European investors are still cautious about growth prospects for developed markets but optimistic about emerging markets, according to Fitch Ratings' Q3 2011 European Senior Fixed Income Investor survey.

Representing the views of managers with an estimated $4.3 trillion of fixed income assets, the survey found that almost three-quarters expect weak growth at below 2% for the European economy, while almost all respondents expect expansion by over 2% for the emerging markets. Over a quarter thought emerging market growth would exceed 4%.

"These findings support Fitch's view that emerging market dynamism is still the main driver of the global recovery. However, as the agency noted in its latest Global Economic Outlook report, emerging market growth will slow from 2010's levels following a tightening in emerging market monetary policy and the slowdown in so-called 'advanced' country economic growth," said David Riley, Fitch's Head of Global Sovereign Ratings.

Overall, the agency maintained that the global economic recovery is likely to continue, but is fragile and uneven from quarter to quarter and from country to country. Moreover, the downside risks to the global economic recovery combined with increased inflationary pressures has exacerbated the policy dilemma facing central banks.

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