The Nikkei gained 112.39 points yesterday and rose 4 percent for December, its first positive month since May. But its annual losses were the biggest ever, surpassing the 38.7 percent tumble marked in 1990.

Market players forecast a tough 2009 but said that hopes of further economic stimulus packages to stem the global economic downturn are providing some lift.

"Everyone's pinning their hopes on economic stimulus policies by the United States and possibly China, which is keeping the market supported for now," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

ADVERTISEMENT

"But people aren't watching things like company results as closely as they should be. We can't say for sure that the market's bottomed out until we see these next spring."

South Korea's benchmark stock index rose slightly, but still closed out its worst year since 2000.

The Korea Composite Stock Price Index gained 0.6 percent to finish 2008 at 1,124.47.

In the United States, a closely watched index shows home prices dropped by the sharpest annual rate on record in October.

The Standard & Poor's/Case-Shiller 20-city housing index fell by a record 18 percent from October last year, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.

Meanwhile US retailers' sales declined last week - the most in almost six years - as steeper markdowns before and after Christmas failed to salvage what may be the worst holiday shopping season in four decades.

Sales at stores open at least a year fell 1.8 percent in the seven days through December 27, the International Council of Shopping Centers and Goldman Sachs said. That is the biggest year-on-year drop since February 2003.

Oil fell below US$40 (HK$312) a barrel, pressured by gloom about prospects for world economic growth. US crude dropped 77 US cents to US$39.25 a barrel.

AGENCIES