Asian stocks started a new month on a cautious note on Monday, with the Bank of Japan's surprise policy easing sparking some buying but further signs of economic weakness in China and a fall in oil prices keeping investors on guard.
The greenback continued to benefit from the growing monetary policy divergence between the U.S. and its counterparts in Europe and Asia while bonds, especially investment grade debt, received a boost after Japan's surprise decision to introduce negative interest rates last week.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) edged up 0.2 percent, after losing 8 percent in January.
Australia (AXJO) and Japan (N225) leading regional markets with gains of more than 1 percent each, while Chinese stocks <.SSEC> (CSI300) slipped in early trade.
"In the short term, the surprise move by Japan will be a catalyst for global equities but it only underlines the weakness of the global economy and we need to see some strong economics data for a sustainable rally," said Cliff Tan, head of global markets research with Bank of Tokyo-Mitsubishi UFJ.
Monday's batch of economic data from China added to worries about the health of the world's second-largest economy and only increased calls for more policy easing from China.
Activity in China's manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing market expectations, while growth in the services sector slowed, official surveys showed on Monday.
"As deflationary pressures remain high, further reserve requirement cuts are still needed to support the slowing economy and permanently inject liquidity into the market," ANZ strategists wrote in a note. They expect a total of 200 basis points of cuts this year with a 50 basis points cut coming in the first quarter.
