Spanish bond yields have risen above seven per cent, tempering stock market optimism that victory for pro-bailout parties could pave the way for a solution to the eurozone debt crisis.
Spanish 10-year bond yields initially fell in early trading on Monday before rising sharply to record levels at 7.06 percent amid investor fear that the eurozone's fourth largest economy could still require its own bailout.
Borrowing rates above seven per cent, the level at which Greece, Portugal and Ireland were forced to seek bailouts, are considered unsustainable by many analysts.
But bond yields for Italy, another country considered vulnerable to the eurozone debt crisis, eased sharply to 5.847 per cent and markets generally reacted positively to the result of an election which had been styled by some as a make-or-break moment for the single currency.
"The rates were helped by the results in Greece, which could have been more unclear," said Patrick Jacq, a bond strategist at BNP Paribas.
Jacq said: "The fundamental situation remains the same. The Spanish bond market continues to get worse, in terms of the yields, of the spread [with German rates] and the lack of liquidity".
In mid-session trading London's FTSE 100 was up 0.33 per cent, Paris's CAC 40 was up 0.30 per cent and Frankfurt's DAX was up 0.73 per cent after all had opened sharply higher.
"European markets opened sharply higher but after the first half hour of trading they gave up some of their gains", Jeremy Gaudichon, a fund manager at KBL Richelieu in Paris, said.
Asian markets also reacted strongly to the poll results coming out of Athens.
Tokyo's benchmark Nikkei 225 index closed 1.77 per cent higher on Monday, while Hong Kong's Hang Seng rose 1.6 per cent, Australia's S&P/ASX200 added 1.9 percent and South Korea's Kospi rose 2 per cent.
The euro jumped to a one-month high against the US dollar, rising to $1.2748 before settling back a little to $1.2684.
"This election results should keep hopes alive that Greece will stay in the euro," said Taisuke Tanaka, chief FX strategist at Deutsche Securities.
"Europe has survived its worst crisis in the 21st century. I see Europe rebounding for the rest of the year," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
But some analysts said the pro-euro parties' slim win in Greece alone would not determine the single currency's fate.
Lisa Fox, head of sales at JI Asia Global, said she expected market euphoria to be "short-lived".
The global financial focus will now shift westward to see whether the Greek election results will help drive Spanish and Italian bond yields lower, some traders said.
"I think the essential problem facing markets right now has to do with Spain's financial institutions, and steps have already been taken to address that," Akira Hoshino, chief manager for Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department in Tokyo.
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