At the end of a tumultuous 12 months which attracted various predictions of disaster, the Federal Reserve has handed markets a year-end gift in the form of new stimulus for the US economy, China appears to be on the up again and the European Central Bank has changed the terms of the euro zone debt crisis.

The ECB's pledge to buy as many government bonds as it takes to shore up the currency bloc has taken some heat off Spain and Italy, political turmoil notwithstanding, and Greece has secured another deal to keep its show on the road for some while longer.

That, as they say, is banked, leaving most investors turning their thoughts to 2013.

"We have chosen to back the US housing recovery and broader growth acceleration in the world, while retaining some exposure to high yield credit as we navigate a potentially sluggish period in early 2013," Goldman Sachs analysts said in a note to clients.

"Beyond that, we have recommended positioning for some compression in euro area risk premia and the initiation of the ECB's OMT," the Goldman analysts wrote, referring to the central bank's bond-buying programme dubbed Outright Monetary Transactions.

The ECB will only be able to buy euro zone government bonds via OMT - which it has pledged to do in whatever amounts it takes - once a country, probably Spain, has sought help from the euro zone rescue fund.

That, the US fiscal standoff and China's performance, will dominate the early part of next year.

For the coming week, the sweeping return to power on Sunday of Japan's conservative Liberal Democratic Party (LDP) will be a major focus for investors.

POLICY DEADLOCK

This is particularly because exit polls showed the LDP and its junior coalition partner securing more than the two-thirds majority in the lower house needed to override the upper house and break a policy deadlock that has plagued governments since 2007.

An LDP government will commit to a radical recipe of hyper-easy monetary policy and big fiscal spending to end persistent deflation and tame a strong yen. The Bank of Japan meets on Thursday and is widely expected to loosen monetary policy again.

"The BOJ will probably ease in December and possibly again in January with the political pressure as well," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

The US "fiscal cliff" saga is an altogether slower-burning saga, which is unlikely to be resolved in the coming week.

Economists say failure to reach an agreement could push the country back into recession. The main hurdle is expiring tax cuts, which President Barack Obama wants extended for all but the rich and his Republican opponents want for everyone.

Obama is not ready to accept a new offer from the Republican leader of the US House of Representatives to raise taxes on top earners in exchange for major cuts in entitlement programs, a source said late on Saturday.  Most analysts expect some sort of deal to be done, not least because a flurry of opinion polls show strong public support for Obama's position.

"We expect it to be resolved within the next couple of months. We think the most likely outcome will be another 'kick the can down the road' agreement that will avoid massive near-term spending cuts and tax increases, even though it will not produce a comprehensive deficit reduction plan," said Larry Kantor, head of research at Barclays Capital.

BIG FIGURE

ECB President Mario Draghi rounds off his year with a lengthy testimony in the European Parliament on Monday, US housing starts data for November are due and in Europe, the big figure is Germany's Ifo sentiment index.

Technocrat Italian premier Mario Monti, who has steered his country into calmer waters and is still considering whether to stand in February elections - a move many investors would welcome - holds his year-end news conference on Friday.

There are also a smattering of central bank meetings to keep investors interested; in Sweden, Norway, Turkey, Hungary and the Czech Republic.

Markets are pricing in a 25 basis point rate cut by Sweden's Riksbank. Norway, one of Europe's fastest-growing economies, will be unmoved, with Norges Bank expecting to raise its 1.5 percent benchmark rate some time between March and August.

Key emerging market Turkey is expected to cut its main policy rate for the first time in more than a year after its hitherto resilient economy slowed more than expected in the third quarter.

Hungary will follow suit, pushing its rate to a two-year low of 5.75 percent, according to a Reuters poll of economists, while the Czechs, with rates already virtually at zero, have turned to intervention to weaken their currency.

Center>Copyright Reuters, 2012