Asian Stocks Week Ahead: Investors To Focus On Chinese Data

Asian stock markets ended with gains last week as hopes increased for further stimulus measures from major central banks. However, markets pared gains after policy makers in the U.S. and Europe failed to offer any new stimulus measures by week's end. Particularly, the lack of concrete new action by the European Central Bank (ECB) weighed on investors. 

Markets are expected to begin the week on upswing gains as better-than-expected U.S. non-farm payroll data eased fears that the strength of the economic recovery in the world's largest economy was losing steam. The U.S. Labor Dept. reported that 160,000 jobs were added in July, far better than economists' estimate of 95,000 to 100,000 jobs. However, unemployment rose to 8.3 percent as more Americans gave up trying to find job.

The market's disappointment over the central banks' failure to announce immediate measures is expected to be short-lived as the ECB's strong tone in recent days, and its President Mario Draghi's comments at a press conference in Frankfurt, suggest that the central bank will prepare something in coordination with governments in the coming weeks to boost the faltering euro zone economy.

"The PBOC (People's Bank of China)  sounded more dovish in its last quarterly report released on Aug. 2, opening the door to more pre-emptive actions if necessary. Even the Fed could well act in September. The market knows that central banks are waiting around the corner, and this should cap the market correction that could take place in the week ahead," a note from Credit Agricole said.

On the data front, economic releases for both the U.S. and the euro zone are reasonably light. Reports on U.S. trade balance and productivity data are unlikely to be strong market-movers. As a result, market participants are likely to focus on Asia where heavy data is due to be released during the week. The main focus will be on China as the world's second largest economy will release its monthly data pack in the second half of next week, and investors are looking for signs of improvement after China's recent pro-growth measures.

However, analysts at Credit Agricole said the sequential rebound is unlikely, and the headline data should continue to soften. Reports on monthly retail sales, fixed asset investment, exports and imports are expected to show a slowdown on an annual basis and to come in below previous consensus expectations.

Industrial production is expected to show a slight pick-up on both a sequential and an annual basis, while the producer price index will decline to 2.8 percent on annual basis due to weaker energy and metal prices and softer demand than expected. Meanwhile, CPI inflation for July is expected to soften to 1.7 percent on weaker food prices, while M2 money supply growth should jump and beat expectations.

In Japan, the seasonal merchandise trade deficit for the month of June is expected to be narrowed to 300.8 billion yen compared to 613.8 billion yen in May. June machinery orders are expected to increase by 6 percent on a monthly basis after plunging 14.8 percent in the previous month.

Reports on industrial production from India and Malaysia and exports data from Taiwan and Malaysia are likely to confirm the economic slowdown.