They will also be closely watching negotiations over a second bailout deal for Greece, while Chinese data on trade and inflation and a heavy week of corporate earnings all lie ahead.

Investors are having to adjust quickly to signs that global economic growth, though very fragile, may be turning out to be better than many had thought likely.

"We expected the equity market to weaken in Q1 before staging a strong recovery around Q2 at the weakest point of the economic cycle," said Peter Oppenheimer, chief global equities strategist at Goldman Sachs.

"We have been wrong so far," he said, adding that significant headwinds remain, and corporate profits and activity are likely to be stagnant at best.

The European Central Bank, the Bank of England and the Reserve Bank of Australia all hold policy meetings during the week, on the heels of the U.S. Federal Reserve's commitment to keep rates on hold until the end of 2014 at the earliest.

Tighter financial conditions as banks and households continue to shed debt are expected to keep policymakers on an easier footing despite the improvement in economic data and an easing up of the euro zone debt crisis.

The improved data was itself brought on by a large influx of low interest three-year loans from the ECB.

ECB TO WAIT

The ECB is set to add to this with another interest rate cut, but probably not in the week ahead. It is likely to wait until its March meeting to move its current record low of 1.0 percent down to 0.75 percent, according to a Reuters poll.

The success of the ECB's three-year lending operation in December, which saw banks borrow 489 billion euros ($644 billion) at very low interest rates, has been a key factor in encouraging the view that the central bank will wait.

"The ECB's action in December averted a major credit crunch," said Christel Aranda-Hassel, director of European economics for Credit Suisse.

A second tender due at the end of February adds to the likelihood the central bank will adopt a 'wait and see' approach to rates next week.

The next loan offering could attract higher demand but even if it doesn't, plenty of money will be pumped into assets as a result.

But Aranda-Hassel says the problem for the ECB is that, while euro zone debt markets and the outlook for banks may have improved thanks to the cheap money, credit conditions in the wider economy have not.

"There's been some easing up in the pace of credit tightening, but that's all you have at this stage."

The Bank of England is widely expected to increase the amount it is pumping into the economy via asset purchases by 50 billion pounds ($79 billion), while its inflation report, due on Wednesday, could signal this will be the last such liquidity move.

The Australian Reserve Bank is considered almost certain to cut interest rates by 25 basis points to 4 percent at its February 7 meeting. The bank's quarterly Statement of Monetary Policy due later in the week is not likely to change the economic outlook.

SLOWING EARNINGS

The quarterly earnings season continues around the world next week with the U.S. and Japanese reporting season now about half way through, although Europe has only seen about 20 percent of its companies report so far.

According to StarMine estimates, of a group of 275 companies in Europe to have reported so far, around 57 percent have missed their earnings forecasts.

In the euro zone government bond market the upcoming week is only expected to see about 9 to 10 billion euros of new issuance from the Netherlands and Germany.

($1 = 0.7592 euros, $1 = 0.6321 British pounds)

(Reporting by Richard Hubbard. Editing by Jeremy Gaunt.)

• A Permanent Economic Emergency