International fund managers are more optimistic about the prospects for the global economy, with a Merrill Lynch survey showing they believe the inflation backdrop is beginning and that monetary policy will be eased aggressively. The survey says 75 per cent of those polled believe equities will be the best-performing asset for the next 12 months and plan to switch out of bonds and cash over the next three months. The fund managers continue to favour European equities, suggesting that corporate profits in the euro zone will be the best of a bad bunch. However, Merrill Lynch notes that, despite their positive sentiment about equities, fund managers are keeping their sector preferences very quiet, while 40 per cent still want to be defensively positioned, which seems at odds with equities outperforming bonds.