China Sets Tone in Busy Week for Asia Markets

Jerome Favre | Bloomberg | Getty Images

A slew of Chinese economic data on Monday kicks off another busy week for Asian markets as investors try to assess the state of play in the world's second biggest economy.

China's industrial output rose 9.3 percent in April from a year earlier, slightly below forecasts for a 9.5 percent rise, while retail sales rose 12.8 percent from a year earlier - in line with expectations.

Fixed-asset investment, which plays an important role in the economy, grew a slower-than-forecast 20.6 percent in the first four months of the year compared with the same period a year ago.

The U.S. also releases manufacturing and retail sales data this week and analysts say the latest economic numbers from the world's two big economies should set the tone for markets this week.

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"It's a big week, we have China data and U.S. data and I think we should see activity moderate," said Tony Nash, managing director at IHS Consulting told CNBC Asia's "Squawk Box" on Monday.

"The second quarter will be tough for the global economy and this week's data will set the stage for that," he said.

Analysts said Monday's economic numbers pointed to sluggish economic growth from China in the months ahead, something that could weigh on the Aussie dollar which has taken a beating in recent sessions.

Tuesday's federal budget is likely to be the key focus in Australia, with economists expecting the government to unveil a revenue shortfall of between A$17- 20 billion.

The budget will be the final one to be unveiled by Treasurer Wayne Swan before Australia's general election in September.

"We expect revenue shortfalls running at around A$17 billion a year to have blown the 2012-13 budget out to a deficit of A$15 billion," Shane Oliver, chief economist at AMP Capital in Sydney said in a note.

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"While the Government is likely to announce budget savings to ensure it remains on a trajectory back to surplus, in an election year it's hard to see it pushing too hard on this front and so we expect the government to project a 2013-14 deficit of A$10 billion," he added.

Japan releases preliminary gross domestic product (GDP) data for the first quarter on Thursday.

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The numbers are expected to be scrutinized for early signs that a sharp fall in the value in the yen and a radical shift in monetary policy is starting to work some magic on Japan's frail economy.

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AMP's Oliver said he expected the Japanese economy grew 0.7 percent in the first quarter from the previous one, compared with flat quarterly growth in fourth quarter.

Elsewhere in Asia this week, Indonesia's central bank meets on Tuesday and is expected to leave its key interest rates steady at 5.75 percent.

Malaysia releases first quarter GDP data on Wednesday, while India's April Wholesale Price Index, a closely-watched gauge of inflation, is due for release on Tuesday.

By CNBC.Com's Dhara Ranasinghe, Follow her on Twitter: @DharaCNBC