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Asian stock markets : https://tmsnrt.rs/2zpUAr4

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Nikkei dives as markets ponder risk of higher rates

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China set to lower mortgage rates in stimulus rush

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Fed's Powell to speak ahead of payrolls test

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Oil prices subdued by supply despite Mideast strife

By Wayne Cole

SYDNEY, Sept 30 (Reuters) - Asia share markets were

mostly firmer on Monday as China announced more stimulus

measures, though the Nikkei dived on concerns Japan's new prime

minister favoured normalising interest rates.

Continued Israeli strikes across Lebanon added geopolitical

uncertainty to the mix, though oil prices were still weighed

down by the risk of increased supply.

The week is packed with major U.S. economic data including a

payrolls report that could decide whether the Federal Reserve

delivers another outsized rate cut in November.

The Nikkei led the early action with a dive of 4.0%

as investors anxiously waited for more direction from new Prime

Minister Shigeru Ishiba, who has been critical of the Bank of

Japan's easy policies in the past.

However, he sounded more conciliatory over the weekend

saying monetary policy "must remain accommodative" given the

state of the economy.

That helped the dollar bounce 0.5% to 142.85 yen,

after sliding 1.8% on Friday from a 146.49 top.

"Ishiba has endorsed the BoJ's intention to normalise

monetary policy, albeit leaving it uncertain as to the pace and

timing," said HSBC economist Jun Takazawa.

"If additional stimulus measures are realised, this would

also likely buttress the recovering trend in spending, thereby

strengthening the BoJ's conviction to raise interest rates at a

gradual pace," he added. "All in all, we continue to see a

constructive outlook for Japan."

Over in China, the central bank said it would tell banks to

lower mortgage rates for existing home loans by the end of

October, likely by 50 basis points on average.

That follows a barrage of monetary, fiscal and liquidity

support measures announced last week in Beijing's biggest

stimulus package since the pandemic.

"We believe deflation risks are now being taken more

seriously," said Christian Keller, head of economic research at

Barclays. "At the same time, the Politburo suggests a consensus

has likely been reached in Beijing that fiscal stimulus and

central government leverage are necessary to arrest the

downturn."

"This is an important shift in a market that was looking for

more than just the bare minimum."

WALL ST ON A ROLL

The blue-chip CSI300 and Shanghai Composite

indexes gained roughly 16% and 13%, respectively, last

week. Hong Kong's Hang Seng index jumped 13%.

On Monday, MSCI's broadest index of Asia-Pacific shares

outside Japan firmed 0.2%, having surged 6.1%

last week to a seven-month high.

Wall Street also had a rousing week helped by a benign

reading on core U.S. inflation on Friday that left the door open

to another half-point rate cut from the Fed.

Futures imply around a 53% chance the Fed will ease

by 50 basis points on Nov. 7, though the presidential election

two days earlier remains a major unknown.

A host of Fed speakers will have their say this week, led by

Chair Jerome Powell later on Monday. Also due are data on job

openings and private hiring, along with ISM surveys on

manufacturing and services.

S&P 500 futures were up 0.1% on Monday, while Nasdaq

futures added 0.2%. The S&P 500 index is up 20%

year-to-date and on track for its strongest January-September

performance since 1997.

In currency markets, the dollar index was flat at 100.41

after easing 0.3% last week. The euro stood at $1.1169

, having bounced on Friday in the wake of the benign

U.S. inflation report.

The euro zone releases its inflation figures this week,

along with producer prices and unemployment. German inflation

and retail sales are due later on Monday, while European Central

Bank President Christine Lagarde speaks to parliament.

A softer dollar combined with lower bond yields to help gold

reach record highs at $2,685 an ounce. It was last at $2,664 an

ounce, and on track for its best quarter since 2016.

Oil prices were erratic as concerns about possible increased

supply from Saudi Arabia countered tensions in the Middle East.

Brent fell 1 cent to $71.86 a barrel, while U.S.

crude rose 3 cents to $68.21 per barrel.