Asia stocks mixed amid Fed easing bets; Nikkei slumps on BOJ hike signals

Investing.com-- Asian stocks moved in narrow ranges on Monday as traders weighed rising expectations of a Federal Reserve rate cut next month, while Japanese shares fell sharply amid bets on a Bank of Japan rate hike.

Some regional markets mirrored losses in U.S. stock index futures, which weakened as technology stocks led the pullback.

Asia stocks mixed; Fed outlook, China PMI in focus

Fed rate-cut expectations have risen meaningfully from last week, driven by softer U.S. data and a shift in market pricing after several policymakers sounded more cautious about keeping policy too tight.

Money markets now imply close to an 87% chance of a quarter-point cut at the December meeting, up from around 40% a week earlier. Still, investors remained cautious, concerned that weaker U.S. data may not translate into sustained risk appetite if economic conditions worsen through the winter.

China’s factory activity offered little relief. A private-sector manufacturing PMI released on Monday showed activity slipping back into contraction, underscoring persistent demand softness.

The reading followed Sunday’s official PMI, which showed the sector shrinking for an eighth straight month.

Still, China’s blue chip Shanghai Shenzhen CSI 300 rose 0.8% on Monday, while the Shanghai Composite index gained 0.4%. Hong Kong’s Hang Seng index advanced 0.9%.

In South Korea, the benchmark KOSPI was largely unchanged.

Elsewhere, Australia’s S&P/ASX 200 fell 0.4%, while Singapore’s STI was largely muted.

India’s Nifty 50 ticked 0.3% higher at market open.

Get more stock picks by Wall Street analysts by upgrading to InvestingPro - get 60% off today

Japan stocks slump 2% amid BOJ hike bets

Japanese markets underperformed the region. The Nikkei 225 index slid nearly 2% as the yen strengthened and Japanese government bond yields climbed, reflecting mounting expectations of a BOJ rate hike.

Traders pushed yields higher after last week’s strong Tokyo consumer inflation reading reinforced the view that underlying price pressures remain firm.

The shift was amplified on Monday when BOJ Governor Kazuo Ueda signaled that policymakers would discuss the “pros and cons” of raising rates at the December 18–19 meeting.

The rise in the yen weighed heavily on exporters and helped drag the Nikkei lower.