China GDP, central banks to keep Asia on edge

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Markets in Asia may brace for more volatility this week as the world's second largest economy releases a string of monthly indicators, alongside keenly-anticipated central bank policy decisions in Japan and Europe.

China is due to release a deluge of data on Tuesday, including retail sales, fixed asset investment and industrial output for the month of December, but the focus will fall on the fourth quarter gross domestic product (GDP) due at 1000 SIN/HK.

Economic growth is likely to have slowed to 7.2 percent in October-December from the year-ago period, according to a Reuters poll, which would be the slowest reading since the first quarter of 2009 when the growth rate slumped to 6.6 percent amid the depths of the global financial crisis. Growth in the third quarter of 2014 came in at an annual 7.3 percent.

"China's economy continued to slow in the fourth quarter because of the continued housing slump. Amid a frail economy, full‐year growth likely slid below the government's target," Moody's Analytics wrote in a note.

Meanwhile, HSBC's January flash reading of China's purchasing managers' index (PMI), a gauge of manufacturing activity, is due on Friday. PMI slowed to 49.6 in December, according to HSBC estimates, below the 50-mark which demarcates expansion from contraction, compared to the official print of 50.1.

Decisions from major central banks will also keep investors on edge this week. The European Central Bank meets on Thursday, and hopes are high that the central bank will roll out government bond purchases, or quantitative easing, to prop up the flagging economy.

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The meeting comes on the back of a shocking move by the Swiss National Bank last week to break the franc away from its set value against the euro, but analysts say the surprise will not derail the ECB's easing plans.

"I don't think it will affect [ECB governor Mario] Draghi's decision," Chris Probyn, chief economist at State Street Global Advisors, told CNBC last Friday. "His focus is on the decline of domestic inflation and the need to get private sector growing after a prolonged period of contraction. So his decision is likely to be large scale sovereign bond purchases."

Meanwhile, the Bank of Japan kicks off its two-day policy meeting on Tuesday and will likely maintain its massive monetary stimulus.

Other data on tap include South Korea's fourth quarter growth due on Thursday. Moody's Analytics sees the advanced GDP figure to show Korea's economy expanding 0.5 percent in the October-December period, lower than the 0.9 percent growth in the previous quarter.

"Despite easier fiscal and monetary policy settings, consumers remained cautious and export‐oriented businesses suffered from stiffer Chinese competition and the falling Japanese yen," analysts noted.

Also due this week, are consumer sentiment data from Japan and Australia.