China stocks just saw their best day of trading since 2008 amid a stimulus rally

Stocks in mainland China surged over 8% for its best day in 16 years while Japan's Nikkei 225 tumbled 4.8% on Monday as investors assessed key economic data from the two countries.

Mainland China's CSI 300 rallied 8.48%, powered by health-care and tech stocks and closing at 4,017.85. This marks a nine-day winning streak, its best day since September 2008 and its highest point since August 2023.

China's official purchasing managers' index reading for September came in at 49.8, better than the 49.5 expected by economists polled by Reuters. However, this marked a fifth straight month of contraction for the manufacturing sector in China.

The Caixin PMI survey, which is a private survey compiled by S&P Global, reported that the manufacturing PMI fell to 49.3 from 50.4 in September, lower than the 50.5 expected from the Reuters poll.

The Caixin survey also marked the fastest decline in the manufacturing in 14 months.

Hong Kong's Hang Seng index rose 3.09% as of its final hour, powered by consumer stocks. The Hang Seng Mainland Properties Index soared 8.11%.

Markets on the mainland will only be trading on Monday, before closing for the rest of the week due to the Golden Week holiday.

In Japan, the Nikkei closed at 37,919.55, led by losses in real estate stocks, while the largest loser on the index was department store holding company Isetan Mitsukoshi Holdings, down 10.64%. The broad-based Topix fell 3.47% and ended at 2,645.94.

Industrial production in the country dropped 4.9% year on year in August, more than the 0.4% fall in the month before.

On a month-on-month basis, industrial production dropped 3.3%, a sharper decline than the 0.9% expected in a Reuters poll and compared with the 3.1% rise in July

The Japanese yen weakened 0.13% against the dollar, trading at 142.38.

Japan's August retail sales climbed 2.8% year on year, beating Reuters poll estimates of a 2.3% rise, and up from a revised 2.7% rise in July.

The moves in Japanese markets come as investors digest Shigeru Ishiba's victory in the Liberal Democratic Party elections last Friday. He will succeed Fumio Kishida as Japan's prime minister.

Australia's S&P/ASX 200 climbed 0.7%, reaching an all-time closing high of 8,269.8.

South Korea's Kospi fell 2.13% to 2,593.27, and the small-cap Kosdaq slipped 1.37% and closed at 763.88.

Overnight in the U.S., the Dow Jones Industrial Average rose to a new high on Friday as traders assessed fresh data that showed to more progress on reining in inflation.

The 30-stock Dow added 0.33%, ending at 42,313.00. The S&P 500 ticked down 0.13%, while the Nasdaq Composite lost 0.39%.

This comes as traders assess encouraging August inflation data, which saw the personal consumption expenditures price index — the Federal Reserve's favored measure of inflation — increasing 0.1%, matching expectations from economists polled by Dow Jones. 

PCE climbed at an annualized pace of 2.2%, below the 2.3% forecast.

—CNBC's Brian Evans and Pia Singh contributed to this report.