Tokyo Stock Exchange, Tokyo
Japanese stocks made early gains on 16 September Reuters

Asian markets traded higher on 16 September following a strong handover from Wall Street overnight. China's benchmark Shanghai Composite edged up 0.2% to 3,009.57 at mid-day after closing 3.5% down on 15 September.

In Tokyo, the Nikkei index was up by 0.4% at 18,102.97 points while Hong Kong's Hang Seng advanced 1% to 21,675.28. US stocks closed 1% higher on Wall Street overnight, after data showed US retail sales increased 0.2% from the previous month in August.

Investors still remained cautious ahead of a highly-anticipated two-day Federal Reserve meeting scheduled to start later in the day, with economists divided on whether the US central bank will raise interest rates for the first time in nearly a decade.

"US data is not exactly supportive for the case of a rate hike this week, but the market seemingly is positioning for one," said Bernard Aw, market analyst at trading firm IG in Singapore. "Futures indicated a higher implied probability of a rate move this Thursday, where the market is pricing in a higher 32%, from 26% last Thursday. The US dollar advanced 0.4% against a basket of major currencies."

Still, "the relatively modest moves in the financial markets suggest that traders are still cautious about their FOMC (Federal Open Market Committee) bets, he added.

Australian shares rise

Australian shares climbed higher, with the S&P/ASX 200 benchmark adding 1.4% to 5,087.60 points. Shares in Woodside Petroleum were up 1.9% after the Sydney Morning Herald reported the company's advisers had pitched an $8bn (£5.2bn; €7.1bn) takeover offer directly to the shareholders of Papua New Guinea's Oil Search on 15 September.

Woodside gas plant, Burrup, Western Australia
Woodside Petroleum is Australia's largest oil and gas company Reuters

The all-share takeover bid was unanimously rejected by Oil Search's board earlier in the week. Woodside chief executive Peter Coleman is also to hold talks with the PNG government, which holds a 10% stake in Oil Search, over tabling an improved offer.

Elsewhere in the region, South Korea's Kospi index jumped 2.1% to 1,978.57 points despite renewed tensions with the North, which announced that its main nuclear facility had resumed normal operations.