Global policymakers have more work to do if they are to restore market confidence, analysts suggest.

In a research note, National Bank Financial predicts that “the ongoing global credit crisis and the resulting strain on financial corporations are about to impact Main Street in a significant way.”

“Until recently, the relatively sound balance sheet of U.S. non-financial corporations had provided relative protection against surging credit spread. This is no longer the case,” it reports, noting that the spread between corporate bond yields and U.S. Treasury rates has widened to levels not seen since 1931.

BCA Research says that indeed, “Panic has returned in full force: equity and commodity prices are gaping lower, while the dollar and yen continue to surge.”

“Investor sentiment has been crushed and despite extremely oversold conditions and appealing valuations, the bleak growth outlook provides little reason to be upbeat. Indeed, credit markets remain frozen across the globe, house prices are falling in many of the major economies, and the adverse knock-on effects to employment and consumer spending are just developing,” BCA says.

“In short, the economic valley is still too wide for investors to see across. The implication is that policymakers will continue to work hard to shore up confidence among market participants,” it adds.

NBF as that while it has been, “encouraged” by the latest U.S. efforts, it says these measures have yet to gain traction. “Mr. Bernanke may have have to dig deeper in his tool kit of non-traditional measures to avoid a worsening of the credit crunch,” it concludes.

“Expect central bank rate cuts, addition fiscal stimulus, further efforts to recapitalize financial institutions, and potentially a blanket guarantee for the liabilities of the banking system,” BCA concludes, adding that U.S. equity markets could retest their 2002 lows.