China stocks lead Asia up on stimulus talk

Chinese stocks led Asia higher on Tuesday, as speculation grows that Beijing could take stimulus measures to boost a slowing economy.

The Shanghai Composite rallied 2 percent, crossing the 2,000 mark for a second session while the Hang Seng Index jumped 2.5 percent.

Elsewhere, South Korea's Kospi hit a five-week high, Japan's benchmark Nikkei tested the 14,800 mark and Australian equities moved off a two-month high.

ASX 200
CNBC 100

Wall Street's lead

Monday's small gains on Wall Street helped support Asian markets. The S&P 500 notched up a third consecutive record closing high. But data showing existing home sales slipped 1.2 percent in June, missing expectations for a 1.5 percent rise, capped stock market gains.

Still, some experts said the data revealed a positive long-term trend.

"What we are seeing in the U.S. property market is just a little caution at the margin in recognition that mortgage rates will be rising from their record low levels. Demand remains high and this number is a fabulous result confirming a rampant U.S. economic growth spurt is currently underway," said Clifford Bennett, chief economist of the financial services firm White Crane Group in a note.

Shanghai rallies 2%

Chinese shares outperformed the region after state newspaper Beijing News reported that Chinese Premier Li Keqiang said the government would not allow the country's gross domestic product (GDP) growth to fall below 7 percent.

Supportive comments from China's vice-premier Zhang Gaoli also bolstered sentiment this week. He reiterated Beijing's commitment to supporting the export and service industry while the economy steers towards a consumer-oriented growth, Reuters reported.

(Watch now: China soon to be wealthier than US in built assets?)

Financials led the gains on hopes that the comments could signal looser monetary policy. Brokerages Founder Securities and Haitong Securities jumped nearly 6 percent each, while mid-sized lender Industrial Bank rose 3 percent.

HSBC releases the flash estimate of its July purchasing managing index (PMI) on Wednesday - a survey that could shed some light on how China's manufacturing sector is holding up this month.

Nikkei tests 14,800

Japanese stocks erased opening losses after the government raised its economic assessment for a third straight month, upping its capital expenditure and factory output targets on signs of deflation easing.

The benchmark's next barrier is 14,953 points, which would mark a new two-month high.

"Markets will now look for long awaited reforms from [Japanese Prime Minister] Shinzo Abe. Patience will likely run thin should no concrete announcements be forthcoming over coming days and weeks," wrote analysts from Credit Agricole in a research report.

(Read more: Here's what could make or break Abe's reform plan)

Steel producers propped up the index after the Nikkei daily reported that Toyota Motor and Nippon Steel & Sumitomo Metal agreed to raise the price of steel sheet for the April-September period. Nisshin Steel jumped 6 percent and Sumitomo Metal Mining rose 4.4 percent.

Sydney pares gains

A rally in Australian gold miners helped the benchmark index briefly touch a new two-month high at the 5,027 mark after the yellow metal traded near a one-month high. The benchmark index closed down just 10 points shy of that level.

Both Alacer Gold and Newcrest Mining rallied over 5 percent each.

(Read more: Gold regains some luster, but can it keep shining?)

Shares of the world's fourth-largest iron-ore producer, Fortescue Metals, lost 1.7 percent after reporting a 24 percent quarterly increase in iron ore shipments.

Kospi up 1.3%

Strength in the Japanese yen propped up South Korean exporter stocks and lifted the benchmark index to its highest levels since June 13. Still, the benchmark index traded at a 40-point discount to it's 200-day simple moving average (SMA) of 1,944.

LG Electronics rallied 4 percent while the index's top component, Samsung Electronics, increased 2.7 percent. Steelmaker Posco rose 3.3 percent ahead of reporting second-quarter results later in the day.

One of Seoul's top department store operators, Lotte Shopping, ended 1.5 percent higher on reports that it is eyeing a $1-billion listing in Singapore next year.

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