Fast forward to 2010

To all extents and purposes, 2009 is over for investors and the coming week will be dominated by the issues of 2010.

Most have closed their books for the year to lock in profits from what has been a sterling year for risk and the big theme of next year -- the withdrawal of central bank stimulus packages -- is already being played out.

In essence, the question is whether worries over what happens when stimulus is withdrawn, plus recent concerns about credit, outweigh the better signals on growth required to prompt the end of emergency economic support.

The European Central Bank got things under way on December 3 when it said the cost of funds at its third and final 12-month liquidity operation next Wednesday would be indexed to its main policy rate.

It was a complicated way of saying that the days of ultra-cheap borrowing by banks -- introduced to pump liquidity into a crisis-riven economic and financial system -- are coming to, or at least nearing, an end.

Then came the monthly U.S. jobless data, which was eye-wateringly stronger than expected, even if still on the negative side. That left investors wondering whether the U.S. Federal Reserve will speed up its exit strategy, though economists said it will likely need something more concrete first.

A stabilization and signs of a topping out in unemployment are a necessary condition for them to begin to change their language, said John Stopford, head of fixed income at Investec Asset Management.

Even before the data the Fed had shown signs of stepping back from its emergency liquidity policies, no longer buying Treasuries, for example, he said.

All this is a long way from actually raising interest rates -- no change is expected at Wednesday's policy-making meeting -- but the language used by the Fed in its statement will be devoured by markets looking for signposts to the exit.

Investors, of course, do not generally wait for events to happen and many take positions ahead of them.

Some of that can be seen in the recent behavior of the dollar, which has risen about 1.6 percent so far this month against a basket of competing currencies.

If sustained, it would be only its second monthly gain since February.

CREDIT FEARS

With this in the background, investors will also have to come to terms next week with what a recurring wave of scattered credit crises mean to their longer-term strategies.

First was Dubai, which shocked financial markets when it announced that debt repayments to creditors of Dubai World and property group Nakheel would be delayed. This scare has not gone away and will come to a head again on Monday when a Nakheel sukuk Islamic bond matures. There is a two week grace period to pay, but a default is quite possible.

The bond was trading about 45 cents on the dollar on Friday, compared with around 110 cents before the announcement.

Since then, ratings agencies have fired strong warning shots at Greece and Spain, two euro zone members with sizable fiscal and economic imbalances.

Standard & Poor's cut its credit outlook on Spain to negative, threatening a rating downgrade in two years if tough budgetary action is not taken.

Fitch Ratings was even more brutal to Greece, taking away the country's single A rating -- dropping it to BBB+ -- and putting it on a negative outlook.

By week's end some of the immediate fears appeared to have eased. The cost of protecting Greek government debt against default, for example, had fallen from its highs and the yield spread of Greek bonds against German Bunds had narrowed some 60 basis points from its widest.

These improvements were based mainly on comforting statements of support from Greece's richer euro zone partners. Such support will be under close scrutiny in the week ahead.

The crises, in the meantime, have investors looking around for the next domino to fall. Independent investment advisers Lombard Street Research suggested it could be Britain.

Britain's deficit is just behind Greece's at 12.6 percent of GDP, (and) larger than Ireland's, economist Charles Dumas wrote to clients.

Both these latter two are sharply cutting structural deficits in 2010, unlike Britain.... Britain risks a Gilts/sterling crisis with its fiscal complacency, he said.

With all this as a backdrop, it may not be long before investors are pinning for the good old days of 2009.

(Editing by Patrick Graham)