European markets rallied on Thursday morning on expectations of more aggressive stimulus measures in the euro zone, but some analysts warned that investors could be "getting ahead of themselves."
Markets surged on Wednesday on hopes that disappointing data from the euro zone could prompt the European Central Bank (ECB) to implement a U.S. Federal-Reserve-style bond-buying program, in an effort to stimulate the economy.
The region's inflation rate fell into negative territory for the first time since 2009, Eurostat data showed on Wednesday. Prices fell 0.2 percent year-on-year in December, driven lower by oil prices, which have fallen over 50 percent since June 2014.
Read More Euro zone slips into deflation, pressure on ECB
All eyes are now on the ECB, which could announce a bond-buying - or quantitative easing (QE) program - when it meets on January 22.
Not so fast, market analysts and economists warned, arguing that markets were extrapolating the wrong conclusions from the data.
"The big concern is that the market may well be getting ahead of itself in its expectations," Michael Hewson, chief market analyst at CMC Markets U.K., said in a note Thursday.
"Given that core prices (that exclude energy, food, alcohol and tobacco), actually rose to 0.8 percent, reinforcing the effect that the volatile nature of energy prices is having on headline prices."
Despite the headline deflationary figure grabbing markets' attention, a senior economist at Schroders, Azad Zangana, said: "There are few signs that the domestic European economy is becoming more deflationary."
"Consumer confidence remains reasonably high, while inflation expectations have not fallen to significantly low levels," he said in a note. "Also, retail sales have held up well, suggesting households are not delaying spending in order to take advantage of falling prices -- the behavioral changes associated with the start of a prolonged deflationary period, like that experienced in Japan."
Read More Euro zone deflation: Why it matters
Given the euro zone's gloomy economic outlook - growth was a meager 0.2 percent in the third quarter - many are calling on the ECB to introduce QE. But there is strong resistance from countries like Germany, which is reluctant to take on the debt of struggling euro zone countries like Greece.
Germany has also argued that government bond purchases would be outside the ECB's remit, which is only to maintain price stability (unlike the Fed which can manipulate monetary policy in an effort to boost employment).
Analysts like Hewson believe the central bank may not push the QE button just yet, however, and warned that markets could be bitterly disappointed by the outcome of the next ECB meeting.