HONG KONG: Asian markets mostly rose Wednesday after a positive lead from Wall Street and Europe but gains were capped by concerns about Spain's banking system and as Greece prepares for another election.

Adding downward pressure to sentiment was a decision by Fitch to downgrade 18 Spanish banks while the euro eased against the dollar in afternoon trade.

Tokyo closed up 0.60 per cent, or 51.12 points, at 8,587.84, while in afternoon trade Hong Kong was up 0.44 per cent and Shanghai was 0.88 per cent higher.

Seoul rose 0.25 per cent, or 4.58 points, to close at 1,859.32, but Sydney slipped 0.22 per cent, or 9.1 points, to finish at 4,063.8.

The early euphoria 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.

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 exiting the eurozone.

The euro bought $1.2492 in Tokyo afternoon trade, down from $1.2502 in New York late Tuesday.

Against the Japanese currency, the common European unit inched up to 99.53 yen from 99.44 yen, while the dollar firmed to 79.63 yen from 79.52 yen.

On oil markets New York's main contract, light sweet crude for delivery in July, eased 30 cents to $83.02 a barrel and Brent North Sea crude for July fell 12 cents to $97.02 a barrel.

Gold was worth $1,609.50 an ounce at 0630 GMT, compared with $1,590.50 late Tuesday.

In other markets:

-- Taipei closed 0.24 per cent, or 16.75 points, higher at 7,088.83.

Smartphone maker HTC rose 1.45 per cent to Tw$350.0 while Taiwan Semiconductor Manufacturing Co. ended up 0.76 per cent at Tw$80.0.

-- Wellington fell 1.28 per cent, or 43.87 points, to 3,381.73.

Fletcher Building was off 2.4 per cent at NZ$6.13, Telecom was down 2.3 per cent at NZ$2.33 and Contact Energy slipped 1.9 per cent to NZ$4.62.