Global policy responses are causing investor sentiment to brighten, according to Sarasin.

In its latest Strategy Outlook, it pointed to the global equity market rally in none of the 10 trading days from 10 March, with gains in US and European bank stocks, mining stocks and emerging market equities, alongside tentative signs of narrowing corporate bond spreads. It flagged a 20% leap in oil and copper prices in March, plus the weaker US$ and the immediate effect of quantitative easing as painting a brighter picture of investor sentiment.

Guy Monson, chairman of the investment policy committee of the Sarasin Group, said: "Given that economic policies can be expected to engineer a massive resurgence of inflation, we believe that the impact will probably be better news for equities in the long term than for bonds, which explains recent upward market movements."