Asian markets trimmed their early gains on Monday as investors took a breather following a rally in financial stocks. But many remained optimistic that the banking sector may finally be putting the credit crunch behind it. Energy shares were mixed despite record crude prices. U.S. light sweet crude touched a new record on Monday at $119.93 on supply fears.
Investors were focused on the U.S. Federal Reserve meeting this week with many debating whether an interest rate cut will be delivered. Expectations for a half-point cut were erased on April 18, when stocks staged a sharp rally after strong earnings from Google and Caterpillar. While the majority of bets are for a 25 basis-point cut, there is still a 1-in-4 chance of no rate cut, based on fed funds futures.
Japan's Nikkei 225 Average closed 0.2 percent higher , after briefly crossing the 14,000 mark for the first time in two months, while the broader Topix Index advanced 1.6 percent to end at 1,361.75 points. Japanese banking shares like Mitsubishi UFJ Financial and Sumitomo Mitsui Financial rallied as much as 10 percent on Monday, while exporters like Hitachi received a boost from the weaker yen.
Sanyo Electric surged as much as 9 percent upon resumption of trade on media reports it may form a capital tie-up with the maker of the Panasonic label, Matsushita Electric Industrial. Although both firms rejected the report, investors still snapped up both stocks. Sanyo shares closed 6.7 percent higher while Matsushita was up 0.7 percent.
On the earnings front, Elpida Memory slid 3.9 percent after the chipmaker posted a 29 percent quarterly loss on Friday, in line with analyst estimates. But Kyocera jumped 6 percent, the highest intraday level since Dec. 28, after the ceramic maker's better-than-expected earnings forecasts eased investors' worries over its outlook. Honda Motor drove higher despite a sharp decline in quarterly profit while NTT DoCoMo shares slipped 3.8 percent at the finish line, as its profit forecast fell short of expectations.
South Korea's KOSPI slipped into negative territory in the afternoon session, to close lower by a marginal 1.5 points at 1,823.17. A plunge in shares of Hynix Semiconductor led the fallout. The stock tumbled more than 5.1 percent on concerns over a prolonged memory chip glut while rival Samsung Electronics hit a two-year high on a strong earnings outlook.
Separately, shares in broadband provider hanarotelecom and Ssangyong Motor both fell on disappointing earnings.
Hong Kong's Hang Seng Index closed up 0.6 percent higher. Financials were also the star performers there, with Wing Lung Bank up 2.4 percent and HSBC gaining more than 1 percent.
China Construction Bank, the country's second-biggest lender by assets, climbed 2.2 percent as investors cheered its first quarter earnings of $4.6 billion. But China Life Insurance, fell 1.6 percent to HK$33.25 after the company reported a 61 percent fall in first-quarter profits.
The insurer's weak earnings led to a decline in the broader Chinese market. The Shanghai Composite Index skidded 2.3 percent to 3,474 points on worries over weak corporate earnings.
Sinopec dropped more than 3 percent as the refiner posted a 69 percent fall in first-quarter net profit.
Singapore's Straits Times Index rose 0.5 percent above the 3,200 mark. Investors were pleased that CapitaLand had decided to drop plans to buy a 10 percent stake in Russia-based Eurasia Logistics due to market conditions.
Australia's Benchmark S&P/ASX 200 gave up its morning gains to close just 0.3 percent higher in the afternoon session at 5,602 points after returning from the Anzac Day long-weekend. Financials continued to advance, with Macquarie Group jumping 5.7 percent at the close.
Retailer Wesfarmers jumped as much as 6 percent in the session but closed 1.9 percent higher, after it sold new shares to raise A$2.6 billion (US$2.4 billion) while insurer IAG fell 2 percent after it lowered its insurance premium forecast.
Shares of Qantas Airways took off after the airline said fundamentals looked strong and that it was optimistic of meeting guidance for pretax earnings to be up at least 40% for the 2008 financial year. Qantas also said it would suspend its share buyback program and is raising fares to offset rising price of jet fuel. The carrier's shares advanced 1.2 percent on Monday.