Asia cheers global PMI data; Nikkei leads gains on weak yen

Japan's benchmark index led Asian stocks higher on Tuesday as dollar-yen flirted with the key 100-level while better-than-expected manufacturing data in Europe and China lifted confidence in the global economic recovery.

The Nikkei rallied 3 percent, Australia's S&P ASX 200 rose to a new three-and-a-half-month high, South Korea's Kospi hit a one-month high and the Shanghai Composite rose to a two-and-a-half-week high.

With U.S. markets shut for the Labor Day holiday, Asian investors took their trading cues from a positive European handover. The FTSEurofirst 300 Index closed up 1.7 percent on Monday after euro zone factory activity rose at its fastest pace since May 2011. The data followed HSBC's final reading of Chinese manufacturing in August, which hit a four-month high.

(Read more: Emerging market slide: A stark reminder of risks)

ASX 200
CNBC 100

Nikkei up 3%

Japanese stocks crossed the 13,900 mark to hit a three-week high as the yen weakened to a one-month low at 99.68 per dollar.

Banks led the gains with Mitsubishi UFJ higher by over 5 percent and Sumitomo Mitsui Financial up 3.5 percent.

Exporters were also in rally mode with Nintendo increasing 5 percent and automakers Toyota Motor, Suzuki Motor and Nissan climbing 3 percent each.

Nuclear plant operator Tokyo Electric Power Company closed up 3.3 percent after the government pledged nearly half a billion dollars to clean up the contaminated water at its Fukushima nuclear plant.

(Read more: Japan pledges $473 million to contain Fukushima leak)

Index heavyweight Fast Retailing rose 4 percent after reporting a 7.3 percent rise in August same-store sales for its Uniqlo clothing brand.

Shanghai up 1.2%

China's benchmark index rose above the 2,120 mark to a hit its highest level since August 16 after data showed a steady improvement in the mainland's services sector, the latest piece of positive data following a pair of manufacturing PMI's earlier this week.

Property stocks rallied after mainland home prices climbed 8.6 percent year-on-year in August, according to data provider China Real Estate Index System. Vanke, Gemdale and Poly Real Estate climbed over 4 percent each.

(Watch now: China GDP revision indicates stabilization)

Environmental stocks benefited after Beijing unveiled another raft of measures to curb pollution, such as limiting the number of new vehicles on the roads.Beijing Capital jumped 2.2 percent while SPC Environment rose 1 percent.

Sydney flat

Australia's share market pared gains after the Reserve Bank of Australia (RBA) left rates on hold at 2.5 percent, a widely expected decision following last month's 25 basis-point cut. The index dropped below the 5,200 mark but still ended at its highest levels since May 22 while the Australian dollar rose above 90 U.S. cents.

Caution ahead of federal elections this weekend capped further gains.

"Whatever happens this Saturday, it is unlikely that Monday morning will see a scorch earth or grass is greener moment. The markets are more likely to react to the Fed meeting, German elections and the fact that the Syrian conflict is still simmering away under the surface. This election from a market perspective is a non-event," wrote Evan Lucas, market strategist at IG in a note.

Resource stocks rallied after the RBA's index of commodity prices climbed to a fifteen month peak in August. Mining giants Rio Tinto climbed 3 percent while Fortescue Metals ended nearly 5 percent higher.

But retailers weighed on the index after retail sales grew slower-than-expected in July. Wesfarmers and David Jones lost over 1 percent each.

Kospi adds 0.4%

South Korea's benchmark index also pared gains after hitting its 200-day simple moving average (SMA) of 1,940 points. Still, the index closed at its highest levels since August 2 thanks to strong gains in shipbuilders.

STX Offshore and Shipbuilding surged 15 percent while Hyundai Mipo Dockyard jumped over 5 percent.

But automakers weighed on the index on news of another strike by Hyundai Motor's union workers. Hyundai Mobis fell 1.6 percent while Hyundai Motor slipped 0.8 percent.

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