Asia Markets

Asian stocks enjoy Summers rally; Fed meeting in focus

Asian equities outside of Shanghai rose on Monday after Lawrence Summers pulled out of the race to lead the Federal Reserve but trading volumes were thin with Japanese markets shut for a holiday.

Indian stocks gained 1 percent, South Korea's Kospi closed at a six-month high, Australia's S&P ASX 200 ended at a five-year high but the Shanghai Composite was the session's sole loser, down 0.2 percent.

(Read more: Fed meeting will top all events in Asia this week)

Fed in the spotlight

Summers' surprise decision to withdraw his name from consideration for Federal Reserve Chairman bolstered risk appetite as investors largely believed he would take a more hawkish course regarding U.S. stimulus than other candidates. This leaves Fed vice chairman Janet Yellen as the frontrunner for the job. A well-known policy dove, Yellen would be expected to continue Bernanke's easy money policies.

"This news is a massive shot in the arm for markets that have seen a drop off in liquidity as investors position themselves ahead of the FOMC meeting," said Evan Lucas, market strategist at IG in a note.

(Read more: Summers out, can emerging currencies now catch a break?)

U.S. stock futures initially jumped over 1 percent following the news while futures on the 10-year Treasury note climbed over a point, indicating a sharp decline in yields and the dollar hit a two-week low against the yen at 98.53.

The Federal Reserve concludes a two-day policy meeting on Wednesday, when it is expected to reduce its monetary stimulus. The latest Reuters poll showed economists expect the Fed to announce that it will finally cut its bond purchases by $10 billion from the current $85 billion a month.

Fed will go 'taper-lite' this week: Pro

Sydney up 0.5%

Australian equities closed at their highest levels since 2008 while the Australian dollar held onto its three-month high at $0.9369 against the greenback in afternoon trade.

Gold miners led the benchmark index higher with Kingsgate Consolidated and Newcrest Mining higher by over 5 percent each after spot gold rose 0.4 percent after posting its largest weekly loss on Friday in two months.

Retail banks also gained with National Australia Bank higher by 1.7 percent and Macquarie increasing by 2.5 percent.

Seoul rallies 1%

South Korea's benchmark index closed at it highest level since March thanks to the the yen's strength. As the Japanese currency appreciates, the competitive advantage of domestic exporters gets a lift in overseas markets.

Automakers Hyundai Motor and Kia Motors rallied nearly 3 percent each.

Look out for a rally in emerging markets

The nation's largest flag carrier, Korean Air surged 9.2 percent after a report ranked the airline tenth worldwide in terms of ancillary revenue.

Shanghai 0.2% lower

China's benchmark index hoveed around 2,230 points in range-bound trade after notching up gains of 4.5 percent for the week ending Friday.

Financials led the declines with Pudong Development Bank lower by 3.5 percent and China Minsheng Banking down nearly 3 percent.

(Read more: Rush for China plays ill-timed: Goldman)

Airlines, a sector expected to benefit from Shanghai's free-trade zone, reversed last week's gains as investors booked profits. China Eastern Air tanked 5 percent while Air China and Hainan Airlines slumped over 3 percent each.

The index hit a three-month high at 2,270 points last Thursday.

India down 0.3%

India's benchmark index reversed gains to enter negative territory after hitting a one-and-a-half month high in early trade. Meanwhile, the rallied over 1 percent to approach a one-month high of 62.45 per dollar.

— By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC