The storm had already claimed the lives of at least two people in China's Hainan and 16 people in the Philippines
Most bourses reversed earlier losses that were fuelled by renewed concerns that the weight of eurozone sovereign debt would force Spain to seek a full state bailout.
However, trade remained cautious after ratings agency Moody’s downgraded its outlook for Germany, delivering a stark warning that not even Europe’s largest and most pivotal economy was immune from the rolling crisis.
Tokyo ended 0.24 percent, or 20.23 points, lower at 8,488.09, but Seoul added 0.25 percent, or 4.49 points, to 1,793.93 and Sydney climbed 0.10 percent, or 4.3 points, to 4,133.2.
Hong Kong, which opened at 1:00 pm (0500 GMT) after a severe typhoon hit the southern Chinese business hub, closed 0.79 percent, or 150.27 points, lower at 18,903.20, while Shanghai advanced 0.24 percent, or 5.19 points, to 2,146.59.
In Europe the focus is now on Spain, which saw its borrowing costs climb on Monday to a level considered unsustainable, sparking fears that the eurozone’s fourth-largest economy may require a bailout.
The yield — the rate of return investors earn — on the benchmark Spanish 10-year government bonds jumped to 7.498 percent from 7.225 percent on Friday, well above the 7.0 percent danger level for long-term funding.
Madrid’s troubles sent global markets spiralling downward on Monday amid fears of another economic downturn.
Adding to the gloom was news that Moody’s revised down its outlook on the sovereign ratings of Germany, the Netherlands and Luxembourg from stable to negative.
On Wall Street the Dow fell 0.79 percent, while European stocks took a pummelling. However, London, Paris and Frankfurt were all in positive territory in early European trade on Tuesday.
Eyes were also on Greece, with auditors from the European Union, International Monetary Fund and the European Central Bank due in Athens this week for another inspection of the new government’s economic programme.
The report will determine whether Greece will receive fresh loans of 31.5 billion euros due by September under its debt rescue programme.
However, there was a little respite from recent bad news, with banking giant HSBC saying that its Purchasing Managers’ Index (PMI) for China — which measures manufacturing activity — had hit a five-month high in July.
The preliminary figure hit 49.5 this month, well up from the 48.2 recorded in June, which HSBC said indicated that government measures to boost growth in the world’s second-biggest economy, including interest rate cuts, were working.
A PMI reading above 50 indicates expansion, while a reading below 50 indicates contraction, and while the data remained negative it provided some hope that the country’s manufacturing sector was heading in the right direction.
On currency markets the euro bought $1.2100 and 94.63 yen in European morning trade, down from $1.2137 and 95.13 yen in New York.
However it was an improvement from Asian trade Monday when it dropped to 94.24 yen, its lowest level since November 2000.
The dollar traded at 78.21 yen, against 78.37 yen on Monday, as the Japanese currency is increasingly seen as a safe-haven unit amid turmoil in Europe and an uncertain US economic recovery.
The swings on the currency markets came as Japan’s Finance Minister Jun Azumi repeated warnings about the yen’s soaring value and hinted at another possible currency market intervention in a bid to tame the unit.
“We will not rule out any measures against excessive moves and will take decisive action when that’s deemed necessary,” he told reporters.
Oil was on the up. New York’s main contract, light sweet crude for September delivery, gained 10 cents to $88.24 a barrel in afternoon trade and Brent North Sea crude for delivery in September was 15 cents higher at $103.41.
Gold was at $1,573.81 at 1040 GMT from $1,571.22 on Monday.
In other markets:
Singapore Telecom gained 0.29 percent to Sg$3.46 and Keppel Corp added 1.18 percent to Sg$11.19.
Leading smartphone maker HTC shed 2.26 percent to close at Tw$280.5 while Taiwan Semiconductor Manufacturing Co was 0.67 percent higher at Tw$74.8.
Ayala Corp. added 1.17 percent to 415 pesos, while unit Ayala Land gained 0.20 percent to 19.94 pesos.
Metropolitan Bank climbed 2.47 percent to 95.30 pesos.
Telecom lost 0.6 percent to NZ$2.525, Air New Zealand was up 0.55 percent at NZ$0.91 and Fletcher Building was steady at NZ$5.81.
Gaming giant Genting Malaysia fell 1.1 percent to 3.46 ringgit, while utility Tenaga Nasional slipped 0.5 percent to 6.69 ringgit. Hong Leong Bank added 0.2 percent to 13.32 ringgit.
Car maker Astra fell 0.8 percent to 6,350 rupiah, Telkom slid 2.2 percent to 8,750 rupiah and nickel and gold miner Antam decreased 2.3 percent to 1,270 rupiah.
Banpu was unchanged at 440.000 baht, while PTT lost 1.53 percent to 321.00 baht.
Hindustan Unilever rose 7.5 percent to a record 476.05 rupees. Software firm Wipro slid 2.93 percent to 346 rupees.
The storm had already claimed the lives of at least two people in China's Hainan and 16 people in the Philippines
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