Week Ahead: Asian Stock Markets Likely To Maintain Bullish Momentum

The markets closed with gains last week as investor sentiment was buoyed after China reported better-than-expected manufacturing and service activity data in November.

The U.S. Department of Labor reported on Friday that 146,000 jobs were added in November, far better than economists' estimate of 93,000 jobs. The unemployment rate declined to 7.7 percent, the lowest level since December 2008, from 7.9 percent in the previous month, mainly because more people gave up looking for work.

Market participants are likely to focus next week on the Federal Open Market Committee (FOMC) policy meeting on Tuesday and Wednesday. Analysts at Credit Agricole said that the main outcome of the FOMC meeting should be the announcement of an extension of the $85-billion purchase of securities each month when Operation Twist ends. The lack of substantial improvement in labor conditions and the weak growth environment at the junction of 2012 and 2013 are the sufficient reasons to justify such a decision.

Meanwhile, U.S. fiscal fears will continue to weigh on the markets. Both the Democrats and the Republicans remained at odds about how to reach a deal to avoid the so-called fiscal cliff, the term used for the automatic tax hikes and spending cuts that will go into effect next year if no budget deal is reached. Republican House Speaker John Boehner said that there had been no progress in negotiations on how to avoid the fiscal cliff.

"This isn't a progress report because there is no progress to report. The president has adopted a deliberate strategy to slow-walk our economy right to the edge of the fiscal cliff,” Boehner said, Reuters reported.

Market participants are likely to focus on Asia, where heavy data are due for release during the week. The main focus will be on China, which is due to release its monthly data pack. Investors are looking for signs of improvement in the world's second-largest economy.

Reports on monthly retail sales, fixed asset investment, industrial production and inflation are due to be released on Sunday and are expected provide additional confirmation that China is on a modest recovery path.

Industrial production is expected to rise 9.8 percent in November on an annual basis, while retail sales are likely to rise by 14.6 percent in November after gaining 14.5 percent in the previous month. Consumer price inflation is expected to accelerate to 2.1 percent in November from 1.7 percent in the previous month, while producer prices are likely to fall 2 percent on an annual basis after declining 2.8 percent in October.

South Korea will announce an interest rate decision on Thursday, and the rate is expected to stay put. India will report October industrial production data Wednesday and the November WPI inflation data Friday. Industrial output growth is likely to return to positive territory, and the WPI inflation will inch lower.

In Japan, the current trade balance is likely to show a surplus of 247 billion yen in October from an unexpected deficit by 142.0 billion yen for September. October machinery orders are expected to increase 3.5 percent on a monthly basis after having declined for two consecutive months.