HONG KONG - Asian markets were mixed Wednesday with a positive lead from Wall Street and Europe offset by ongoing concerns about Spain's banking system and as Greece prepares for a crucial election.
Adding downward pressure to sentiment was a decision by Fitch to downgrade 18 Spanish banks while the euro fell against the yen and dollar in early trade.
Tokyo rose 0.75 per cent, Hong Kong eased 0.10 per cent, Shanghai was up 0.15 per cent, Sydney shed 0.10 per cent and Seoul was flat.
The early eurphoria over eurozone finance chiefs' weekend agreement to a bailout for Spain's banks of up to $125 billion has evaporated amid concerns the government will now need a rescue as its borrowing costs have soared.
Spanish 10-year government bonds yields - the rate of return earned by investors - spiked to a record of 6.834 per cent, the highest level since the eurozone was founded, as tension reigned on sovereign debt markets.
The 10-year yield on bonds in Italy, another troubled economy, leapt to a high of 6.301 per cent from the previous day's closing level of 6.032 per cent.
The Spanish rate settled afterwards to 6.716 per cent - a rate still regarded as unsustainable over the longer term.
Meanwhile Fitch slashed the ratings of 18 Spanish banks, a day after it cut the country's two biggest lenders, Santander and BBVA.
Fitch, which cut Spain's sovereign debt rating by three notches last week to "BBB", said its latest move was the result of the potential for the loan portfolios of certain banks to deteriorate further.
However, despite the news markets in the US and Europe were higher, with repeated calls by the European Central Bank for a common banking union to bolster the region's financial system providing some reassurance.
Also Chicago Federal Reserve Bank President Charles Evans reiterated his support for more monetary stimulus ahead of next week's meeting of the Federal Open Market Committee.
On Wall Street the Dow rose 1.31 per cent, the S&P 500 gained 1.17 per cent and the Nasdaq Composite advanced 1.19 per cent.
And in Europe London's FTSE 100 gained 0.76 per cent, Frankfurt was up 0.33 per cent and the Paris CAC 40 added 0.14 per cent, while Madrid edged up 0.09 per cent.
"Many investors remain on the fence, awaiting the outcome of Greece's upcoming elections, so risk capital is sparse," Monex market analyst Toshiyuki Kanayama told Dow Jones Newswires.
Traders fear that Sunday's general election in Greece, the second in six weeks, could end in a victory for anti-austerity groups who would tear up a bailout agreement that would lead to Athens making exiting the eurozone.
The euro bought US$1.2485 (S$1.6047) and 99.30 yen ( S$1.60) in early Asian trade, from $1.2503 and 99.46 yen in New York late Tuesday. The dollar was trading at 79.65 yen, from 79.52 yen in New York.
On oil markets New York's main contract, light sweet crude for delivery in July, sank US46 cents to US$82.86 a barrel and Brent North Sea crude for July delivery fell US35 cents to US$96.79 a barrel.
Gold was at US$1,607.70 an ounce at 0100 GMT, compared with US$1,590.50 late Tuesday.