Market closes after disastrous year

London's blue chip share index closed 2008 today with the worst annual performance in its 24-year history.

A last-minute dose of post-Christmas cheer was not enough to prevent the FTSE 100 Index from notching up a record fall of 31 per cent, closing at 4434.2.

A disastrous 12 months for UK blue chips led the Footsie to shed 2022.7 points in a year that has seen stocks rocked by the credit crunch, housing market slump and banking crisis.

Stock markets across the world have suffered this year, with Japan's Nikkei 225 Index also yesterday ending with a historic annual fall of 42 per cent, while China's benchmark Shanghai Composite Index closed 2008 down 65 per cent.

Despite a rise of 41.5 points today, the Footsie currently stands nearly two-thirds below its opening mark of 6456.9 for 2008.

This dire performance even surpasses 2002's 25 per cent decline in the midst of the dotcom crash.

The fall is also the second biggest annual slide of all time, only overshadowed by the 55.3 per cent fall for the FTSE All-Share seen in 1974.

Stricken banks HBOS and Royal Bank of Scotland are among the year's worst performers.

The two groups were forced to call on the taxpayer for a multi-billion pound rescue bailout after suffering in the aftermath of the credit crunch - a crisis which slashed HBOS shares by 90 per cent and more than 80 per cent for RBS.

Lloyds, another to receive State support under the Government's part-nationalisation scheme, has also seen its shares plummet, down more than 70 per cent in a sector-wide bloodbath that has already left the taxpayer nursing hefty losses on its stakes.

Housebuilders, too, will look back on a torrid 12 months that have seen many suffer the ignominy of being kicked out of the FTSE 100.

Taylor Wimpey and Persimmon were both ejected from the top flight in 2008, while Taylor Wimpey - Britain's biggest housebuilder - was even relegated out of the FTSE 250 in the last reshuffle earlier this month.

But some firms have performed well in the year, including miner Randgold, which has seen a rise of around 60% rise thanks to higher commodity prices earlier in the year.

British Energy is another big gainer, up more than 40 per cent, after a year in which the Government secured the sale of its stake in the nuclear power firm to French energy giant EDF.

The Footsie's overall performance came as a surprise to many experts, many of whom made bullish predictions at the start of the year that the FTSE 100 could beat its all-time high to hit 7000 or more in 2008.

The benchmark index confounded these optimistic expectations as the credit crunch wreaked havoc across the global financial system, dragging country after country into recession and sending shockwaves through stock markets.

London's benchmark index plunged to 3714 in October - its lowest point since April 2003 in the midst of the Iraq war.

Today's close marks a marginal improvement on this, although opinions are divided on whether or not this week's more positive sentiment will continue into 2009.

And with 16 companies leaving the top flight over the course of 2008, the shifting composition of the index gives would-be forecasters a headache in comparing the markets and plotting the way forward.

BGC Partners senior strategist Howard Wheeldon forecasts a 10 per cent rise to around the 4800 mark over the course of the year - but warns that things could get worse before they get better.

Other stock market analysts see more grounds for optimism due to the actions taken to kick-start the economy by rate-setters around the world, as well as billions being pumped in by governments such as the UK.