Asian stock markets advanced Tuesday, bouyed by expectations that the major central banks will announce further stimulus measures when they hold policy meetings later this week.

Japan's benchmark Nikkei gained 0.69 percent or 59.62 points to 8695.06, Hong Kong's Hang Seng gained 1.08 percent or 211.14 points to 19796.81 and South Korea's Seoul Composite surged 2.07 percent or 38.20 points to 1881.99, while Chinese Shanghai Composite fell 0.30 percent and India's benchmark BSE Sensex were trading flat.

Market sentiment has improved as investors are optimistic that the U.S. Federal Reserve and the European Central Bank (ECB) will announce further policy steps this week to tackle the deteriorating global economic conditions.

Expectations were particularly high on the ECB monetary policy decision Thursday where many expected President Mario Draghi to take fresh action, following his last week’s pledge to do whatever it took to save the euro. The data on Monday also added to the urgency for policy action in the single currency region as the Business and Consumer Survey, which measures the level of confidence in the euro zone, fell for the fourth straight month from 89.9 in June to 87.9 in July.

Market sentiment was also supported after the phone calls of German Chancellor Angela Merkel with French President Francois Hollande, in which the two leaders pledged to “do everything” to save the euro zone. Speculations are high that the ECB may reactivate its bond purchase program again to prevent Spain from evolving into a full-blown crisis.

“According to two anonymous central bank officials, Draghi’s proposal involves Europe’s rescue fund buying government bonds on the primary market, supported by ECB purchases on the secondary market. The biggest hurdle remains the Bundesbank’s opposition and talks have been scheduled between Draghi and the Bundesbank President Weidmann ahead of the ECB meeting this week,” said a note from Credit Agricole.

In Japan, Panasonic Corp. surged 4.60 percent on the news that that the company probably finished the April to June quarter with a group net profit just above Y10 billion, a sharp improvement on the net-loss a year earlier, the Wall Street Journal reported citing Nikkei report.

Sony Corp. rallied 4.67 percent and Hitachi Ltd. gained 1.97 percent while Canon Inc. surged 3.52 percent after announcing a share-buyback plan.

Financials and property developers led the gains in Hong Kong. China Overseas Land & Investment Ltd. advanced 1.55 percent and China Construction Bank Corp gained 2.17 percent while heavyweight HSBC Holdings Plc advanced 0.84 percent after announcing first half results in line with the expectations.

The South Korean shares rallied on renewed hopes that policy makers in the U.S. and Europe would announce further stimulus measures. Heavyweights Samsung Electronics and Hyundai Motor gained 2.67 percent and 1.94 percent, respectively.

On the economic front, South Korea's industrial production declined in June from the previous month with exports decreasing and the domestic demand continuing to be weak. Official data showed that the industrial output declined to 0.4 percent in June compared to a rise of 1.3 percent in May.

The Reserve Bank of India (RBI) kept its main policy rates unchanged in its quarterly monetary policy review on Tuesday, in view of the high inflation and fiscal disappointments that led to an economic setback in almost a decade. The RBI revised down its outlook for the fiscal year ending in March 2013 to 6.5 percent from the earlier 7.3 percent, while raised its headline inflation projection for the current fiscal year to 7 percent from 6.5 percent in its April review.