Why it’s still ‘too early’ to dive into European stocks
The 17-nation euro zone bloc finally emerged from 18 months of recession after gross domestic product data on Wednesday showed the economy growing 0.3 percent in the second quarter.
But for investors looking at the data as a trigger to increase exposure to European stocks, some analysts have advised to wait.
"It is too early," said Andrew Su, CEO of Sydney based firm Compass Global Markets. "It will only take more credit downgrades or a crisis in Italy or Spain to see renewed market volatility."
Industry watchers are well familiar with the ongoing problems of the euro zone, where heavy indebtedness, sky-high unemployment and lackluster growth have dogged progress in the region for years.
Periodical flare-ups of tension, more recently over the banking crisis in Cyprus and political uncertainty in Italy, have continued to shake investor belief in a sustainable recovery in the region.
"There are many structural problems with many of the economies in the euro zone that are far from resolved and youth unemployment across the region is a staggering 25 percent," he said.
Planned structural reform includes action to increase the flexibility of labor markets and streamline welfare systems to help slash down debt levels and increase competitiveness. Many investors are hopeful that these reforms will help the euro zone along its growth trajectory and by buying cheap looking stocks now, they can take advantage of the recovery.
But Ric Spooner, chief market analyst at CMC Markets, remained unconvinced that opportunities were worth stomaching at this time.
"At this stage, I favor a conservative, underweight stance on European stocks until there is more clarity on reform," he said, adding that a key upcoming risk event - the German elections next month - could lead to further volatility.
(Read more: Euro zone seen growing at last: Thank Germany)
"Once the German elections are out of the way, the politicking around reform initiatives could easily see risk premium being built back into European markets," he added.
Meanwhile Shane Oliver, head of investment strategy and chief economist at AMP Capital, said European stock market have rallied in recent months and may be primed for a correction.
"In the short term you could argue that markets have come up so much in Europe you could go through a bit of a pull-back, especially if the U.S. market hits a rough patch, you might see a bit of a pause," he added.
Oliver noted that investors might have already missed the ideal time to invest, which in his view was September 2011. The Euro STOXX 600 index has gained 44 percent since then.
He still sees upside potential for upside on a 12-month view, but advised staying away in the next two months.
—By CNBC's Katie Holliday: Follow her on Twitter