* Asian shares gain for 3rd day; post worst year on record
* Oil falls on global econ worries; challenging year ahead
* Dollar hit by rate outlook; sterling near record low
* Government bonds end year as outperformers
By Rafael Nam
HONG KONG, Dec 31 (Reuters) - Asian shares rounded out
their worst year ever on Wednesday, down 50 percent after 12
months of financial market and economic turmoil, but optimism
that 2009 will be an improvement lifted stocks for a third
straight session.
Government bond yields held near their lowest in decades,
oil prices dipped further below $40 a barrel and the U.S.
dollar extended its recent falls as it heads into 2009 in a
position of weakness due to the near-zero interest rates in the
world's largest economy.
Yet some remain optimistic after a year of shattered
milestones, as policy makers worldwide respond to the worst
financial crisis in decades with antidotes that combine
slashing interest rates, rescuing whole sectors and boosting
spending.
"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 in Australia.
Turning to 2009, however, he saw hope.
"The blood has been drained and we are now getting a
transfusion," he added.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.9 percent as of 0615 GMT.
On a yearly basis it was ugly. The MSCI index dropped a
little more than 50 percent in its worst performance on record
after U.S. mortgage and real estate markets collapsed, sparking
the collapse of Lehman Brothers and threatening the global
economy.
Merrill Lynch estimates nearly $2 trillion was wiped out
this year from the broader MSCI Asia-Pacific.
SANTA RALLY
Yet 2008 also ends with momentum. December marks the first
monthly gain for the index since April and it has now risen
over 25 percent since hitting a five-year low in late November.
The gains come despite consistently bleak signals in
December on the economic front, in a sign that investors may
already be discounting the grim environment.
"Most of the bad news we can think of, we've already heard
it this year," said Winson Fong, managing director at SG Asset
Management in Hong Kong.
Data on Tuesday showed U.S. consumer confidence fell to a
record low in December, prices of U.S. single-family homes
continued to plunge, while the U.S. holiday shopping season was
the worst since at least 1970. []
Yet Australia's main index <> rose 1.9 percent on
Wednesday, while Hong Kong shares <> rose 1.1 percent and
Indian shares <> advanced 0.5 percent.
However, markets in Shanghai <> and Singapore <.FTSTI>
fell. Shanghai posted the biggest drop among major world
indexes, down some 65 percent.
Markets in Japan and South Korea were already closed for
the year.
GOOD, BAD AND JUST UGLY
From inflation to deflation, or de-coupling to contagion,
it was a year of unprecedented swings, not only in global
markets but also in conventional wisdom.
Oil <CLc1> started the year setting a series of records
that culminated with prices hitting a peak at little under $150
in July.
It heads to the end of year below $39 a barrel, as
investors have adjusted to the new economic order.
Prices will rise in 2009, but not by much. Analysts are
forecasting an average of $49 a barrel for U.S. crude in the
first quarter, and an average of $58.48 for the year.
In between, bursts of volatility in oil prices are expected
as shown by the violence between Israel and Islamic group Hamas
that sent oil prices jumping as much as 12 percent on Monday.
"Basically, the situation globally is much worse than
expected. It's all very pessimistic numbers," said Tetsu Emori,
a fund manager at Astmax Co Ltd in Japan.
Meanwhile, the U.S. dollar ends on a weakening tone, with
the safe-haven bid that only a few months ago sent the
greenback rallying all but forgotten now that the Federal
Reserve intends to keep U.S. interest rates at near zero.
Japan's yen surged about 19 percent this year to post its
biggest annual percentage gain since 1987, denting the prospect
of exporters in the world's second-largest economy.
British sterling is pinned at near record lows amid a truly
dire outlook for the U.K. economy.
The euro edged up to $1.4115 <EUR=> in Asian trade, from
$1.4072 late on New York on Tuesday, while the dollar was down
almost 1 percent <.DXY> at 80.627 against a basket of
currencies.
The euro was holding firm at 97.75 pence <EURGBP=D4>
against the sterling, having touched a high of 98.05 on
Tuesday, near parity for the first time since its launch in
1999.
Assets seen as safer during times of trouble outperformed.
Gold <XAU=> was trading at $865.35 an ounce, down $6.75 from
New York's notional close on Tuesday, but it still ends the
year as one of few commodities to end the year firmer despite
its traditional role as an inflation hedge.
Among the best bets this year were government bonds. U.S.
Treasury benchmark yields have dropped this month to their
lowest since 1950, amid an intense bid for safety, rock bottom
rates and expected Fed buybacks of debt, including of
mortgage-backed securities.
Benchmark 10-year notes <US10YT=RR> dipped 4/32 in price to
yield 2.067 percent on Wednesday, near the five-decade low of
2.04 percent struck earlier in the month. For the year, yields
have tumbled 1.96 percentage points for their biggest yearly
drop since 1995 and the second biggest in the last 20 years.
(Additional reporting by Simone Giuliani in SYDNEY and
Parvathy Ullatil in HONG KONG, Editing by Lincoln Feast)
