Asian markets sank Wednesday on growing concerns that Spain could be forced into seeking a bailout while China dashed previous hopes it will introduce fresh stimulus measures to boost its economy.
The euro also set new two-year lows against the dollar as attention turned away from positive news from Greece at the weekend that had provided some lift earlier this week.
Tokyo fell 0.28 percent, or 23.89 points, to 8,633.19, Seoul was 0.27 percent, or 5.05 points, lower at 1,844.86 and Sydney shed 0.49 percent, or 20.2 points, to 4,094.2.
Hong Kong tumbled 1.92 percent, or 365.24 points, to 18,690.22 and Shanghai slipped 0.21 percent, or 4.97 points, to 2,384.67.
The losses reversed two days of gains after opinion polls in Greece on Sunday pointed to a victory for the pro-austerity conservatives in June 17 elections, easing concerns the country could end up leaving the euro bloc.
But Madrid's economic woes are now in focus as its borrowing rates approached the 7.0 percent mark considered unsustainable for governments to service their debts.
Economists fear that if yields stay so high the government will have to seek an international bailout -- following Greece, Ireland and Portugal -- despite assurances from Prime Minister Mariano Rajoy that it would not need to.
Adding to traders' woes was a European Central Bank warning that it would oppose any plan by Spain to tap its lending facilities in order to recapitalise the country's ailing Bankia, which has asked for $24 billion in state aid.
Spain already this month paid $5.6 billion to the lender to take it into government control and the latest plea from its board comes as the nation's own finances are stretched to breaking point.
While officials say they are only considering the ECB as a last resort, the Frankfurt-based bank's governing council is set against it, the Wall Street Journal said.
"There is this ongoing concern about the Spanish banking system and what kind of bailout it could need," Tim Waterer, senior trader at CMC Markets in Sydney, told Dow Jones Newswires.
Spain's woes weighed on the single currency which fell in Tokyo to $1.2437 -- a low not seen since July 2010 -- from $1.2503 late Tuesday in New York.
The troubled unit also bought 98.50 yen from 99.39 yen. The dollar was at 79.20 yen, compared with 79.49 yen.
Regional markets, particularly Hong Kong and Shanghai, also slipped after an editorial by China's state run Xinhua news agency saying Beijing would not embark on a stimulus drive like that seen during the 2008 financial crisis.
The news countered a Tuesday report in the state-run Shanghai Securities News that measures would be introduced to jumpstart demand for automobiles, fuelling hopes for similar moves in other sectors.
Traders were unmoved by a Wall Street rally that saw the Dow up 1.01 percent, the S&P 500 gain 1.11 percent and the Nasdaq climb 1.18 percent.
On oil markets New York's main contract, West Texas Intermediate crude for delivery in July was down $1.12 to $89.64 per barrel while Brent North Sea crude for July shed $1.26 to $105.42 in the late afternoon.
Gold was at $1,549.12 an ounce at 1050 GMT, compared with $1,573.60 late Tuesday.
In other markets:
-- Singapore closed down 0.64 percent, or 17.90 points, at 2,783.95.
Oil rig maker Keppel Corp was up 0.10 percent at Sg$10.19 while beverage distributor Fraser and Neave shed 2.23 percent to Sg$6.59.
-- Taipei fell 1.10 percent, or 80.49 points, to 7,261.80.
HTC shed 1.85 percent to Tw$424.0 while TSMC was 0.73 percent lower at Tw$81.7.
-- Manila fell 0.10 percent, or 4.79 points, to 5,018.32.
SM Investments fell 0.79 percent to 687.50 pesos, while DMCI Holdings was 2.48 percent off at 56.95 pesos.
Philippine Long Distance Telephone rose 0.17 percent to 2,310 pesos.
-- Wellington closed flat, edging up 3.05 points, to 3,481.34.
Fletcher Building rose 0.16 percent to NZ$6.26, Chorus was up 1.25 percent at NZ$3.25 and Telecom fell 1.16 percent to NZ$2.55.
-- Jakarta ended flat, edging down 1.15 points to 3,917.92.
Aneka Tambang lost 2.26 percent to 1,300 rupiah, Indosat slid 3.01 percent to 4,025 rupiah and Timah fell 1.37 percent to 1,440 rupiah.
-- Kuala Lumpur ended 0.63 percent, or 9.85 points, higher at 1,575.17.
Financial firm CIMB Group Holdings gained 1.77 percent to 7.49 ringgit, while telecoms company Axiata Group added 0.57 percent to 5.33. Carmaker DRB-HICOM lost 0.41 percent to 2.42 ringgit.
-- Bangkok closed 1.30 percent, or 15.03 points, lower at 1,138.63.
PTT dropped 1.92 percent to 307.00 baht, while BANPU lost 1.69 percent to 466.00 baht.
-- India's benchmark Sensex index slid 0.77 percent, or 126.43 points, to 16,312.15 points, snapping two days of gains, a day ahead of the announcement of expected weak quarterly economic growth figures.
Tata Motors was one of the biggest losers, down 11.8 percent, or 32.55 points, to 243.35 rupees on worries about a fall in operating margins at its luxury Jaguar Land Rover subsidiary.