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LONDON (Reuters) - Spring is in the air for financial markets. Liquidity is abundant, the desire to invest is rising and green shoots of growth are becoming more apparent across the developed world.
The official start of spring in the northern hemisphere falls on March 20, when night and day are equally long, but before investors put a grim winter behind them entirely, they may want to wait for surveys of economic health in China and the euro zone due a couple of days later.
Along with this purchasing managers data, the coming week's releases feature a detailed readout on the health of the U.S. housing market, inflation measures from the UK and Germany, and Japan's latest trade figures.
And perhaps the biggest cloud on the horizon is rising oil prices, which are threatening to unleash inflation in the fragile developed world and worsen the problem in emerging markets.
So the question most investors will be looking to answer is whether, with central bank policy easing now mostly on hold, the economic outlook justifies further gains in risk asset prices, which are already on track for a stellar first quarter.
"If you've got big chunks of the world not firing on all cylinders, to expect ongoing material gains from risk assets seems a touch too hopeful to us in the short run," Adrian Cattley, pan-European equity strategist at Citigroup said.
The March flash purchasing manager's surveys for the euro zone on Thursday are expected to confirm that the debt-laden region is in a recession, albeit a mild one, with Germany and perhaps France avoiding the contraction.
The HSBC Flash China Purchasing Managers' Index (PMI), an unofficial reading of manufacturing activity in the giant economy out on the same day, is also expected to point toward a slowdown in growth though this index is rising from a low base.
The data contrasts with similar U.S. activity surveys, which have shown the giant economy undergoing a moderate expansion, a view confirmed in recent comments by the Federal Reserve.
"Given what all of the lead indicators are pointing at, then one would be surprised to see any of the data coming out that would materially alter our view that the world is doing all right but not brilliantly," Cattley said.
The data may not be brilliant yet but many investors have decided not to wait. In the past week the S&P 500 stock index .SPX closed above the 1,400 mark for the first time since onset of the 2008 financial crisis.
On the other side of the Atlantic, European shares have climbed back to their levels of last summer before renewed fears of a region-wide debt and banking crisis sparked a huge selloff.
Citigroup noted that the UK benchmark index, the FTSE 100 .FTSE reached an all time high in terms of total returns at the end of February and again in the past week.
The MSCI world equity index .MIWD00000PUS is back at levels last sine in July and has gained over 20 percent since its November 25 low, a sign of a bull market.
But caution remains very much the watchword among the big funds, who remain happy to pick up risk assets on any retreat in the markets but fearful the gains may not last.
"Our investment strategy thus aims to seize upside opportunities still offered by today's markets, while maintaining very active risk management," Didier Saint-Georges, a member of the investment committee at French asset manager Carmignac Gestion said.
Or as Citigroup's Cattley described the mood: "It's been a miserable bull rally rather than a joyful one."
Asset performance in 2012: link.reuters.com/nyw85s
Currency performance in 2012 link.reuters.com/tak27s
VIX index performance: link.reuters.com/cuf27s
U.S. housing data in the coming week, which includes building permits, housing starts and mortgage application rates, will be scrutinized to see if this sector of the economy, which has been lagging in its recovery, is showing better health.
In the UK, the focus will be on the government's annual budget where austerity measures are expected to be extended after recent warnings by credit rating agencies that the country's prized AAA-rating is under threat.
Japan reveals its latest export and import figures on March 21 after posting its biggest ever trade deficit in January, topping the previous record seen during the financial crisis in 2009, as the yen's undergoes a major shift down against the dollar designed to boost its economy.
In debt markets, investors will be monitoring yield spreads of Spanish and Portuguese government bonds over safe haven German bonds for signs of stress as euro zone governments prepare a deal to boost the size of their bailout funds.
An agreement on the size of the bailout funds - the temporary European Financial Stability Facility (EFSF) and the permanent European Stability Mechanism (ESM) is not expected until a meeting on March 30-31 but any public disunity over proposals could rock the markets.
European union foreign ministers meet on March 23 to discuss measures to enforce the oil embargo on Iran due to take effect from July as uncertainty over how the EU embargo and U.S. sanctions will impact oil supplies drives up prices.
Reporting by Richard Hubbard; Editing by Toby Chopra