European shares gained on Tuesday but lost some of their shine in late trading as investors cautiously approved a eurozone deal to help Spain, and shrugged off weak Chinese data.

The European single currency tumbled to a new two-year dollar low as traders questioned whether the latest eurozone deal would resolve Spain's massive debt problems.

The euro dived as low as $1.2235 at 1510 GMT, the lowest level since July 1, 2010. That beat the previous two-year trough of $1.2251 that was hit the previous day.

The single currency traded later at 1.2255 dollars, down from 1.2312 late on Monday in New York.

London's benchmark FTSE 100 index of leading shares gained 0.65 percent to close at 5,664.08 points, Frankfurt's DAX 30 won 0.79 percent to 6,438.33 points and the Paris CAC 40 added 0.59 percent to 3,175.41 points.

Madrid's IBEX 35 index rose by 0.58 percent to 6,726.9 points and Rome's FTSE Mib was 0.40 percent higher at 13,868 points.

All markets were off intraday highs however.

"The afternoon pullback is largely thanks to EU finance ministers unable to calm concerns about the region's crisis in the second day of the Eurogroup meeting, despite efforts to help Spain," commented ETX Capital trader Ishaq Siddiqi.

In midday trading in New York, US stocks were mixed, after a strong opening owing to in-line results posted on Monday by the aluminium giant Alcoa.

The Dow Jones Industrial Average gained 0.18 percent, the S&P 500 was down by 0.11 percent, and the tech-rich Nasdaq had given up 0.34 percent.

The euro fell back for the second day running on heightened concerns over soaring Spanish bond yields.

RIA Capital Markets analyst Nick Stamenkovic underscored concern that a German court could delay ratification of a permanent eurozone rescue fund, the European Stability Mechanism, which is to be used to recapitalise Spanish banks, easing pressure on public bonds.

"The euro is crumbling following news that the German constitutional court will take three months to come to a conclusion. A delay of ESM ratification will add to negative sentiment towards the single currency.

"The euro could test $1.20 soon," Stamenkovic forecast.

Eurozone finance ministers have agreed to offer Spain 30 billion euros ($37 billion) this month to help its distressed banks as the ministers raced to battle market scepticism over efforts to tackle the debt crisis.

They also extended a deadline for Spain to cut its public deficit to the EU's 3.0 percent limit by one year to 2014 because of the difficult economic conditions it faces.

"Spanish and Italian bonds are a touch firmer, so yields have fallen slightly," noted said GFT Markets analyst David Morrison.

"However, both remain firmly in the spotlight as Spanish 10-year yields continue to trade around the 7.0-percent danger level," he warned.

After nine hours of talks, Jean-Claude Juncker, the Luxembourg premier who also heads the Eurogroup, said a memorandum of understanding for Spain would be formally signed "in the second half of July," with 30 billion euros in rescue loans available by the end of the month.

Spain is under increasing pressure as markets pushed its borrowing costs to above the dangerously high 7.0-percent threshold.

Meanwhile, Germany's top court began hearing challenges to euro crisis-fighting tools on Tuesday, in a process that could hamper Chancellor Angela Merkel's efforts to tackle the turmoil.

The powerful Constitutional Court will weigh a raft of complaints against the eurozone's permanent ESM rescue shield and the European fiscal pact for greater budgetary discipline.

Earlier in the day, Asian markets fell as weakening demand for imports in China provided new evidence of a slowdown in the region's biggest economy.

Hong Kong lost 0.16 percent, Tokyo dropped 0.44 percent and Shanghai closed down 0.29 percent, while Sydney dipped 0.49 percent and Seoul was off 0.36 percent.

Official data showed China's trade surplus expanded in June as demand for imports fell more sharply than expected, adding to investor nerves before the release of more key data this week including second-quarter GDP.