Asian stocks mixed; Sydney little changed after RBA decision

Japan's benchmark index reversed earlier losses on Tuesday to rally 1 percent as the yen weakened while the rest of Asian stocks were mixed in choppy trade.

The Shanghai Composite hit a new three-week high, Australia's S&P ASX 200 index ended flat and South Korea's Kospi pared losses after hitting a two-week low

Wall Street's negative lead capped large gains in Asia. U.S. stocks finished in negative territory in light-volume trading with the Dow and S&P 500 retreating from all-time highs as investors looked for catalysts to propel recent market gains.

Sydney down 0.2%

Australia's benchmark index was largely unchanged after the Reserve Bank of Australia (RBA) cut interest rates to a record low of 2.5 percent, as widely expected. But the move saw the Australian dollar add 0.5 percent to hit a three-day high of $0.8980 following it's overnight tumble to a three-year low.

The central bank said the rate cut was especially appropriate given recent tepid economic data as well as slowing growth in China, Australia's largest trading partner.

"The RBA cut interest rates by 25 basis points that wasn't a great surprise. I think one of the most interesting things the statement seems a little less dovish than previous statements as they didn't explicitly indicate that the inflation outlook provided them with scope for further easing from here," said Paul Bloxham, chief Australia and New Zealand economist at HSBC.

(Read more: Gold miners: we aren't in 'dire straits')

Banks were broadly lower following the announcement. Westpac and Macquarie fell 0.7 percent each.

In earnings news, hearing implant maker Cochlear rallied 1.5 percent after it's full-year results matched analyst expectations while engineering firm Downer lost half a percent despite reporting an 80 percent increase in net profit.

Nikkei outperforms

Japan's benchmark index staged a turnaround to close at a session high after hitting a five-day low earlier in the session as dollar-yen rose above the 98 handle in afternoon trade, reversing earlier losses in exporter stocks.

Shares of Sony tanked nearly 5 percent after the firm's board rejected activist investor Daniel Loeb's call to spin off its entertainment business.

"I think there's a lot of value in the stock and I would recommend investors buy it on this current dip today. I do believe the CEO is a doing a decent job in turning around the business and investors buying today are likely going to get a pretty decent returns going forward," said King Lip, CIO at Baker Avenue Asset Management.

Toshiba shares jumped 1.4 percent after the Nikkei newspaper reported that the firm may enter a joint venture project with Sandisk to build a flash memory chip maker with total investment estimated at $3.9 billion.

(Read more: Sales tax hike will hurt Japan but must happen: IMF)

Tokyo Electric Power rallied over 3 percent even after the country's nuclear watchdog announced that highly radioactive water from its Fukushima nuclear plant has seeped into the ocean.

Shanghai hits highs

China's benchmark index also reversed earlier losses to hit its highest level since July 17, extending its five-day winning streak. The next barrier for the Shanghai Composite to cross will be it's 200-day Simple Moving Average (SMA) of 2,177 points, last hit in mid-June.

Real estate developers dragged on the index after a report in the official China Securities Journal said that Beijing must continue with policies to curb the property market. China Merchants Property and Poly Real Estate lost lost 1.7 and 1.5 percent, respectively.

(Read more: Business activity in BRICs shrinks for first time in 4 years)

Shipbuilders declined after Beijing urged local governments to halt approvals of new projects as part of its three-year plan to restructure the industry. China State Shipbuilding fell over 2 percent while Guangzhou Shipyard lost 1 percent.

In Hong Kong, shares of HSBC tanked 5 percent after reporting a 10 percent rise in pre-tax profit in the first half of the year. But its revenue fell a steeper-than-expected 12 percent, prompting the firm's shares to fall over 4 percent in London trade.

Kospi 0.5% lower

South Korea's benchmark index recouped some losses after hitting a two-week low earlier in the session, largely due to a sell-off in market heavyweight Samsung Electronics abated. Shares fell 1.6 percent following an earlier 2 percent drop after the U.S. vetoed an import ban on Apple products in the U.S., which would likely hurt Samsung's patent rights.

(Read more: Tech wars: How Obama's veto will change the game)

But other technology stocks benefited from the strong yen, which gives South Korean exporters a competitive advantage. LG Electronics and LG Display rallied over 2 percent each.

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