Asian stocks edge higher on some rate cut cheer, yen strength weighs

Investing.com-- Asian stocks were a mixed bag on Monday, taking some support from expectations of lower U.S. interest rates although Japanese markets retreated amid pressure from the yen and bets on rate hikes by the Bank of Japan.

Regional markets took a positive lead-in from Wall Street, where the S&P 500 and the Dow Jones Industrial Average came close to record highs on Friday after comments from Federal Reserve Chair Jerome Powell cemented expectations for a September cut.

U.S. stock index futures steadied in Asian trade, with focus turning to key inflation data due this week, as well as earnings from market darling NVIDIA Corporation (NASDAQ:NVDA) for more cues on the artificial intelligence boom. 

Japan’s Nikkei dips as yen firms sharply 

Japanese stocks lagged on a spike in the yen, with the Nikkei 225 and TOPIX down about 1% each. 

The yen’s USDJPY pair- which gauges the amount of yen needed to buy one dollar- fell 0.4% and was close to lows hit earlier in August, amid growing conviction that the Bank of Japan will hike interest rates further this year. 

Hawkish comments from BOJ Governor Kauzo Ueda furthered this notion. 

Strength in the yen pressured export-oriented Japanese stocks, while the prospect of higher rates also presented headwinds for the technology and export sectors that had fueled a Japanese stock rally earlier this year. 

A stronger yen also further undermines carry trade through the currency- which had served as a vehicle for capital flows into high-yield Asian markets.

Inflation data on Tokyo, due later this week, is expected to offer more cues on the path of Japanese interest rates. 

Rate cut hopes offer some strength, China lags 

Barring Japan, most other Asian markets rose, tracking gains in Wall Street on expectations of lower U.S. interest rates. 

Australia’s ASX 200 added 0.6% and was back in sight of record highs, while futures for India’s Nifty 50 index pointed to a mildly positive open. 

South Korea’s KOSPI was flat, pressured some losses in major chipmaking stocks ahead of Nvidia’s results.

Hong Kong’s Hang Seng index rose 0.8%, recovering a measure of steep losses from the prior session and also ducking losses in mainland Chinese markets.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.4% and 0.3%, respectively, weighed by persistent concerns over a slowing economic recovery.

Markets were also somewhat spooked by the People’s Bank of China withdrawing about 101 billion yuan ($14.2 billion) of liquidity from the open market.

While the withdrawal appeared to be aimed at strengthening the yuan, it also raised concerns over just how much support Beijing was mobilizing for the Chinese economy.

A slowdown in China has been a key point of contention for sentiment towards Asia, and has also left Chinese markets largely lagging their peers.