Investors are becoming increasingly confident about the outlook for the world economy. Having teetered on the brink of recession last year, there are now signs that the worst is over and smart investors may be able to pick up bargains in those regions which have suffered most.

Standard Life Investments points to signs of life in Asia, most notably in Korea. The pace of deterioration in the European economy has eased, the British economy is bottoming out and the US is very strong. Some analysts also hold the view that things are not as bad as they seem in South America despite the devaluation of Brazil's currency. Rising oil and commodity prices are seen as confirmation of this upswing.

Investors have been spending their money recently in areas where they believe they can benefit most, such as Japan, the Pacific Basin and South America. They have also been switching some money out of what are perceived as reasonably safe growth companies such as life assurances and drug stocks into more cyclical sectors such as oil and paper companies.

Standard Life, while noting this trend, remains cautious. "They might be right but our best guess is that they are jumping the gun a bit," says Mr Pat Woods. "The troubles for the global economy are far from over - Japan is in a mess, the rest of Asia is still going to struggle for a while and the South American situation has a long way to run yet."

The bogeyman lurking in the background is still the US Federal Reserve chairman, Mr Alan Greenspan. He saved the world economy last October by cutting interest rates as recession loomed but has now returned to haunt the markets warning that inflation is not dead.