EUROPE - Almost half of European fund managers now predict the region's economy will weaken over the next year, according to Bank of America Merrill Lynch's monthly Fund Manager Survey.

Further, of those surveyed, a net 12% believe that along with a weakening economy, investors will see their earnings per share fall in the next 12 months.

A net 17% of respondents expected a weaker European economy, or even a double-dip recession, while three months ago more than 60% predicted the region would grow.

Gary Baker, the company's head of European equity strategy, said the findings were similar to those at the beginning of last year.

However, the European market continues to be perceived as undervalued by investors, with a net 28% of global investors seeing the Eurozone as cheap, ahead of Japan in second place.

The UK also benefited from this perception, with an average of 15% of all investors now saying they are underweight the region, down by 8 percentage points from the previous month.

The information complements the survey's claim that the euro is no longer seen as strong, with only 15% rating it overvalued, down sharply from 45% in May.

Additionally, investors now no longer fear inflation, with fewer than 1 in 10 expecting rising prices to be a problem for now.

As well as fewer people fearing inflation, investors are also no longer concerned about the European Central Bank increasing interest rates, with nearly half saying the institution will not make any changes until the second quarter of next year.