European stocks losses limited despite Greek 'No' vote

European stock markets retreated on Monday but losses were less sharp than feared after Greece rejected creditors' austerity demands in a weekend referendum.

The relatively muted reaction indicated that the result had been somewhat priced-in and that it does not necessarily mean that Greece will crash out of the eurozone, according to analysts.

In late morning deals, Frankfurt's DAX 30 shed 1.10 percent to 10,936.75 points and the CAC 40 in Paris fell 1.33 percent to 4,744.41 points.

Madrid lost 2.0 percent and Milan slid by 2.73 percent in value. Greece's main index remained shut.

Outside the eurozone, the FTSE 100 index decreased by 1.07 percent to stand at 6,515.67 points compared with Friday's close.

In foreign exchange, the euro dropped to $1.1059 from $1.1107 late on Friday.

While the referendum was a victory for the government, Greece's Finance Minister Yanis Varoufakis surprisingly resigned, suggesting that he could be an impediment to future debt talks where the outcome is far from certain.

"Fear of the unknown, following the decisive Greek rejection of austerity, has seen global stock markets drop -- however the freefall that was predicted has not materialised," said Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.

"The relatively subdued reaction from the equity and bond markets belies the difficult position that European leaders find themselves in.  Any significant compromise by Europe towards Greek debt forgiveness runs the risk of causing a dramatic change in European politics if extreme left-wing parties in Spain and beyond choose to follow Syriza's tactics.  

"However, holding firm on their existing policy stance threatens to see Greek banks run out of money within days which would send Greece over the edge," O'Keeffe added.

-- Top level talks --

Greece's voters decisively rejected international creditors' tough bailout terms Sunday, but Greek premier and Syriza leader Alexis Tsipras insisted the result does not mean a "rupture" with Europe despite fears it will end in a "Grexit" from the eurozone.

German Chancellor Angela Merkel was to meet with French leader Francois Hollande in Paris ahead of an emergency eurozone summit on Tuesday to discuss a way forward over Greece.

In the final tally, 61.31 percent of Greeks had rejected creditor demands for further austerity in return for more bailout funds.

All eyes were meanwhile on the European Central Bank, with the ECB seen as the only institution capable of calming market panic and preventing the Greek economy from collapsing.

Until now, the ECB has agreed to keep Greek banks -- and, by extension, the debt-wracked Greek economy afloat -- on life support via the eurozone's Emergency Liquidity Assistance or ELA facility.

William Jackson,  senior emerging markets economist at Capital Economics, said "the muted reaction in financial markets in Central and Eastern Europe... suggests that contagion to the region has, so far at least, been relatively well contained".

In a note to clients he added: "Bulgaria and Romania remain the most vulnerable economies to the deepening crisis in Greece, but even here, there have so far been few signs of financial stress."

Events in Greece sent Asian equities falling on Monday, while Shanghai underwent another day of volatility as China introduced a raft of measures to shore up the slumping market.

The US market reopens Monday after shutting Friday ahead of the July 4 Independence Day festivities.