Asian markets opened the week on uneven footing as fresh manufacturing data from Japan and China underscored lingering economic fragility across the region. While pockets of resilience emerged in select equity benchmarks, sentiment remained subdued as traders assessed whether the latest factory readings signal deeper softness ahead or simply mark another phase in the region’s stop-start recovery.

Japan’s Persistent Manufacturing Strain Pressures Equities

Japan led regional declines after new data confirmed another month of industrial weakness. The Nikkei 225 dropped 1.9% to 49,285.66 following a disappointing survey showing that corporate investment softened and factory activity contracted for a fifth consecutive month.

The country’s PMI rose marginally to 48.7 from 48.2, but remained firmly below the 50-point threshold separating growth from contraction. Economists at S&P Global noted that sluggish domestic and external demand continues to suppress new orders, reinforcing concerns about the durability of Japan’s industrial base heading into 2026. Investors are increasingly cautious about whether improving export conditions will be sufficient to offset weakening internal momentum.

The yen’s modest firming against the U.S. dollar—moving to 155.57 per dollar—offered little comfort, as currency dynamics continue to reflect broader uncertainty over the Bank of Japan’s policy path and the global rate environment.

China’s Factory Sector Extends Its Downward Trend

China’s manufacturing sector remained under pressure, logging an eighth consecutive month of contraction in its latest official PMI. The data highlighted persistent structural challenges facing Chinese industry despite pockets of optimism around improving trade flows.

Even so, investor reaction was mixed. The Shanghai Composite added 0.4% to 3,904.90, while Hong Kong’s Hang Seng rose 0.8%, lifted by gains in select technology and financial names. Market analysts suggested that bargain-hunting and expectations of further policy support from Beijing helped offset concerns triggered by weaker factory activity.

Still, the persistent PMI downturn signals that China’s recovery remains uneven, and that policymakers may need to deepen targeted stimulus to shore up industrial momentum.

Regional Equity Moves Reflect Cautious Sentiment

Across the broader Asia-Pacific region, markets traded without a clear direction. South Korea’s Kospi was nearly unchanged at 3,926.20, while Australia’s S&P/ASX 200 slipped 0.3% amid continued softness in local manufacturing indicators. Taiwan’s Taiex declined 0.5%, weighed down by cyclical tech names, whereas India’s Sensex gained 0.3% on the back of strong domestic demand and ongoing inflows into financials.

Analysts at Capital Economics noted that while factory output across Asia remains soft, exports have shown tentative signs of re-acceleration—an early indication that global demand may be stabilizing after a challenging year for trade-sensitive economies.

Oil and Currency Markets Add to the Cautious Backdrop

Oil prices strengthened early Monday, with both U.S. crude and Brent gaining $1.05 per barrel. The advance followed expectations of firmer demand heading into winter and ongoing geopolitical uncertainties.

The euro edged slightly higher to $1.1602, while regional currency moves versus the dollar were largely muted, reflecting a generally risk-neutral backdrop in global markets.

As traders look ahead, the interplay between regional manufacturing softness, global demand signals, and currency stability will shape sentiment. With several economies showing signs of strain, markets may remain sensitive to incremental data shifts and policy commentary over the coming weeks.