold would glisten even more than it has. "



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