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Asian stocks lower as investors watch US talks; Nikkei outperforms

Asian stocks fell on Thursday as investors were cautious of President Obama's latest efforts to resolve Washington's political impasse but Japan bucked the trend thanks to positive economic data.

"Everyone is trying to remain optimistic about the U.S. budget impasse and until that's restored it's hard to move forward," said Kelly Teoh, market strategist at trading firm IG, in Singapore.

Japan's outperformed to hit a one-week high while Australia's , South Korea's Kospi and Indian stocks were all modestly lower. The Shanghai Composite however, led losses by over 1 percent.

Asia-Pacific Market Indexes Chart

What's moving markets

President Obama launched a series of meetings with lawmakers at the White House on Wednesday in hopes of reaching a short-term increase in the debt limit to allow time for broader budget negotiations.

(Read more: Are investors ignoring much bigger global risks?)

IMF: US needs to control systemic risks

Meanwhile, minutes from the Fed's latest meeting in September showed that the central bank's decision not to scale back its bond-buying program was a "relatively close call" for policymakers.

The official nomination of Fed Vice Chairman Janet Yellen to replace Ben Bernanke as the next U.S. central bank chief underpinned equity market gains. Yellen is widely perceived as a dove on monetary policy, which means she is unlikely to be in a rush to scale back the Fed's bond-buying program that has helped support the U.S. economy in recent years.

(Read more: Remember the earnings season?)

Nikkei 1.1% higher

Japan's benchmark index extended its winning steak into a third session on the back of positive economic data and as the yen moved further away from this week's two-month high against the dollar.

Core machinery orders for August surged over 5 percent from July, topping Reuters estimates for a 2 percent gain. The data, a key indicator of capital spending, is a sign that government stimulus is slowly filtering through to corporates.

Industrial exporters gained across the board on the news. Mazda Motor, Nissan Motor and battery maker GS Yuasa jumped over 2 percent each.

Shanghai down 1%

China's benchmark index posted its first loss in five sessions thanks to steep declines among brokerages.

Haitong Securities led losses by 5.4 percent while Citic lost nearly 4 percent on fears of competition from e-commerce giant Alibaba, after one of its affiliates firms made a move into online financial services.

Mainland investors were cautious ahead of a batch of economic data next week, including September loan growth, trade data, inflation and third-quarter GDP.

(Read more: China will get old well before it gets rich)

HSBC: Defensive stocks priced for castastrophe

Shares related to the city of Tianjin extended the week's strong gains on speculation that the port city may obtain approval for a free-trade zone. Real-estate developer Tianjin Jinbin surged 10 percent while cargo shipper Tianjin Marine Shipping added nearly 6 percent.

Sydney eases 0.1%

Australia's benchmark index pared losses on the back of September's jobs report, a key factor in the Reserve Bank of Australia's policy decisions. The nation's unemployment rate came in better-than-expected at 5.6 percent but only 9,100 jobs were created, missing estimates for a 15,000 gain.

"While employment growth is weak, the report is consistent with the RBA remaining on hold with respect to interest rates. Jobs growth is probably no weaker than the RBA had been allowing for, the labor market is a lagging indicator of economic conditions and will be the last to turn around," said Shane Oliver, head of investment strategy and chief economist at AMP Capital in a note.

Miners weighed after copper prices hovered near a three-week low and as spot gold approached $1,300, extending Wednesday's 1 percent decline. Atlas Iron shed nearly 4 percent while Kingsgate Consolidated declined 3 percent.

(Read more: Gold bull: 20% rallycoming for bullion)

The nation's sixth largest bank, Bank of Queensland ended 7 percent higher after swinging to a profit for the twelve months to the end of August, after recording a loss the year before.

Seoul flat

South Korea's benchmark index ended just below the flatline after the Bank of Korea left its base rate steady for a fifth straight month at its October policy meeting, as widely expected.

Blue-chip automakers led the gains with Hyundai Motor higher by nearly 3 percent while Kia Motors tacked on 1.6 percent.

The index played catch-up with the region after being shut on Wednesday for a public holiday.

India choppy

India's benchmark index bounced between gains and losses after climbing to a new three-week high above the 20,280 mark in early trade. Investors are awaiting industrial output data, due on Friday for further trading cues.

By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC