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Asian stocks mixed as US deadline nears; Shanghai outperforms

Asian stocks were mixed on Monday after the latest U.S. budget talks failed to produce a solution to the budget impasse while Shanghai outperformed on the back of a strong inflation report.

Amid gainers, the Shanghai Composite added 0.4 percent and Indian stocks closed near a 1-month high. But Australia's and South Korea's Kospi were modestly lower.

Japan and Hong Kong are shut for public holidays. U.S bond markets will also be closed for 'Columbus Day.'

(Read more: Asia still at risk from quantitative easing: Nomura)

Asia-Pacific Market Indexes Chart

US debt talks continue

Dow futures dropped 100 points as the U.S. government shutdown ended day 13. On Sunday, Senate leader Harry Reid said he had a "productive conversation" with Senate Republican leader Mitch McConnell on reaching a short-term debt ceiling incresae.

(Read more: Senate leaders talk; GOP blames Obama for gridlock)

Lagarde: US shutdown is 'very, very concerning'

The move follows President Obama's Friday rejection of a proposal by House Republicans for a short-term increase of the ceiling until November 22nd.

"It is so counter-intuitive to say this but I do think the USD will rally in the event of a default. Yields will spike up across the whole U.S. yield curve and that will attract investor interest," said Jeff Halley, Senior Manager FX Trading, Saxo Capital Markets.

Shanghai 0.4% higher

China's benchmark index extended gains after climbing 2.5 percent for the week ending Friday after annual consumer inflation rose to a seven-month high in September.

"Employment is fairly stable and domestic consumption is still going to trend higher so those two factors forgive some of the ills in China's economy at the moment," said Lorraine Tan, director of equity Research at S&P Capital IQ.

Meanwhile, producer prices fell an annual 1.3 percent, close to expectations for a 1.4 percent decline. The data follows September's surprise 0.3 percent drop in exports over the weekend.

Railway stocks led the gains after Premier Li Keqiang opened a Chinese high-speed rail exhibit in Thailand, aimed at introducing Chinese rail technology to the Thai public. China Railway Group and CSR Corp climbed 10 percent each.

India up 0.4%

Agriculture a bright spot in India's economy

India's benchmark index closed near a 1-month high above the 20,600 mark after headline inflation hit a seven-month high in September.

Sydney slips 0.4%

Australian investors took their trading cues from weak Chinese export data since the mainland is Sydney's top trading partner.

Gold miners were dealt a blow after spot gold hovered near a three-month low. Newcrest Mining and Evolution Mining both fell 4 percent while Alacer Gold tumbled nearly 6 percent

Oz Minerals tanked over 9 percent after the copper miner cut its 2013 copper production target for the second time this year.

Seoul eases 0.2%

South Korea's benchmark index traded in a narrow 27-point range, hovering near Friday's six-month high of 2,028 points.

Nuclear stocks suffered after the Energy Ministry published a study that urged Seoul to reduce its reliance on nuclear power. Kepco slumped 15 percent while Doosan Heavy Industries lost over 6 percent.

By's Nyshka Chandran. Follow her on Twitter