* Rocky road upward for risk assets seen
* Confidence growing on U.S. led global recovery
* Central bank policy risks
By Richard Hubbard
LONDON, March 9 (Reuters) - Central bank policies and euro zone rescue efforts have laid out a path for global recovery, and higher prices for riskier assets, although the recent rapid pace of gains will inevitably slow, fund managers and strategists say.
The growing confidence among investors that central bank policies and euro zone rescue efforts have laid a path for global recovery, and higher prices for riskier assets, still faces many tests, fund managers and strategists say.
One potential road block is seen as inflation risks from higher oil prices with the U.S. and Japanese central banks due to meet in the coming week, while in Europe the German ZEW survey will be tracked for signs growth there is on track.
Risk assets ended the past week firmer after Greece reached a deal with its private creditors, which effectively ended the prospect of the world's largest ever sovereign debt default.
Along the way MSCI's global equity index posted its biggest one-day fall of the year, then recovered to end the week showing gains of nearly 10 percent for the year to date. Similarly strong gains have been recorded for German and Japanese equities this year, and for copper, gold and oil.
"The dip encouraged me, but you can't wait for dips in this market," said Trevor Greetham, portfolio manager at Fidelity Worldwide Investment.
With the risk of a Greek debt default off the table for the foreseeable future, HSBC's Global Head of Macro and Investment Strategy Philip Poole is another moderate bull, even after the gains seen in many asset prices so far this year.
"I think its impossible to sustain the pace we've had since the start of the year...but in reality we look at the valuations and we don't think, even with what has happened, those valuations are really over stretched."
Fidelity's Greetham believes that, although euro zone political risks remain high, the scale of central bank policy easing since late December and signs of a U.S.-led recovery in global growth, justifies a shift in asset allocation to stocks and commodities.
He prefers U.S. stocks but is also overweight UK equities, a wide range of commodities and global property securities.
Greetham said the U.S. equities look good in part because fiscal policy remains firmly stuck in expansion mode due to the presidential election, while Europe embarks on austerity measures, driving a pronounced divergence in performance between the two regions.
The latest Thomson Reuters Directors Report on U.S. corporate earnings adds weight to this view finding that S&P 500 companies are look set to post a rise of 8.2 percent in earnings for 2012 after 10 percent growth last year.
A quarterly breakdown also points to the first quarter being a low point with earnings growth in the first three months dipping to about 3 percent, before rising to 8.8 percent in the second quarter.
A risk some see as just over the horizon for now is the short term nature of current recovery cycles and the potential for markets to repeat the last year's cycle of a strong first half only for things to then turn dramatically worse.
"A premature curtailment of central bank liquidity could lead to another downswing in global growth and stocks prices as we saw in 2011," Greetham said.
These fears will keep attention focused on next week's Federal Open Markets Committee meeting in Washington although reports suggest the Fed remains open to more policy easing but will likely wait until its current programme, known as "Operation Twist", expires in June.
The Bank of Japan meets for the first time since it surprised market with a policy easing in mid-February which has sent the yen down 4.9 percent against the dollar, pushing the greenback to 9-1/2 month highs.
The Swiss National Bank (SNB) is also meeting midweek and is expected to keep rates on hold and leave its 1.20 Swiss francs to the euro floor unchanged.
Among the main data releases next week the German ZEW economic think tank's monthly poll of business sentiment is one of the most important and should confirm that Europe's biggest economy is on track for steady improvement.
French, Italian and final euro zone inflation data for February should give a reading on the impact higher oil prices are having on the region.
In debt markets Italy, France and Spain are due to test investor demand for euro zone sovereign issues in the first auctions for medium and longer term debt after the Greek debt swap deal.
The second Greek bailout should get final approval at next week's euro area finance minister meeting in Brussels and the IMF is expected to indicate its participation on March 15.