Asian shares inched higher on Tuesday, helped by improving Chinese manufacturing data, but the euro remained under pressure as surging Spanish borrowing costs stoked fears that the euro zone's fourth-largest economy will be forced to seek a bailout.
The HSBC flash China manufacturing purchasing managers index rose to a five-month high in July, driven up by a jump in the output sub-index and signs of an improvement in new export orders that offered some relief to fragile markets.
Asian shares erased earlier losses while oil and copper rose after the Chinese data, pushing the commodity-linked Australian dollar up to $1.0288 from around $1.0265.
The euro also received a temporary boost before retreating to stand not far from a two-year low against the dollar and a near 12-year low against the yen.
The single currency was undermined by Moody's Investors Service changing its ratings outlook to negative for Aaa-rated Germany, the Netherlands and Luxembourg amid Europe's ongoing debt crisis.
"China's PMI data beat market expectations and gave shorts a reason to cover today," said Orient Futures derivatives director Andy Du, referring to buying by short-sellers to realise their gains on earlier bets that markets would fall.
It was the first significant Chinese data in the third quarter and signalled that pro-growth government policies may be gaining traction in the world's second-largest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2%, after spending most of the session in negative territory. It tumbled 2.4% on Monday for its biggest one-day drop in about two months.
Japan's Nikkei stock average also steadied after earlier slipping to a six-week low.
Brent crude rose 0.8% to $104.03 a barrel and U.S. crude added 0.8% to $88.81, while copper jumped 1.1% to $7,485 per tonne on China's PMI.
European stocks were seen mixed and U.S. stock futures were barely changed. Financial spreadbetters called the main indexes in London, Paris and Frankfurt to open between a 0.4% fall and a 0.3% gain.
Hong Kong's stock market opened up 0.1% after the morning session was cancelled due to Typhoon Vicente.
The euro was at $1.2126, off a 25-month low of $1.2067 hit on Monday, and stood at 94.87 yen, barely above its lowest since November 2000 of around 94.23 yen marked on Monday.
Fears about Spain possibly needing a fully-fledged bailout intensified investor flight to safety and pushed the 10-year U.S. Treasury yield down to a record low 1.3977%, while five- and 10-year German government bond yields also set new lows on Monday.
In contrast, Spanish 10-year borrowing costs surged to a euro-era high above 7.5% on Monday.
Gold was capped, up 0.1% at $1,577.55 an ounce, with both its 55- and 100-day moving averages having crossed below the 200-day moving average in April to imply a bearish technical outlook. Analysts expect gold to find support at its 2012 low near $1,521 and resistance at $1,641.
