Stocks in Hong Kong soared nearly 4% on Wednesday afternoon trade following reports that a controversial extradition bill is set to be withdrawn.
By the market close, the Hang Seng index had jumped 3.9% to 26,523.23, paring some gains after surging as high as more than 4% earlier.
Hong Kong leader Carrie Lam will reportedly announce the withdrawal of a contentious extradition bill that has sparked months of mass protests and dampened investor sentiment. Its full withdrawal is one of five demands that protesters have been fighting for.
According to the South China Morning Post and other local media reports, Lam is due to make the announcement on Wednesday. CNBC sources confirmed that Lam will be calling for an urgent meeting with pro-Beijing supporters on Wednesday, but the agenda has not been confirmed.
Shares of companies that have come under the spotlight amid the turmoil in Hong Kong also skyrocketed following those reports.
Railway operator MTR, which has been hit by disruptions in its operations and damage to its infrastructure, jumped 6.4%. Embattled airliner Cathay Pacific also saw its shares surge 7.21%, with the firm's CEO stepping down in mid-August amid heavy political pressure from Beijing after one of its pilots was found to have taken part in the ongoing protests in Hong Kong.
Mainland Chinese stocks also saw gains on the day, with the Shanghai composite rising 0.93% to about 2,957.41 while the the Shenzhen component added 0.69% to 9,700.32. The Shenzhen composite also advanced 0.667% to approximately 1,636.40.
The Caixin/Markit Services Purchasing Managers' Index came in at 52.1 in August, its highest since May. The 50-mark in PMI readings separates growth and contraction. Official data for August released over the weekend showed services sector activity picking up for the first time in five months in August.
The S&P/ASX 200 in Australia closed 0.31% lower at 6,553.00. Data released Wednesday showed Australia's economy rising as expected during the second quarter. Gross domestic product rose 0.5% quarter-on-quarter on a seasonally adjusted basis, and grew 1.4% year-on-year. Both figures came in in line with expectations from their respective Reuters polls.
Overall, the MSCI Asia ex-Japan index was more than 1.6% higher.
Overnight stateside, stocks on Wall Street fell on their first trading day of September. The Dow Jones Industrial Average closed 285.26 points lower at 26,118.02 while the S&P 500 declined 0.7% to end the day at 2,906.27. The Nasdaq Composite pulled back 1.1% to 7,874.16.
The moves downward came the Institute for Supply Management said U.S. manufacturing activity contracted last month for the first time since early 2016, fueling fears of a potential recession stateside.
"That's another negative concern ... for our economy," Matt Maley, managing director and chief market strategist at Miller Tabak, told CNBC's "Street Signs" on Wednesday.
"The consumer still seems to be holding up there real well, but as we ... learned last year in the fourth quarter, the consumer can kind of change on a dime and with some recent consumer data coming in a little bit lower than expected, that does have some people a little bit ... more worried than they were just a short time ago," Maley said.
The yield on the benchmark 10-year Treasury note also dropped to a 3-year low on Tuesday following the disappointing manufacturing activity data, falling to 1.441% — its lowest level since July 2016. It was last at 1.4859%. Yields decline as bond prices rise.
— Reuters and CNBC's Fred Imbert and Grace Shao contributed to this report.