Asian markets will digest the latest reserve requirement ratio cut from China`s central bank at the start of the week, while Greece remains in the international spotlight.
The People`s Bank of China (PBoC) reduced the reserve requirement ratio for banks by 100 basis points on Sunday - its second cut in two months. That followed data on Saturday showing home prices dropped for the eleventh straight month in March.
Data releases will be fairly light this week, but the decline in commodity prices and bailout talks for Greece could still pressure markets.
Meanwhile, investors will keep an eye on US earnings, which are expected to be lackluster due to a stronger greenback and falling oil prices. The corporate reporting season also kicks off in Japan this week, with firms like Mazda Motor due to hand in first-quarter results.
1. Economic data this week
For the first three months of 2015, South Korea`s economy likely expanded 0.5 percent on-quarter, a pick-up from the 0.3 percent in the preceding quarter, but more easing may be necessary for Asia`s fourth-largest economy.
"Net exports made a bigger contribution to growth, thanks to the lower import bill and improved global tech demand," Moody`s Analytics said. "However, this is still below the long-term trend, with consumer spending remaining subdued. Earlier monetary stimulus will lift growth in coming months."
In Australia, the first-quarter consumer price index (CPI) scheduled for release on Wednesday is expected to be flat due to falling petrol prices. This brings the annual price growth to 1.1 percent, well below the Reserve Bank of Australia`s (RBA) long-standing target of keeping inflation between 2-3 percent.
"Upward pressure has come from the lower Aussie dollar and new dwelling purchases, but not enough to dislodge medium-term inflation from the bottom end of the RBA`s target range," Moody`s Analytics said, adding that the estimated weak inflation will increase the odds of a rate cut in May.
Meanwhile, Japan`s trade data for March will be due on Tuesday before the market open, while HSBC`s preliminary reading of China`s factory activity for April is expected at 0945 SIN/HK on Thursday.
2. Iron ore rout to continue
After falling to a decade-low of $46.70 in early April, the price of iron ore has struggled to regain its footing above $50 a tonne. Hit by a double whammy of a supply glut and slowing demand from China, the steel-making raw material has seen prices lose 60 percent over the past 12 months, but experts say the turmoil isn`t over.
"This southbound path for iron ore has just started. We will continue to see mine closures and budget impacts in Australia," Warren Gilman, chairman and CEO of CEF Holdings, told CNBC.
Iron ore is Australia`s biggest export and the rout in prices is beginning to take a toll on the federal budget as well as the share prices of the mining sector on the benchmark SandP ASX 200 index.
3. Greece walks on bankruptcy tightrope
Ahead of a crucial meeting between Greece and the Eurogroup on April 24, European Central Bank (ECB) president Mario Draghi said the problems that the debt-stricken nation faces are " urgent ." These comments were made at the International Monetary Fund`s spring meeting in Washington over the weekend.
It is not difficult to see why; Greece is struggling to make payments after not receiving financial aid since last August. To stave off bankruptcy, it will need its creditors to give their blessings to a list of reforms, but issues such as pension remain as sticking points, with Greece`s leftist government keen to fulfill its election promise of ending austerity.
According to Reuters, Greek prime minister Alexis Tsipras was " firmly optimistic " of an agreement by the end of this week, but some officials like German finance minister Wolfgang Schaeuble are skeptical.
"Markets still believe Greece will stay within the union in some form, but the risks are growing and a full `Grexit` won`t be pleasant," Chris Weston, IG`s chief market strategist, wrote in a note last week. "The market is not prepared at all for this."
Copyright 2011 cnbc.com
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