It's a new year. Is the worst over?

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Investors begin the first full week of 2009 trading on Monday with one question in mind: Is the worst over?

Given that a 38 percent loss on the broad U.S. S&P 500 stock index last year was actually one of the better performances on stock markets, it is hard for some investors to imagine otherwise.

Indeed, December ended on a rare up note, with global stocks putting in something of a rally.

MSCI's main gauge of global stocks, its all-country world index, gained almost 3.6 percent for the month, its first gain since May and the sixth best performance in two years.

Its generally riskier emerging market counterpart -- one of the worst performers of 2008 with losses of 54.5 percent -- gained 7.6 percent in December, also its first gain in seven months.

Some sentiment indicators, such as the Reuters monthly investment polls, also showed some return to risk appetite.

So it would not be a major surprise if some of the most recent gains spilled over into the new year because many investors have argued that stocks are attractively priced.

Many are also expecting financial markets to return to more normal patterns during the year.

"Stocks are likely to recover in Q2/Q3 as the recession troughs in the U.S. and other major economies, earnings begin to recover, led by financials, credit markets stabilize and deflation fears ease," John Praveen, Prudential International Investments Advisers' chief strategist said in a note.

But while few expect to experience again the kind of turmoil seen in 2008, there is little belief that any kind of new bull market is on the way.

"2009 is likely to be another volatile year for stocks," Praveen wrote.

JUST THE JOB

There is, meanwhile, little optimism when it comes to the global economy. The year has already started with gloomy signs of recession, including dismal U.S. manufacturing data.

Manufacturing in the euro zone was also bad, hitting a record low in December, according to data released at the end of last week. Factories in China, India and Russia slashed output and jobs at a record pace in the month.

This week's big data report will come on Friday, when the United States issues its latest monthly jobs data. Economists are looking for job losses in the region of 475,000, which would be hefty, albeit an improvement on the month before.