Japan stocks rebound to lead gains in Asia as traders assess U.S. inflation data, await BOJ meeting

Asia-Pacific markets climbed on Monday, with Japan’s Nikkei 225 leading gains in the region after a key U.S. inflation report late Friday raised hopes for an interest rate cut.

The U.S. June personal consumption expenditures price index rose 0.1% month on month, and 2.5% compared to the same period a year ago, in line with estimates from economists polled by Dow Jones.

The Nikkei snapped an eight-day losing streak to rise 2.13% to 38,468.63, while the broad-based Topix advanced 2.23% to close at 2,759.67. The Japanese yen strengthened 0.31% against the greenback to trade at 153.26.

Automaker Mitsubishi Motors was one of the top gainers in the Nikkei index, rising over 5% after Nikkei Asia reported that the company will join the Honda-Nissan alliance to standardize in-vehicle software.

“The tie-up, whose members sell more than 8 million vehicles worldwide, will consolidate the domestic market into two forces: the Toyota Motor Group and the Honda-Nissan-Mitsubishi alliance,” Nikkei said.

Shares of Eisai, however, plunged 13% after the European Medicines Agency on Friday did not approve the drugmaker’s Leqembi treatment for Alzheimer’s disease, making it the biggest laggard among the 10 Nikkei 225 stocks that fell amid a broad rally.

In Asia, the highlight for this week will be the Bank of Japan’s monetary policy meeting starting July 30. A Reuters poll of economists expects the central bank to raise rates by 10 basis points to 0.1%.

A note from ING has said that the bank will lift rates by 15 basis points and reduce its bond-buying program simultaneously.

“We believe that the economy is back on a recovery track after an unexpected contraction in the first quarter of 2024, and solid wage growth for May should the central bank give more confidence,” the analysts wrote.

Other key inflation data from the region include China’s July PMI data, while Australia will release its latest set of inflation data before the central bank’s Aug. 6 monetary policy meeting.

Hong Kong Hang Seng index was up 1.64% as of its final hour of trade, but mainland China’s CSI 300 bucked the trend in Asia to fall 0.54% to 3,390.74, dragged by real estate stocks.

South Korea’s Kospi rose 1.23% to end at 2,765.53, while the small-cap Kosdaq rose 1.31% to 807.99.

Australia’s S&P/ASX 200 was 0.86% up, finishing at 7,989.6.

On Friday in the U.S., the Dow Jones Industrial Average rallied 1.64%, while the S&P 500 climbed 1.11% and the Nasdaq Composite gained 1.03%.

Friday’s moves stem from a combination of oversold sentiment, a stronger-than-expected GDP report Thursday and the view that the Federal Reserve will begin cutting rates, said CFRA Research’s Sam Stovall.

—CNBC’s Samantha Subin and Pia Singh contributed to this report.