Asian stock markets mostly ended lower last week as sentiment was weighed down by news that China’s inflation rate accelerated to a seven-month high in December, denting hopes of further stimulus measures to boost the ongoing recovery. 

Market participants are likely to focus on economic data this week as a slew of reports from the U.S. and Asia are released. Reports on retail sales, Empire manufacturing, Philly Fed, housing starts, industrial production and inflation from the U.S. are due.

Most of the reports are likely to show an improvement and will lift the mood slightly in the coming week. U.S. industrial production is likely to report a strong 0.5 percent gain in December while housing starts are expected to rise 3.4 percent and building permits will show a 1.1 percent gain in December.

Investors are likely to be extremely cautious ahead of a slew of economic data from China. The world's second-largest economy is due to release its fourth quarter and full year GDP data later in the week, and numbers are likely to beat estimates.

The main event, the fourth-quarter economic activity data, will be released Friday along with the retail and industrial production figures. The GDP data are expected to show that China's growth picked up in the last quarter of 2012 and would put to rest any remaining doubt about China escaping a hard landing.

“We are on the optimistic side of the market. We expect a strong end to 2012 in terms of demand, with both retail sales and fixed asset investment accelerating and beating consensus. We believe that fourth-quarter GDP growth accelerated to 2.3 percent in QoQ terms and 7.9 percent in YoY terms. Both results would be better than markets anticipate, and would allow annual growth to reach 7.7 percent – above the government’s 7.5 percent target,” said a note from Credit Agricole.

In Japan, November machinery orders are expected to increase by 1.5 percent on a monthly basis while domestic corporate goods prices are likely to show a 0.5 percent monthly gain in December.

Meanwhile, investors will turn their attention to corporate earnings as earnings season heads into full swing this week. According to Thomson Reuters’ data, S&P 500 companies are expected to report earnings and revenue growth of 1.9 percent in the last quarter of 2012.

A slew of companies, including Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Intel Corp (NASDAQ:INTC), Bank of America (NYSE:BAC) and EBay, will report quarterly earnings, which will weigh on the markets.

"The banks have a read on the economy, on the health of consumers, on the health of demand. What we're looking for is demand. Demand from small business owners, from consumers," Quincy Krosby, market strategist at Prudential Financial in Newark, N.J., told Reuters.