Shanghai and Hong Kong stocks fell Monday after a gauge of Chinese factory activity hit a more than three-year low, but the Nikkei soared on lingering euphoria from Japan's decision to slash interest rates to negative.
In another example of weakness in China's economy, the official Purchasing Managers Index (PMI) showed the country's key manufacturing sector shrank for the sixth straight month in January and was now at its weakest since August 2012.
The news followed a string of data indicating that the once-mighty growth rates in the Asian giant are well in the past.
"The manufacturing sector will likely face a tough year ahead on the back of overcapacity, weakening global demand, and the government's plans to tackle pollution," ANZ economists Liu Ligang and Louis Lam said in a report.
Worries about the slowdown in the world's second biggest economy -- and its leaders handling of it -- were among the key reasons for a rout across global markets in January that wiped trillions of dollars off valuations.
"The headline number is a disappointment to the market as output and new orders show no signs of a rebound," William Wong, head of sales trading at Shenwan Hongyuan Group Co. in Hong Kong said. “Trading this week will remain shallow ahead of the Chinese lunar new year holiday,” he told Bloomberg News.
Shanghai ended 1.8 percent lower and Hong Kong lost 0.6 percent in the afternoon.
However, Tokyo soared two percent, extending a 2.8-percent gain Friday following the shock announcement from the Bank of Japan that it would effectively start charging lenders to park their cash with it.
The move -- intended to ramp up lending to people and businesses in order to kick-start the economy and fend off deflation -- spurred a rally across world markets and sent the yen tumbling.
- Oil prices retreat -
Adding to the upward pressure in Japanese markets was a 12.4-percent surge in Sony, which on Friday posted a nine-month net profit of almost $2.0 billion thanks to huge demand for its PlayStation video games console and image sensors.
Sydney gained 0.8 percent and Seoul added 0.7 percent. There were also gains in Wellington, Taipei and Bangkok.
The announcement came as central banks from Asia to the Americas look to support world markets after they took a beating in January. The European Central Bank indicated after its most recent policy meeting it was ready to ease monetary policy further in March, while the Federal Reserve held off another interest rate hike last week.
Data showing growth in the US economy slowed sharply in October-December and further reduced the chances the Fed will hike rates anytime soon.
On oil markets, US benchmark West Texas Intermediate fell 2.2 percent and Brent lost 2.3 percent after enjoying a four-day rally at the end of last week, fanned by hopes of talks between the OPEC producers' club and Russia on cutting output.
The black gold picked up recently after sinking to 12-year lows owing to a perfect storm of overproduction, weak demand, a slowing global economy and a strong dollar.
"Oil has stopped its bullish momentum and most of the reason comes from the relatively strong dollar on light of Japan's surprising negative interest rate decision," said Phillip Futures analyst Daniel Ang.
- Key figures around 0730 GMT -
Tokyo - Nikkei 225: UP 2.0 percent at 17,865.23 (close)
Shanghai - Composite: DOWN 1.8 percent at 2,688.85 (close)
Hong Kong - Hang Seng: DOWN 0.6 percent at 19,565.28
Euro/dollar: UP at $1.0848 from $1.0831 Friday
Dollar/yen: UP at 121.35 yen from 121.12 yen
New York - Dow: UP 2.5 percent at 16,466.30 (close)
London - FTSE 100: UP 2.6 percent at 6,083.79 points (close)