A woman walks past an electronic board displaying market indices outside a brokerage in Tokyo (Reuters)

Hopes of a global economic recovery spurred by positive indicators from the world's largest economies, a weak Yen and monetary easing speculations in Japan have pushed Asian stock markets ahead in the week.

The Nikkei advanced 3.8 percent while South Korea's KOSPI rose 2.7 percent. Hong Kong's Hang Seng index gained 3.6 percent. China's Shanghai Composite Index posted a 0.6 percent weekly gain.

Hopes of the United States lawmakers reaching a consensus on the impending 'fiscal cliff' retained optimism among Asian investors early in the week. Conciliatory rhetoric from the Democratic and Republican leaders has succeeded in appeasing fears, at least in the short term.

US economic indicators added further cheer. A preliminary Purchasing Managers Index (PMI) reading showed that manufacturing activity in the world's largest economy is gathering momentum in November while housing starts jumped to the highest rate in four years in October. The number of people claiming jobless benefits too fell in the previous week, although this data was believed to be distorted by the super-storm Sandy.

Concerns on eurozone debt crisis renewed after the region's finance ministers failed to take final call on the bailout funds to Greece. The ministers have extended the discussions to 26 November, citing the requirement of more time to sort out some technical matters.

Japan Up on the Drop in Yen

Traders in Tokyo remained upbeat this week on the Yen's extended weak run against the Dollar. The Japanese currency dropped to almost eight month low against the greenback, but managed to edge up towards the weekend.

Fears of the country's economy easing into recession increased after official data showed that exports dropped 6.5 percent in October as slowing global economy and the territorial disputes with China hurt demand.

But the concerns had failed to pressurise the Bank of Japan (BoJ) to initiate further monetary easing measures. The central bank officials retained its key policy rate around zero to 0.1 percent and left the asset purchase programme at 91tn Yen.

Japan is heading to the polls on 16 December and investors are optimistic that the opposition, Liberal Democratic Party (LDP) will take office next. LDP is known for its support for more monetary easing measures from the BoJ and increase of inflation targets to 2 percent. But analysts warn against over-enthusiasm from the markets, as the outcome of the elections and the effect of raising inflation targets remain uncertain.

"Even if opposition leader Shinzo Abe does become Prime Minister and is able to persuade the Bank of Japan to raise its inflation target, this may not make much difference in practice," say analysts at Capital Economics.

"Monetary policy is already very loose and likely to remain so regardless of the identities of the Prime Minister or the next Governor of the central bank".

The Week Ahead

The US Commerce Department is expected to come up with an upward revision to the third quarter GDP on 29 November. Bloomberg reported, citing economists from Goldman Sachs and Barclays that the economy probalby expanded at about 2.9 percent annual rate in the three months ending September. While this may cheer the markets, durable goods orders and personal income spending data could be disappointing.

Greece will be in focus as eurozone finance ministers meet again to take a final decision on the much-needed yet much-delayed, bailout funds. Athens has made it clear that it will run out of cash within days unless the aid is released.

Traders will also keep a close watch on the elections in Catalonia, Spain's second populous region and its economic power house. The outcome of the polls is widely expected to have a major impact on the already struggling Spanish economy.

A host of economic indicators are set for release in Japan. Industrial production data could show further drop in October and unemployment figures could indicate the impact of the slowing economy. The October Consumer Price Indices are likely to remain at the same level as the previous month.

South Korean Industrial output figures too are expected in the coming week. The data is expected to be positive, as production is estimated to have picked up month-on-month in October.