The spotlight is on China, Ukraine this week

Weak PMI affirms 'Year of the Donkey' for China: StanChart

China should remain the key focus for markets this week, with the release of manufacturing activity data as well as the annual meeting of the National People's Congress which could shed some light on economic policy.

But events in Ukraine will dominate as well, as a stand-off between Ukraine and Russia threatens to escalate into conflict.

Ukraine mobilized on Sunday for war and called up its reserves, after Russian President Vladimir Putin threatened to invade in the biggest confrontation between Moscow and the West since the Cold War.

"Markets have a lot to digest this morning; a geopolitical crisis in Ukraine, China's PMI index beating expectations (which was a surprise) and the start of central bank week. But the biggest talking point is the developments out of Crimea," Evan Lucas, market strategist with IG wrote in a note on Monday.

Lucas added that while investor response to the Ukrainian developments is hard to quantify, markets were mixed during Russia's invasion of Georgia back in 2008.

"During the five-day (Russo-Georgian) war, reactions in typical markets were mixed; gold actually contracted over the five days, oil traded sideways, but EUR/USD fell through the floor from $1.532 to $1.493 on the opening day and dropped for the preceding four," Lucas wrote.

"The major difference between the five-day war and the Crimea situations is the cultural and political divides are larger and more pronounced, with greater possibilities for flare ups and conflict over the longer term," he added.

Members of the Russian armed forces stand guard around the Ukrainian military base in the village of Perevalne, 20 km south of Simferopol.
Bulent Doruk | Anadolu Agency | Getty Images

In China, the health of the economy remains in focus as investors digested the latest batch of manufacturing data.

HSBC on Monday released the final reading of its China PMI for February, which fell to a seven-month low of 48.5, roughly in line with 48.3 initial figure released last month.

This follows the official purchasing managers' index released on Saturday, which came in at 50.2 from 50.5 in January, above the 50-mark that divides expansion in the manufacturing sector from contraction.

China's National People's Congress begins on Wednesday. It meets yearly to approve, policies, the law and major economic targets such as the annual growth target.

Economists expect Beijing to maintain a 7.5 percent target for economic growth. A sharp fall in the yuan last week and increased volatility in the currency meanwhile has fueled talk that Beijing is preparing for a widening of the currency's trading band, which could also be in focus this week.

(Read more: Yuan sets for its biggest weekly loss in history)

Louis Wong, head of research for Phillip Securities in Hong Kong said he will be looking at what China's leaders say about tackling pollution.

"There is a pressing need for the Chinese government to roll out more policies to deal with pollution, so at the upcoming NPC I expect more policies in this area," he told CNBC on Friday.

How you should be reading yuan movements

It's a busy week ahead in general for Asia, with manufacturing surveys from India, South Korea and Australia on Monday likely to give some insight into the outlook for global exports, while the Reserve Bank of Australia meets on Tuesday and earnings season in the region continues.

(Read more: China's NPC: Here's what to watch for)

Elsewhere, Australia's central bank meets on Tuesday. All 19 economists polled by Reuters expect the Reserve Bank of Australia (RBA) to keep its benchmark interest rate unchanged at a record low of 2.5 percent.

"The RBA has clearly indicated that with growth remaining low but tentative signs of improvement in some indicators, a period of stability in interest rates is appropriate," said Shane Oliver, head of strategy and chief economist at AMP Capital, said in a note. "Since not enough has really changed since the last meeting, this remains the case."

Malaysia's central bank meets on Thursday and is expected to leave its key rate steady at 3 percent. Economists expect a rate rise later this year as inflation and exports pick up.

"We expect Malaysia to hold rates this week but think the central bank will become increasingly hawkish as the year progresses, with a rate hike likely in the third quarter as inflation creeps up," he added.

On the international scene, the European Central Bank meets on the Thursday while Friday sees the release of closely-watched U.S. jobs numbers.

Other data due this week in Southeast Asia include January trade and February inflation data from Indonesia, and Thai inflation data on Monday. Also due later in the day are manufacturing surveys from India, South Korea and Australia.

(Read more: India and Indonesia: Not so bad after all)

— By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC