World stock markets started the year on positive note on Friday, as investors hoped aggressive government policies would steady a wobbly global economy after a disastrous 2008.
Markets in the United States, Europe and Asia made strong gains.
Factories from China to India, Europe and the United States slashed output and jobs in December, but investors seemed determined to start 2009 on a positive note.
US manufacturers had their worst December since 1980, and new orders fell to a record low, according to the Institute for Supply Management. The downturn was even more severe than already pessimistic economist forecasts.
In Europe, the group's index hit a record low, pointing to a deepening recession on the continent.
But analysts in the US said investors seemed to be discounting the gloomy economic data on hopes that a recovery is on the horizon in the second half of 2009.
On Wall Street, the Dow Jones industrial average rose 252.81 points, or 2.88%, to 9,029.20. The Standard & Poor's 500 Index jumped 27.83 points, or 3.08%, to 931.08. The Nasdaq Composite Index gained 55.18 points, or 3.50%, to 1,632.21.
Britain's top share index rallied nearly 3% on its first trading day and extended its winning run to four sessions on the back of commodities stocks. The FTSE 100 closed at 4,561.79 points, up 127.62 or 2.88%, adding 345.2 points since 24 December.
European shares also finished higher, with commodity shares rising on higher energy and metals prices, while banks made gains. The FTSEurofirst 300 index of top European shares rose 3% to close at 856.79 points.
The index rose 6.6% over the shortened week, but fell more than 44% in 2008, hurt by the credit crisis.
Asian markets rally
Asian stock markets rose sharply on Friday after a horrendous 2008 for equities as the global economic crisis took hold.
Hong Kong share prices closed 4.6% higher, boosted by pre-New Year gains on Wall Street and bargain hunting, dealers said. The benchmark Hang Seng Index was up 655.33 points at 15,042.81.
South Korea's main stock index closed up 2.9% at 1,157.40 points, while Indian shares climbed 0.6%.
Markets in Japan and China were closed for a public holiday.
However, the Australian sharemarket had a poor start, dragged lower by financial stocks despite solid gains in the resources sector.
The benchmark S&P/ASX200 index was down 8.5 points, or 0.23%, at 3,713.8 while the broader All Ordinaries index fell 3.6 points, or 0.1%, to 3,655.7.
The New Zealand share market last traded on Wednesday and was up 37 points, or 1.4%, to 2715.
Markets hammered in 2008
In 2008, markets were hammered by the world economic crisis, sparked by the collapse of the sub-prime, or higher risk, mortgage market in the US.
This led to the American government takeover of mortgage giants Freddie Mac and Fannie Mae in September.
But shares went into a tailspin soon after following the failure of Wall Street banking icon Lehman Brothers under a mountain of debt. Giant insurer American International Group then had to be bailed out by Washington.
A $US700 billion rescue package for the ailing US financial industry was unable to stop the rot as the US and other leading nations entered recession.
Last year saw the worst market performance since the 1930s.