UK fund managers have turned bullish on the prospects for the global economy and have been strong buyers of UK and US stocks this month.

According to the Merrill Lynch Gallup Fund Manager Survey, optimism about the prospects for stock markets rebounded in February with 19 per cent of fund managers expecting a stronger global economy next year, up from 9 per cent a month earlier.

Bulls of UK stocks outweighed bears by a record 68 per cent following the first interest rate cut by the Bank of England since June 1999 and a net 37 per cent of fund managers saw UK equities as undervalued.

Positive sentiment on domestic stocks was underlined by expectations that the UK's central bank would lower the interest rate, currently at 5.75 per cent, by a further 35 basis points to 5.4 per cent by the end of the year, according to the survey.