TORONTO -- The trading week will start off with the latest indications on the health of the Chinese economy, including inflation data being released on Sunday and retail sales and industrial production figures on Monday.

Still, this is likely to be a cautious week on stock markets as investors weigh possible U.S.-led military action against Syria and what the Federal Reserve may decide to do later in the month about cutting back on key stimulus.

Traders will be looking for more clarity on the Syria situation this week. President Barack Obama is set to take his case Tuesday to Americans for punishing the Assad regime for an alleged sarin gas attack on civilians Aug. 21. A congressional vote on military action could also take place this week as lawmakers return from their summer break.

Syria weighed on sentiment last week but Colin Cieszynski, markets analyst at CMC Markets Canada, said it's quite possible markets could rally once investors get a better idea of what the U.S. will do.

"Instead of anticipating something is going to start, they start anticipating something is going to end," he said. "And especially in this case, when they're talking about a limited strike and they're not going to send soldiers and drag themselves into another 10-year war or anything like that."

Of course, there is always the law of unintended consequences.

"That's the one issue out there -- the risk that if anything flares up out of that, does it cause anything further or is it just a one-time thing and then it subsides and things go back to the way they were, then markets tend to go back to where they were," Cieszynski said.

The week will also see more speculation about Fed intentions about starting to wind up its monthly US$85 billion of bond purchases.

The prospect of the Fed tapering those asset purchases has unnerved some investors as the stimulus has kept rates low and channelled lots of money into equity markets around the globe.

There is still a good deal of doubt about Fed intentions ahead of the central bank's meeting Sept.17-18, with doubts fuelled by last week's U.S. August jobs data that narrowly missed expectations.

"I don't think they will move this month," Cieszynski said.

"What I think they will do is probably talk about it this month and say we're starting to think about it more actively or something like that but I think they're more likely to do something in October. There are just too many members just kind of kicking around going, you know I want to see some more data and so on."

The Toronto market ended last week with a respectable 1.32 per cent advance, with gains seen across all sectors except for gold producers.

The TSX has had an uphill grind so far this year, up only 3.1 per cent but some analysts think its fortunes are set to change.

"Canada has lagged and will improve," said Chris King, portfolio manager at Morgan, Meighen and Associates.

"We have seen that in the financials, I think we will see the same on the energy side and you might have a bit of firming on the mining side. So overall I think Canada probably does a little bit better over the next while vis-a-vis the U.S."