Japan, Hong Kong Lead Asian Stocks Higher

Asia's stock markets were in rally mode on Monday after better-than-expected U.S data boosted investor confidence in the global economic recovery.

The Nikkei hit a new five-and-a-half year high, the Hang Seng Index rallied 1.7 percent to a three-month high and the Shanghai Composite closed just below an eight-week high.

Amid laggards, the Kospi dipped 0.2 percent and Australia's S&P ASX 200 pared earlier gains to retreat further from a previous five-year high of 5,249.

(Read More: Central Banks in Driving Seat for Asia Markets)

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Nikkei Crosses 15,300

An optimistic economic outlook fueled the Nikkei's rally after the government upgraded its economic assessment for the first time in two months, while a Reuters Tankan survey revealed an improvement in manufacturers' sentiment.

Machinery and power stocks were amid the index's best-performers with a 16 percent gain each in Japan Steel Works (JSW) and Tokyo Electric Power after Prime Minister Shinzo Abe announced that transport and power-generation exports would increase as part of his latest tranche of stimulus measures.

Meanwhile, dollar-yen crept down from its four-and-a-half-year high of 103 after Japan's economy minister was quoted as saying that more currency weakness could be harmful.

(Read More: Here's Where the Dollar/Yen 'Should' Be)

China Property Rallies

Real-estate developers saw extended gains with Lvjing Real Estate jumped 2.5 percent after April's new home prices rose at their fastest pace in two years.

"We don't think the authorities will be satisfied until there is no evidence of overheated prices in any of the 70 cities. Housing is prone to overheating but boom-bust is not the natural state of the market," said Tim Condon, head of research for Asia at ING Financial Markets in a note.

Meanwhile, a 10 percent gain in dairy producer China Mengniu Dairy supported the rally in Hong Kong shares on news of a joint venture by Danone Group.

Australia Above 5,200

Persistent weakness in the Australian dollar boosted stocks with significant exposure to the U.S market. Insurance firm QBE rose 2 percent.

(Read More: Australia Stock Rally Showing Signs of Fatigue)

Resources recovered some of last week's losses with Mirabela Nickel leading gains by 9.6 percent after copper prices inched up on signs of improved demand.

Investors are awaiting Tuesday's minutes from the latest Reserve Bank of Australia (RBA) gathering for signs of further stimulus from the central bank. "Further easing is likely this year to provide confidence that a pick-up in non-mining activity will provide an offset to slowing mining investment," said AMP Capital's chief economist Shane Oliver in a research note.

Kospi Down 0.2%

Rising tensions on the Korean peninsula over the weekend added some pressure to Seoul's benchmark index. Pyongyang fired off four short-range missiles for two days in a row despite international condemnation.

The Kospi moved further away from a six-week high of 1,991, weighed down by a 10 percent slump in STX Corporation. Shares tanked after the holding company of troubled STX shipbuilding group received a $271 million cash injection last week.

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