July 29 (Reuters) - A look at the day ahead in Asian

markets.

Asia on Monday kicks off a pivotal week for world markets which

includes policy decisions from the Bank of Japan and Federal

Reserve, U.S. employment data, inflation numbers from Australia

and South Korea, and purchasing managers index reports from

around the world.

Coming on the heels of the previous week's volatility,

investors' nerves will be taut. Will the scramble to reduce risk

continue, or has last week's selling opened a window of

opportunity to rebuild risk exposure and carry trades?

Financial conditions have tightened thanks in large part to

the widespread equity selloff, but they are coming from a low

base - according to Goldman Sachs. U.S. financial conditions

earlier this month were the loosest in two years.

Emerging market financial conditions are also tightening,

even though U.S. yields and the dollar have slipped, and implied

volatility in stocks, bonds and currencies are higher too.

Monday may be too soon for animal spirits to fully return,

with the BOJ and Fed decisions looming on Wednesday. On the

other hand, Friday's relief rally soothed some of the pain from

what was a grueling week as Big Tech dragged stocks lower.

Asian stocks, however, didn't see any rebound on Friday as

the MSCI Asia & Pacific ex-Japan index fell to a near-two month

low. The index has lost 5% in the last two weeks and has risen

only once in the last 10 trading sessions.

Chinese equities rebounded on Friday but not enough to

prevent the eighth weekly decline in 10 weeks. The 3.7% fall was

the biggest weekly loss since January.

But China bulls do have a rare bit of good news to enjoy as

official data on Saturday showed that industrial profits grew at

a faster clip in June. A 3.6% year-on-year rise in profits last

month followed a 0.7% gain in May, accelerating first-half gains

to 3.5%.

This should lift China's economic surprises index, which is

languishing around its lowest level in 10 months.

Japanese stocks, meanwhile, will again be at the mercy of

the exchange rate, which could be in for another rocky ride. The

Nikkei has lost 10% in the last two weeks as the yen has rallied

some 10 'big figures' to a four-month high of 152 per dollar.

Japanese money markets are attaching a 70% probability on a

10 basis point rate hike from the BOJ on Wednesday, and U.S.

rate futures suggest it's a near certainty that the Fed stays on

hold.

Can the yen break through 150 per dollar?

Asia's economic calendar is light on Monday but brimming

with top-tier events and releases later in the week. The same

goes for the corporate calendar, with major earnings releases

from Japan rolling out as the week progresses.

Here are key developments that could provide more direction

to markets on Monday:

- Indonesia FDI growth (Q2)

- U.S. earnings

- U.S. secretaries of State, defense meet Japanese

counterparts