Both the US and Europe will revert to a growth path in the second quarter of 2012, with the upswing picking up momentum in the coming months and continue into the third quarter of 2012, said a report.

"Apart from the easing of the credit squeeze and the abating euro debt crisis, the main impetus to growth is coming from the improving global economy," said the research by Bank Sarasin, which operates in the kingdom as Sarasin-Alpen (Bahrain).

"The falling level of risk has triggered a strong rally on financial markets. Equity markets should continue to rise, albeit at a slightly slower pace. Equities should therefore once again outperform bonds in the second quarter," the report said and added that the equity market scenario shows potential for Europe and for emerging market countries.”

"Within the euro zone, the main beneficiary will be the German stock market. Switzerland's defensive equity market is likely to underperform. With the reversal in global economic indicators and the central banks' generous liquidity provision, the downside risks to the global economy and the financial markets have scaled back dramatically," it added.

According to the report, across Europe there are significant differences between the more robust core nations and the peripheral states.

"But the worst of the European debt crisis is now over," said the report.

"Not least, the global economy is providing a strong stimulus. In the US and emerging markets the pace of economic growth is starting to accelerate again. The emerging upswing is pulling Europe along in its wake with the usual time lag of one to two quarters."

Bank Sarasin chief economist Jan Amrit Poser said the US jobless rate is rapidly diminishing, which has also resulted in a powerful recovery in US consumer sentiment and will develop into an international growth driver.

Bank Sarasin chief strategist Philipp E Baertschi said global leading indicators have trended favourably in recent months with the majority of them delivering positive surprises.

"The steep price increase has fuelled a rising risk appetite among investors. Whereas many hedge funds have increased their exposure to equities," he said. – TradeArabia News Service