File picture: Alex Grimm

Asian markets mostly fell Tuesday as fears about Spain's surging borrowing costs replaced the previous day's optimism over Greece's election, while G20 leaders struggled to soothe dealers' nerves.

The euro edged higher from late trade in New York, where it gave up all the gains it had made against the dollar earlier Monday in Asia.

Tokyo tumbled 0.75 percent, or 65.15 points, to 8,655.87 and Sydney shed 0.33 percent, or 13.6 points, to 4,123.3.

In the afternoon Hong Kong was 0.39 percent off and Shanghai gave up 0.44 percent.

However, Seoul ended flat, edging up just 0.06 points to 1,891.77.

Regional shares staged a strong rally on Monday after news that Greece's two main pro-austerity parties had garnered enough votes to form a government, beating groups who had promised to tear up a bailout deal with global lenders Ä a move many feared would lead to Athens leaving the euro.

However, the rally faded in Europe and the United States as traders' attention moved to deepening troubles in Spain, where the yields on benchmark 10-year bonds rocketed to a euro-era record 7.13 percent.

Anything over 7.0 percent is considered unsustainable and is the point above which Ireland, Portugal and Greece were forced into asking for a rescue package.

Madrid's woes come as it struggles to deal with a banking crisis as well as a miserable financial situation with soaring unemployment and a huge fiscal deficit.

Adding to the gloom, a report from Spain's central bank said bad debts in the country hit their highest level for 18 years in April, sparking concerns that a 100-billion-euro ($126 billion) bailout for its banks might not be enough.

“The eurozone situation is far from over amid worries over the financial health of Spanish banks as the amount of non-performing loans in hand mounts,” Rakuten Securities senior market analyst Masayuki Doshida told Dow Jones Newswires.

Despite the concerns the euro rose to $1.2607 and 99.60 yen, up from $1.2571 and 99.45 yen in New York trade late on Monday. The single currency tumbled in New York after surging as high as $1.2727 in Asia earlier in the day.

The dollar eased to 78.99 yen from 79.11 yen.

Leaders of the 20 most developed and developing nations are holding a summit in Mexico which has been dominated by Europe's long-running crisis.

The two-day meeting kicked off with the United States saying there had been a clear change in European thinking from austerity and towards more growth-friendly policies.

The Group of 20 said they “will act together to strengthen recovery and address financial market tensions”, according to a leaked draft communique.

“All G20 members will take the necessary actions to strengthen global growth and restore confidence,” it said.

But while US President Barack Obama was said to be “encouraged by what he heard” ahead of the talks, German Chancellor Angela Merkel has not indicated she is about to abandon her hardline stance on austerity measures imposed on indebted eurozone members.

Also in Mexico the International Monetary Fund said it had raised $456 billion for a firewall, with China saying Monday it would stump up $43 billion and India and Russia saying earlier they would each kick in $10 billion.

On oil markets New York's main contract, light sweet crude for delivery in July, fell 18 cents to $83.09 per barrel in the afternoon while Brent North Sea crude for August delivery gained four cents to $96.09.

Gold was worth $1,629.07 an ounce at 08:10 SA time, compared with $1,621.62 late Monday.

In other markets:

- Taipei closed 0.11 percent, or 8.37 points, lower at 7,273.13.

Smartphone maker HTC rose 3.9 percent to Tw$386.0 while Taiwan Semiconductor Manufacturing Company was 0.37 percent lower at Tw$80.5.

- Wellington rose 0.70 percent, or 24.71 points, to 3,480.38.

Air New Zealand closed up 0.58 percent at NZ$0.87, Fletcher Building gained 0.16 percent to NZ$6.31 and Telecom was 1.81

percent higher at NZ$2.54. - Sapa-AFP