Asian markets experienced a mixed performance on Monday, with Japan's Nikkei leading losses due to investor concerns over interest rate normalisation, while China's stock market extended its rally following additional stimulus measures.
Japan's Nikkei 225 plunged 4.1% as investors reacted to uncertainty surrounding new Prime Minister Shigeru Ishiba’s stance on monetary policy.
Ishiba, previously critical of the Bank of Japan's loose policies, softened his tone over the weekend, stating that monetary policy must remain accommodative given Japan’s economic challenges. This led the yen to recover slightly, rising 0.2% to 142.52 against the U.S. dollar after a sharp drop last Friday.
Meanwhile, Chinese stocks continued to rally, with the CSI300 climbing another 3%, adding to last week’s 16% surge. The Shanghai Composite also jumped 4.4% following a 13% gain the previous week.
The rally was buoyed by fresh stimulus, including the People's Bank of China's announcement to lower mortgage rates for existing loans by the end of October.
Geopolitical tensions in the Middle East, particularly Israeli airstrikes on Lebanon, added to market uncertainty, but oil prices remained tempered amid the potential for increased supply from Saudi Arabia.
Brent crude rose 31 cents or 0.4% to $72.41 per barrel, while U.S. crude gained 36 cents or 0.5% to $68.54.
In the U.S., Wall Street enjoyed a strong week following a positive inflation report, leaving the door open for a potential half-point rate cut from the Federal Reserve in November.
Futures currently suggest a 53% chance of the rate cut, though upcoming U.S. economic data, including payrolls and manufacturing surveys, will be key to determining the Fed's course of action.
Meanwhile, European stocks opened mixed, with FTSE futures and EuroStoxx futures flat.
The U.S. dollar index remained flat at 100.41, and gold, buoyed by a softer dollar and lower bond yields, hit $2,656 an ounce, continuing its strong performance this quarter.