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Asian stocks enjoy 1% rally on optimism after White House talks

Asian equity markets enjoyed a relief rally on Friday, tracking Wall Street's strong performance on optimism that U.S. lawmakers would soon reach a deal to avert a debt default.

Japan's Nikkei, the Shanghai Composite, Australia's , South Korea's Kospi and Indian stocks all bounced over 1 percent each.

"Asian markets are acting like we have already seen agreement on extending the debt ceiling through to November 22. However, it almost seems as if they are also assuming an end to the shutdown could also be worked into an agreement," said Chris Weston, market strategist at IG.

(Read more: Why it's 'incredibly treacherous' to trade right now)

Asia Marketwrap 131011 Chart

LastToday's % Change1 Week % ChangeMTD % ChangeYTD % Change
Shanghai Composite2228.14,1.70%2.46%-0.44%-1.81%
S&P ASX 200,5230.9,1.63%0.44%0.57%12.52%

White House talks in focus

Media reports on Friday that President Obama had rejected a Republican proposal to a short-term debt limit plan led to an initial sell-off in U.S. stock futures, which then reversed losses after Republicans said the president did not reject the plan.

Hoping to have government open Monday: Rep. Jenkins

Following the meeting, Rep. and Vice Chair of the House Republican Conference Lynn Jenkins, said, "Opening the government is a negotiation that will happen tonight [Thursday night] and in the hours ahead, we hope to have it open by Monday night."

(Read more: No deal yet: White House)

Hopes of an end to the political stalemate saw Wall Street rally more than 2 percent overnight. The Dow catapulted 323 points while the CBOE Volatility Index (VIX), considered the best gauge of fear in the market, tumbled to 16.29 after hitting a seven-week high of 21 this week.

Nikkei 1.5% higher

Japanese traders took their cues from a weaker currency after dollar-yen climbed above the 98 handle, rebounding from a two-month low hit this week.

The index hit its highest level since October 2 thanks to strong gains in blue-chip exporters. A depreciating currency boosts their competitive advantage in overseas markets. Camera maker Nikon and robotics maker Fanuc rose over 4 percent each.

But index heavyweight Fast Retailing, owner of the Uniqlo clothing chain, shed over 3 percent after its full-year operating profit came in below its target.

(Watch now: Japan official: Economy needs corporate tax cuts)

Shanghai adds 1.7%

China's benchmark index hit a new two-and-a-half week high in afternoon trade after Premier Li Keqing hinted of a positive third-quarter GDP report, due October 18.

Sentiment also rose on news that Beijing has launched a currency swap deal with the euro zone in the country's latest push to transform the yuan into a major world currency.

Pro: News headlines are making trade 'treacherous'

Stocks related to the Shanghai free-trade zone rallied. Shanghai Lujiazui Finance rose by the maximum trading limit of 10 percent on news it has entered an agreement to develop an internet-based financial services platform.

Automakers surged after data showed vehicle sales in China rose an annual 19.7 percent in September, better than August's 10.3 percent annual rise. Changan Auto led gains by 10 percent while SAIC Motor rose 4 percent.

(Read more: China's exports mayhave stalled in September)

Sydney up 1.6%

A strong financial sector underpinned gains in Australia's share market.

Westpac climbed 2.5 percent after agreeing to buy Lloyds Banking Group's Australian assets for $1.3 billion. Australia New Zealand Banking and National Australia Bank also rose over 2 percent on the news.

The resource-heavy index also benefited from modestly higher copper prices. Miners Atlas Iron jumped nearly 4 percent while Rio Tinto ended 2.3 percent higher.

Seoul up 1.2%

South Korea's benchmark index rose on continued foreign buying. Foreigners, the main driver of Seoul's market, extended buying for a 30th consecutive session on Thursday.

Tech heavyweights Samsung Electronics and LG Electronics rallied 1 and 2 percent, respectively.

India climbs 1.26%

India's benchmark index tracked Asia-wide gains, rising above the 20,500 mark to hit a new three-week high for a second consecutive session.

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