The weekend was a stressful one for markets in Asia as Chinese stocks retreated with the Hang Seng Index shedding 0.9 percent. However, the situation was better in Europe as only 25 banks in the bloc out of 130 failed the stress test.

The admission by Charles Li, chief executive of the Hong Kong Exchanges & Clearing Ltd., that he does not know when its mutual access with Shanghai would start caused the drop in the Hang Seng Index. It tempered the gains make in Japan, Australia and South Korea, reports Businessweek.

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Investors in Shanghai stocks are dumping their shares after Li's statement as the delay hampers their chances of getting price discounts versus Hong Kong with the mutual access. Chinese shares in Hong Kong went down 1.1 percent, while the Shanghai Composite Index declined 0.6 percent and the HKEx slipped 3.7 percent, representing the fastest pace of investor pullout from Shanghai since March.

In Europe, bank shares and bonds rallied after the European Central Bank (ECB) released the results of its stress test on 130 banks, with only 25 lenders failing the test.

The impact of the positive news was felt across the bloc as the euro went up to $1.2704 against the dollar, while the krone of Norway and krona of Sweden gained 0.3 per cent after the ECB said the largest banks in Europe could withstand periods of economic stress. The central bank also did not require French, German or Spanish financial institutions to add capital.

The ECB, which published the results of the stress test on Sunday, said the unique and rigorous exercise is a major milestone as the EU prepares to put in place the Single Supervisory Mechanism that will be fully operational in November.

"This unprecedented in-depth review of the largest banks' positions will boost public confidence in the banking sector. By identifying problems and risks, it will help repair balance sheets and make the banks more resilient and robust. This should facilitate more lending in Europe, which will help economic growth," ECB Vice President Vito Constancio said in a statement.

The stress test found that the 25 banks which failed had a capital shortfall of €25 billion, but 12 of them covered the shortfall by increasing their capital in 2014 by €15 billion. The ECB gave the remaining 13 banks with shortfalls to prepare their capital plans within two weeks, but the banks have nine months to cover the shortfall.

Commenting on the results of the stress test, Tokyo-based Ueda Harlow senior analyst Toshiya Yamauchi said it had relieved some concerns in the banking sector. He forecast that if results of the business outlook surveys made by the IFO Institute in Germany would be positive, that would scale back worries about Germany and further lead to the rise in the euro's value.

Daniele Nuoy, chair of the ECB Supervisory Board, added that the stress test "is an excellent start in the right direction" since it required extraordinary efforts on the part of national authorities in euro area nations and the ECB, while boosting transparency in its banking sector and exposing areas that could improve.

"The comprehensive assessment allowed us to compare banks across borders and business models, and the findings will enable us to draw insights and conclusions for supervision going forward," Nuoy said.

TagsHang Seng China Enterprise Index (HSCEI), asian shares, european central bank, Stress Test