Investors who have not already done so will cash in their first-quarter chips next week and turn their attention to the next three months, during which they will have to do without central bank bellows to blow stocks effortlessly higher.

World shares as measured by the MSCI index .MIWD00000PUS are up more than 10 percent since January, after the European Central Bank turned its liquidity taps on full, while Italian and Spanish 10-year borrowing costs have plunged from around 7 percent to 5, though they are now picking up again.

The ECB has played the critical part, creating more than a trillion euros of three-year money for banks to feast on, some of which has leached into stock and bond markets. But it is highly unlikely to repeat the process.

Other major central banks seem to be delivering a similar message, so investors should not count on further money printing by the Federal Reserve or Bank of England either.

The sugar rush is probably over.

That could cause borrowing costs in the United States, Germany and Britain - the safe havens that investors flocked to while the euro zone debt crisis raged - to push up from record low levels and throttle back gains in risk assets.

But most strategists expect a slowing or pause in the recent market rallies, rather than a full-blown reversal.

Never in the field of central banking have so many owed so much to so few, said Paul-Mortimer Lee at BNP Paribas. ECB chief Mario Draghi must take a great deal of credit for the improvement.


There are a number of imponderables going into the second quarter, though few at the turn of the year were predicting the sort of three months investors have just enjoyed.

Greek elections could weaken austerity resolve there, while Italy's Mario Monti faces a fight to push through his flagship labor reforms. A new president in France could seek to renegotiate freshly minted euro zone debt rules and the currency bloc's powers have not yet agreed on how far to bolster their ESM rescue fund, which will come into being by mid-year.

We think that at some stage, peripheral spreads may suffer a setback, perhaps if the Greek elections rattle nerves, for example, and we have pencilled in a widening of Spanish and Italian spreads relative to Germany by about 100 basis points, Mortimer-Lee said.

Spanish yields have already started heading higher after Madrid ripped up a budget deficit target agreed with Brussels.

There are also growing signs of an economic slowdown.

Data over the past week showed Chinese industry - a vital motor for the world economy - is continuing to flag. Parallel figures for the euro zone suggest it will flirt with recession, and while the United States seems to be firmly in recovery mode for now, massive deleveraging and fiscal retrenchment is still required, although presidential elections may delay that.

Euro zone inflation data, Germany's Ifo index and U.S. and euro zone consumer confidence numbers will help gauge activity and sentiment in the coming week.

Spain - facing a general strike - will present its full 2012 budget, while a meeting of EU finance ministers late in the week will consider how bulky to make the new ESM rescue fund. If German resistance to increasing the size of the rescue fund does not soften, markets may sniff a weakness of resolve to protect the larger of the euro zone's big debtors.

For now, many market experts see nothing to burst the balloon, not least because prevailing sentiment is a world away from late last year, when the prospect of a euro zone break-up looked all too real. And the trillion euros courtesy of the ECB is still rattling around the financial system.

Although the relief rally of the past quarter is largely behind us, we do not recommend a risk-off strategy across asset classes, Barclays Capital analysts said in a note.

While a minor setback would not be surprising, we are not anticipating a major correction, and would thus avoid reducing exposure to equities, whose valuations appear favorable relative to fixed income.

The MSCI world equity index has added 19 percent since late November.

Reuters' monthly asset allocation polls, to be published on Thursday, will give a guide to where the serious money is being put to work from now on.

The rally in risk assets has been extraordinary this year, so in a way it's positive that weak data is giving traders an opportunity to take profit, said Teppei Ino, currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.

If the recent falls end as a mere correction, the subsequent rally would be stronger thanks to this pullback.

If the United States continues to look buoyant, a higher dollar and Treasury bond yields could have profound consequences for emerging markets, diluting appetite for carry trade investment in emerging assets.

Central banks in Turkey, South Africa, Hungary, Israel and the Czech Republic all hold monetary policy meetings during the week.