Asia mixed with China, Japan leading gains; Emerging markets slump

Asian stocks kicked off the week on a mixed note with China and Japan leading gains but pessimism over Wall Street's losing streak and rising U.S. yields weighed on sentiment.

Japan's Nikkei and the Shanghai Composite rose 0.8 percent each while Australian equities ended flat and South Korea's Kospi dipped 0.1 percent.

Emerging markets were under pressure with Indonesia's Jakarta Composite tumbling as much as 5.6 percent while its currency hit a four-year low thanks to a widening current account deficit for the second quarter. Elsewhere, India's rupee hit record lows against the greenback.

(Read more: Emerging market taper terror 'quite overdone': Mobius)

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Dow's worst week of 2013

A weak U.S. handover late last week was largely to blame for weak sentiment in Asia. Stocks extended their losses for a third-straight session on Friday with the Dow Jones Industrial Average posting its worst week of the year as worries mount about the Federal Reserve's policy outlook.

(Read more: September or December taper – does it really matter?)

Nikkei increases 0.8%

Japan's benchmark index reversed earlier losses in choppy trade after the yen resumed its decline against the greenback but weak economic data capped gains.

The nation's monthly trade deficit came in wider-than-expected for a thirteenth straight month, largely due to rising import costs as a result of the weak yen and cast some doubt on Prime Minister Shinzo Abe's economic policies, known as "Abenomics."

However, experts warned that investors must be patient. "It takes up to a year between currency depreciation and what happens with exports and imports," said Lim Say Boon, CIO of DBS Group Wealth Management.

Exporter stocks were mixed with index heavyweight Softbank up 2.4 percent while watch manufacturer Citizen Holdings fell 3 percent and Suzuki Motor lost 1 percent. Kawasaki Heavy jumped 2 percent after the Nikkei reported that it will be teaming up with Rolls-Royce to develop an aircraft engine.

Shanghai up 0.8%

China's benchmark index climbed above 2,080 points as sentiment in the mainland rose following last week's trading error at Everbright Securities that caused a spike of over 5 percent in domestic indices.

(Read more: That 6% rally in China? Blame a trading goof)

Real estate developers were mixed after average new home prices rose at a slower pace in June than the previous month. Gemdale lost 3 percent while Vanke reversed losses to add 0.7 percent.

"We think the market speculation on easing in housing policies is overplayed. The new administration could have different views on the framework of housing policies, but restoring housing affordability remains a key policy objective in our view. In the near term, the likelihood of further property tightening is very small given the soft economic condition," wrote analysts at J.P. Morgan in a research note.

Sydney flat

Australia's benchmark index was rangebound in cautious trade as investors digested the latest corporate earnings but support from gold miners boosted sentiment.

Kingsgate Consolidated rallied 17 percent and Perseus Mining jumped 13 percent after gold prices hit a fresh two-month high.

The nation's largest steelmaker, BlueScope Steel plummeted 15 percent after posting a full-year net loss of $84 million and warning that uncertainty over domestic demand would lead to further downside for the first half of 2014.

(Watch now: BlueScope Steel on the road to recovery)

Blue-chip stocks Commonwealth Bank of Australia and Telstra fell 3 percent each as they traded ex-dividend.

Kospi slips 0.1%

South Korea's benchmark index was dragged down by a 0.8 percent fall in Samsung Electronics and other key exporter stocks. Market sentiment fell following declines in global markets last week and as investors await further catalysts to lift risk appetite.

Hyundai Motor lost nearly 1 percent on news that its workers voted to strike following failed wage talks with management.

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