HONG KONG - Asian markets tumbled on Tuesday following overnight losses on Wall Street and the euro weakened as investors' initial euphoria over a bailout for Spain's banks faded.

The optimism over the US$125 billion (S$159.8 billion) weekend deal was replaced by concerns about the practicalities of implementing the bailout and fears that it would not be enough to avert a broader catastrophe in the eurozone.

Tokyo was 1.28 per cent lower at the break, Hong Kong was down 0.85 per cent, Seoul was off 0.92 per cent and Shanghai edged 0.58 per cent lower. Sydney however was up 0.38 per cent, catching up on Monday's gains after a holiday.

Asian stocks surged on Monday and the single currency strengthened, a burst of optimism that was initially followed in Europe and the United States.

But the rallies proved short-lived, with London closing almost unchanged and the Dow Jones Industrial Average down 1.14 per cent. Madrid advanced almost six per cent in early trade only to close down 0.54 per cent.

As fears over Europe's debt crisis resurfaced, the yield on Spain's 10-year bond rose to 6.48 per cent Monday, higher than Friday's close, after Fitch downgraded Spain's two largest banks.

"Spain has been offered a line of credit and it is already weighed down with too much debt. It is just going to delay the inevitable," Ben Taylor, a sales trader at CMC Markets, told Dow Jones Newswires.

Investors were also looking to the weekend when Greece makes a second attempt at holding elections amid fears that a victory for anti-austerity groups could lead to Athens making a disorderly exit from the euro.

The euro weakened overnight, losing a bounce from the deal for Spanish banks.

The common currency, which rose past US$1.26 (S$1.61) in Asian trade Monday, bought US$1.2480 (S$1.5952) early Tuesday, compared with US$1.2482 (S$1.5954) in New York late Monday. Against the Japanese currency the euro fell to 98.83 yen (S$1.600) from 99.13 yen (S$1.605)  in New York.

The dollar eased to 79.23 yen (S$1.282248 ) from 79.43 yen (S$1.285972).

"Concerns over Spain are sending the euro lower, which will be the biggest negative," said Rakuten Securities senior market analyst Masayuki Doshida.

Oil extended losses made overnight. New York's main contract, light sweet crude for delivery in July, was down 83 cents to US$81.87 (S$104.65) a barrel, a level last seen in October.

Brent North Sea crude for July delivery shed US82 cents to US$97.18 (S$124.22) in morning trade.

Gold was at US$1,594.15 (S$2,037.64) an ounce at 0230 GMT, compared with US$1,592.30 (S$2,035.28) late Monday.