Asian stocks steadied and the euro held above a seven-month low against the dollar on short-covering on Tuesday, after a report that Italy may get financial support from China lifted Wall Street in late trade but did nothing to ease fears that Europe is descending into a banking crisis.

Mounting fears of a Greek debt default, sharp drops in European shares -- especially of French banks due to their sovereign debt exposure -- and a surge in Italian bond yields meant any rally would be short-lived as broader sentiment remains fragile.

U.S. stocks rose on Monday, bouncing back in late trading, after a report that Italy could get financial support from China tempered investors' worst fears over the euro zone debt crisis.

The late rally lent some support to Asian stocks, with shares in Australia .AXJO and Japan .N225 posting meager gains in early Asian trade after suffering steep losses this month. Hong Kong and Korea are shut for holidays.

The MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS was up 0.1 percent after falling more than 3 percent so far this month. U.S. stock futures were up 0.3 percent in early trade.

European fears will continue despite the latest developments, because the euro zone's problems are not easily solved, but Japanese stocks were oversold yesterday, so we will see some traders buying back shares today, said Kenichi Hirano, operating officer at Tachibana Securities.

In currency markets, the euro climbed to $1.3636 against the dollar after falling to a seven-month low of $1.3495 in the previous session though weak demand at an Italian bond auction later in the day may see the single currency fall back again.

Steadying shares halted a rally in safe-haven assets such as U.S. Treasuries and gold.

Yields on ten-year notes stabilized around 1.95 percent after dropping by about 30 bps so far this month.

Gold bounced to 1,820 per ounce after dropping by more than 2.5 percent in the previous session. It hit a record high of $1,920.30 last Tuesday.