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Asian stocks closed mostly higher; Chinese markets jump 3%

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Asian markets were mostly higher on Tuesday, with Chinese mainland markets up more than 2 percent and Japan shares rising after better-than-expected economic data.

Chinese mainland markets soared on Tuesday, with the Shanghai Composite closed up 3.32 percent, or 93.7 points at 2,916.49 and the Shenzhen composite closed 4.091 percent higher, or 73.585 points at 1,872.359. In Hong Kong, the Hang Seng index was 1.2 percent higher at 3:22 p.m. HK/SIN time.

China shares may be getting a fillip from a Goldman Sachs report released Tuesday, which raises its probability estimate from 50 percent to 70 percent for A-share inclusion in the MSCI indexes. The MSCI will announce the results of its Annual Market Classification Review on June 15, which may see the A-share market included in the index.

There is also speculation that China's "National Team" might be behind the rallying of brokerage stocks which are giving mainland markets a boost, according to a Dow Jones report. Among brokerages, Hong Kong-listed Citic Securities was up 3.29 percent and mainland-listed Huatai Securities added 8.12 percent.

Futures for the China market index CSI 300 spiked lower intraday, dropping as low as 2,732.4 from 3,127, before recovering almost immediately to levels above 3,131 without any clear trigger.It did not affect that underlying index, which was up 3.35 percent, leading to speculation that the futures' move might be due to a "fat finger" error, or a misentered trade.

The Nikkei 225 closed up 0.98 percent, or 166.96 points at 17,234.98, while in South Korea, the Kospi ended the session up 0.83 percent, or 16.27 points at 1,983.4.

Australia's ASX 200 closed down 0.54 percent, or 29.417 points at 5,378.6, weighed by its energy subindex, which shed 1.45 percent, but that follows a 5.6 percent gain over the past four sessions.

Asia-Pacific Market Indexes Chart

Japan's industrial output in April saw a 0.3 percent increase from March, beating expectations for a 1.5 percent fall. The better-than-expected data suggested that production was holding up despite weaker exports and impact from the Kumamoto earthquakes, Reuters reported.

Japan's April household spending fell 0.4 percent year-on-year, the second month of declines, but still came in better than expected, while unemployment rate held steady at 3.2 percent.

After the data, the U.S. dollar/ Japanese yen pair fell as low as 110.77 from levels around 111 before the data. But it recovered to trade at 111.26 at 02:31 p.m. SIN/HK. A weaker yen is generally seen as a positive for Japanese stocks.

South Korea's Samsung Heavy stocks jumped 7.55 percent after it announced that Templeton Asset Management increased its stake to 5.13 percent in the shipbuilder. The news was welcomed by investors as South Korea's "Big Three" shipbuilders, which include Samsung Heavy, have been struggling with a build-up of debt in recent times due to slowing global trade, a vessel glut and low freight rates.

Shares of LG Electronics were up 0.72 percent. Daiwa Capital Markets initiated coverage of the stock at "Outperform," saying the company, a consumer electronics giant, will see strong earnings growth driven by its "market-leader status in OLED TVs" as well as its appliance and vehicle-components businesses.

Virgin Australia shares surged 7.14 percent after it announced on Tuesday that China's HNA Aviation would buy a 13 percent stake in the Australian airline for A$159 million ($114 million). The Australia-China airline alliance is to capitalize on the growing tourism market between the two countries, Reuters reported.

The Australian Bureau of Statistics released data showing Australia's first-quarter current account deficit was A$20.8 billion, compared with Reuters forecasts of the deficit at A$19.5 billion.

The Australian dollar strengthened against the greenback to $0.7241 as of 2:34 p.m. HK/SIN.

South Korea saw industrial activity in April slow by 1.3 percent on-month, the second straight month of declines, coming in worse than a Reuters forecast for a 0.2 percent decline. The service sector output rose by 0.5 percent in the same period.

Meanwhile, the dollar, which had firmed on the back of Federal Reserve rate hike expectations, lost steam on Tuesday, trading against a basket of currencies at 95.731, after climbing as high as 95.968 in Monday's session.

Brent crude futures were trading at $49.73 a barrel, down from the settlement price at $49.76 a barrel. Nymex crude had no settlement but it traded at $49.66 a barrel, up 34 cents at 2:35 p.m. HK/SIN time. U.S. were shut on Monday for the Memorial Day holiday.

An OPEC meeting this week will likely be closely watched, Mizhuo said in a morning note.

"The likelihood of a deal to freeze production is rather slim in our opinion," Mizuho said. "Ahead of the meeting, Iraq announced that it will increase exports in June. Meanwhile, a number of OPEC members are also planning to increase supply in coming months. This means that global supply will remain flush overall despite recent production disruption in Venezuela and Nigeria."

CNBC's Nyshka Chandran and Reuters contributed to this report

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