World Economy

Asia on central banks, China watch this week

What could rock markets this week

Asia's central banks will likely hog the market spotlight this week, while earnings season continues in Japan with Panasonic, Sharp, Toyota Motor, Mazda and Mitsubishi Motors handing in their report cards.

Meanwhile, a private survey of China's manufacturing activity could provide some insight into the state of the world's second-largest economy.

Central banks

After a string of unexpected moves by central banks as of late, the Reserve Bank of Australia's (RBA) policy meeting on Tuesday will likely attract more attention than usual.

Analyst expect the RBA to join the easing bandwagon, after its Asian peers India and Singapore recently surprised markets with inter-meeting easing measures. Beyond Asia, the European Central Bank (ECB) unleashed a larger-than-expected bond-buying program on January 22, while the Bank of Canada cut its benchmark rate for the first time since 2010 in the same week.

Read MoreAussie dollar to keep falling - but by how much?

A 25 basis point reduction in interest rate will make sense as "insurance" to improve the Australian economy, wrote Shane Oliver, head of Investment Strategy and chief economist at AMP Capital, in a note.

"Growth is too low, confidence is subdued, prices for key commodities like iron ore and energy have collapsed resulting in a much bigger hit to national income than expected. Besides, the Australian dollar remains too high and is set to bounce if the RBA fails to cut soon," he added.

Reserve Bank of Australia (RBA) headquarters in Sydney, Australia.
Dan Himbrechts | Bloomberg | Getty Images

Australia's benchmark index rallied to a more than four-month high last Friday, chalking up a seven-session winning streak, while the Aussie dollar settled at $0.7766 to the greenback, on the back of rising hopes for a RBA move.

Central bankers in India are also due to meet on Tuesday, following an unscheduled inter-meeting rate cut two weeks ago. The Reserve Bank of India (RBI) cut its key repo rate by 25 basis points to 7.75 percent, its first cut since March 2013, citing lower-than-expected inflation and weak crude oil prices.

Read MoreWhy surprise parties are central banks' new thing

China PMI

Investors are also eyeing HSBC's final reading of China's factory activity for January, which fell to 49.7, a touch below its 49.8 flash reading, and after dipping to 49.6 in December. A reading below 50 indicates contraction.

The data came a day after the government's official PMI for January unexpectedly shrank for the first time since September 2012, with firms seeing more gloom ahead.

Beyond Asia, investors will be looking at the U.S. nonfarm payrolls for January, which the Federal Reserve monitors for its decision to raise interest rates. Westpac expects last Friday's less-than-stellar gross domestic product (GDP) for the fourth quarter to be a prelude to a soft jobs report.

"It is possible to see softness in the upcoming jobs numbers, due to oil and gas workers being laid off," Robert Rennie, global head of FX Strategy at Westpac Bank, told CNBC Asia's "Squawk Box" on Monday.

"The GDP data made it a clear that while the Fed expects the net impact of lower energy prices to be positive in the medium term basis, we are still seeing signs of weakness at least in the first quarter," he added.