After a long, cold year, investors are flocking back to Europe

By Alun John and Danilo Masoni MILAN/LONDON (Reuters) - A European recession looked like a no-brainer just a few weeks ago, but that picture has changed dramatically,

and investors have started pouring money into the region's stocks, currency and bonds. Warmer temperatures and well-filled gas storage facilities mean there's less concern

about power shortages and sky-high energy bills. That, along with China reopening its economy at breakneck speed, promises a boost for Europe's export-oriented economy.

Figures on Tuesday on Tuesday showing euro zone business activity made a surprise return to modest growth in January were the latest indicator that the downturn in the bloc

may not be as deep as feared. JPMorgan has raised its forecast for euro zone first-quarter economic growth to 1% from a contraction of 0.5%, echoing a similar move from

Goldman Sachs earlier this month, and data from BofA Global Research on Friday showed the first weekly inflow of investor money into European equity funds in almost a year.

Markets are picking up those positive vibes. The euro is set for its largest three-month gain against the dollar since 2011, having risen nearly 10%. European stocks

have vastly outperformed their U.S. peers. The euro STOXX benchmark has beaten its U.S. peer, the S&P 500, by over 18 percentage points since September. Morgan Stanley says

this is its best outperformance in 20 years relative to Wall Street.