The Australian sharemarket finished in the black, supported by hopes that Chinese growth was steadying, after the Spanish bank-bailout knee-jerk global market rally and reversal settled around Friday's levels.
Having missed the surge in Asian stocks on Monday the S&P/ASX 200 index gained 9.2 points, or 0.23 per cent, to 4072.9 points, bucking the negative lead from index futures, as Asian markets pared early losses.
Overnight on Monday Wall Street and European stocks reversed solid opening gains, with the US S&P 500 index sliding 1.3 per cent on the "sobering" news that European Union banking officials would assess the full extent of Spanish bank losses before receiving bailouts.
Credit Suisse analsyst have estimated that under a high stress scenario Spanish banks could need up to 250 billion euro ($315 billion), well in excess of the "maximum"100 billion euro package agreed on Saturday.
Finland compounded market jitters when it said only "solvent banks" should receive bailout money and asked for collateral against any funding, underscoring concerns over the subordination of existing Spanish bond holders.
Spanish government 10-year bond yields initially fell 17 points to 6.06 per cent on Monday before surging 45 points to 6.51 per cent, while Italian bonds jumped 26 points to close at 6.03 per cent as investors fear the domino impact of funding ever increasing regional bailouts could soon leave "too-big-to-save" Italy in a credit crunch.
"There are uncertainties about whether or not the 100 billion euros is enough to shore up the Spanish banks and resolve the problem and whether or not the weakness in Italy is becoming uncontrollable," Barclays Capital chief interest rate strategist Gavin Stacey said.
The Shanghai composite index was off 0.5 per cent at the close of the ASX.
Japan's Nikkei index pared a 1.9 per cent drop to close 1.2 per cent down, after the International Monetary Fund said the yen was overvalued and the central bank should consider "substantial" further monetary stimulus, including assets purchases.The Australian dollar fell 1.5¢ to US98.50¢ before bouncing to US98.95¢ on speculator bargain hunting and exporter selling. Australian government 10-year yields lost 8.5 points to 2.973 per cent.