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Asian stocks climb on US deal hopes but Shanghai slips

Asian equity markets outside of China rose on Tuesday after U.S. lawmakers hinted at the possibility that a bipartisan U.S. budget deal could be announced soon.

Among outperformers, Australia's hit a new two-week high and South Korea's Kospi rose to a ten-month high. Japan's Nikkei closed just below a two-week high but the Shanghai Composite dipped 0.2 percent and Indian stocks were flat.

Markets in Singapore, Malaysia, Indonesia and Philippines are shut for public holidays.

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Asia-Pacific Market Indexes Chart

US debt deal?

Details of a possible U.S. budget deal emerged after Senate majority leader Harry Reid ended talks with his Republican counterpart Mitch McConnell late on Monday and said a short-term funding deal could be announced on Tuesday.

The deal would end the ongoing government shutdown and raise the debt ceiling by just enough to cover the nation's borrowing needs through mid-February 2014, according to a Reuters report.

(Read more: Damage unfolds as default deadline clock ticks)

House Majority Leader Eric Cantor said that Republican lawmakers will hold a closed-door meeting on Tuesday "to discuss a way forward, so stayed tuned."

What's in this potential deal?

Nikkei 0.2% higher

Japanese shares resumed trade on a positive note after a long weekend as a weaker currency underpinned sentiment.

Blue-chip exporters gained across the board as the yen fell to a new two-week low at 98.69 per dollar. Consumer electronic firms Sony rose 1 percent while Panasonic added 0.6 percent.

Fuji Heavy Industries rose 0.7 percent following a report in the Nikkei newspaper that the automaker posted a 250 percent annual rise in group operating profit for the April-September quarter.

Shanghai slips 0.2%

Mainland markets were unable to track Asia-wide optimism as investors were cautious ahead of this week's third-quarter growth-domestic product (GDP) report.

Railway stocks fell on profit taking after rising by the daily trading limit of 10 percent in the previous session. China Railway Group and China Railway Construction fell 4.7 and 3 percent, respectively.

Meanwhile, banks reacted negatively to data on Monday showing that September money-supply growth came in line with Reuters estimates while bank new loans beat forecasts. ICBC, China Construction Bank and Bank of China fell over 1 percent each.

Sydney up 1%

Australia's benchmark index crossed the 5,260 mark to hit its highest levels since September 30 thanks to sold gains in miners.

Rio Tinto jumped 2.5 percent after announcing third-quarter global iron ore shipments rose 4 percent while Fortescue Metals rose nearly 6 percent on the news.

Minutes from the latest policy meeting showed that the Reserve Bank of Australia (RBA) left its easing bias intact but indicated no urgency to act due to existing stimulus in place. The RBA also noted signs of increasing appetite among house investors but said labor market conditions remain weak.

Kospi rises 1%

Continued foreign buying supported Seoul's share market after data on Monday showed offshore buying extended to a 32nd consecutive session.

Large-cap stocks led gains with Samsung Electronics 1.3 percent higher and automaker Kia Motors up 1.6 percent.

The index climbed above 2,030 points to hit its highest level since January 3.

India flat

India's benchmark index moved off the previous session's one-month high while the strengthened 0.3 percent to 61.3 per dollar.

By's Nyshka Chandran. Follow her on Twitter