Caution rules ahead of ECB meeting, China data

By Wayne Cole

SYDNEY (Reuters) – Asian share markets were looking to edge higher on Monday, though anxious investors were wary of being disappointed yet again by economic news from China and policy stimulus in the euro zone.

A holiday in the United States could make for thin conditions at the start of a week littered with major data and a crunch policy meeting for the European Central Bank.

Oil prices started with a soft tone as Brent crude futures eased 29 cents to $ 49.88, while U.S. crude lost 31 cents to $ 48.38 a barrel.

Relief that Wall Street had managed to end last week with a bounce, helped Australia’s main index <.AXJO> rise 0.8 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> added 0.3 percent in early trade.

The Dow <.DJI> ended Friday 1.1 percent higher, while the S&P 500 <.SPX> gained 1.34 percent and the Nasdaq <.IXIC> 1.39 percent. All were still down more than 1 percent for the week.

Not so positive was data showing Chinese new home prices fell an average 4.3 percent year-on-year in 68 of the 70 major cities monitored. Yet property sales volumes were up 9 percent at the highest of the year.

That was just an appetizer to Tuesday’s report on gross domestic product which is expected to show annual growth slowed to 7.2 percent last quarter, undershooting Beijing’s 7.5 percent target and the weakest in 24 years.

The main event of the week will be Thursday’s meeting of the ECB which is considered almost certain to see the launch of a government bond-buying campaign.

Sources have told Reuters the ECB may adopt a hybrid approach – buying debt and sharing some of the risk across the euro zone while national central banks make separate purchases of their own.

There has also been talk the program would be limited in size to 500 billion euros, an amount that would almost certainly disappoint investors eager for bold measures.

“The market is baying for action from the ECB on Thursday, with expectations now firmly entrenched in favor of a QE announcement,” said James Ashley, chief European economist at RBC Capital Markets.

Ashley suspects the ECB will not put an amount on the bonds to be bought and will rather refer to the current objective of expanding its balance sheet to 3 trillion euros.

But with consumer prices falling, even that might not be enough. “We think that the 3 trillion goal will need to be raised at some point in the future – and with that, so too will the amount of asset purchases,” said Ashley.

Just to make the challenge all the greater the Greek general election is due on Jan. 25 and could see the anti-bailout Syriza party win but without a controlling majority.

All this uncertainty kept the euro pinned at $ 1.1564, having hit an 11-year low of $ 1.14595 on Friday.

The common currency was shaky on the Swiss franc at 0.9951 after tumbling 17 percent last week when the Swiss National Bank abandoned its cap on the franc.

The dollar was a shade softer against the safe-haven yen at 117.43, but a touch firmer on a basket of currencies at 92.652.

(Editing by Eric Meijer)