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After a blockbuster January for both equities and bonds -- rallies that caught many in the market by surprise -- investors will be paying keen attention to the world's central banks in the coming week for signs of continued easy money.
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They will also be closely watching negotiations over a second bailout deal for Greece, while Chinese data on trade and inflation and a heavy week of corporate earnings all lie ahead.
Investors are having to adjust quickly to signs that global economic growth, though very fragile, may be turning out to be better than many had thought likely.
"We expected the equity market to weaken in Q1 before staging a strong recovery around Q2 at the weakest point of the economic cycle," said Peter Oppenheimer, chief global equities strategist at Goldman Sachs International.
"We have been wrong so far," he said, adding that significant headwinds remain, and corporate profits and activity are likely to be stagnant at best.
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The European Central Bank, the Bank of England, and the Reserve Bank of Australia all hold policy meetings during the week, on the heels of the U.S. Federal Reserve's commitment to keep rates on hold until the end of 2014 at the earliest.
Tighter financial conditions as banks and households continue to shed debt are expected to keep policy makers on an easier footing despite the improvement in economic data and an apparent easing in the Eurozone debt crisis.
The improved data was itself brought on by a large influx of low-interest three-year loans from the ECB.
ECB to Wait
The ECB is set to add to this with another interest-rate cut, but probably not in the week ahead. It is likely to wait until its March meeting to move its current record low of 1.0 percent down to 0.75 percent, according to a Reuters poll.
The success of the ECB's three-year lending operation in December, which saw banks borrow 489 billion euros ($644 billion) at very low interest rates, has been a key factor in encouraging the view that the central bank will wait.
"The ECB's action in December averted a major credit crunch," said Christel Aranda-Hassel, director of European economics for Credit Suisse.
A second tender due at the end of February adds to the likelihood the central bank will adopt a wait-and-see approach to rates next week.
The next loan offering could attract higher demand, but even if it doesn't, plenty of money will be pumped into assets as a result.
