Shares were mixed in Asia early Tuesday, though strength in Japanese banking stocks and a weaker yen helped boost the Nikkei Stock Average.

The Nikkei was up 0.3%, after closing at its highest level since May on Monday, and building on last week's 3.5% gain.

The yen was recently down 0.4% against the dollar, which remained weak after the release of weaker-than-expected U.S. jobs data on Friday, reducing the likelihood of an imminent interest rate increase by the Federal Reserve. A weaker yen helps boost the competitiveness of Japanese exports.

Meanwhile, banking stocks drove gains on the Nikkei amid expectations that the Bank of Japan may cut back on longer-term bond buying at its next meeting, thus boosting bond yields. Mitsubishi UFJ Financial Group was up 0.6%, Mizuho Financial Group gained 0.8%, and Sumitomo Mitsui Financial Group was trading up 1.9%.

"The Japanese banking sector has been doing very well of late," said Angus Nicholson, a market analyst at IG. "In the lead-up to the BOJ meeting on Sept. 21, there's a lot of speculation that the BOJ is going to do a major recalibration of their [qualitative and quantitative easing] policy."

Japanese banks have been some of the biggest victims of the BOJ's monetary easing and negative rates policy. They claim that their profits were suffering amid very low yields on all government bonds.

In the Philippines, the stock market benchmark PSEi was the region's biggest decliner, falling 0.7%, after U.S. President Barack Obama abruptly canceled a first meeting with Philippine leader Rodrigo Duterte in a rare diplomatic rupture. Analysts point to concerns that rising tensions between the two close allies could impact future trade deals.

The meeting was called off following bombastic comments from the Philippine leader on Monday demanding that their discussion not touch on his approach to human rights and referring to the U.S. leader in Tagalog with an expression widely translated to mean "son of a bitch."

The decline in Philippine stocks came even as data Tuesday showed inflation in the country slowing unexpectedly in August, providing the central bank plenty of scope to keep monetary policy supportive of stronger economic growth.

Elsewhere in the region, markets lacked direction from U.S. indexes as the country's exchanges were closed Monday for the Labor Day holiday. Australia's S&P/ASX 200 was down 0.4%, Hong Kong's Hang Seng Index was up 0.1%, the Shanghai Composite fell 0.4% and the South Korean Kospi was about flat.

Looking ahead, investors will be watching for news from the annual summit of the Association of Southeast Asian Nations, which kicks off Tuesday in Laos and could move stocks in the region.

More broadly, uncertainty on the U.S. interest rate outlook may continue ahead of speeches by Federal Reserve officials, including one by Federal Reserve Bank of San Francisco President John Williams, later this week.

Kosaku Narioka and Takashi Nakamichi contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

 

(END) Dow Jones Newswires

September 05, 2016 23:55 ET (03:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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