European and US stocks were mixed on Monday and Spanish bond rates hit a record high despite a Greek vote result welcomed by investors, who were nonetheless turning their attention to a key G20 summit.
Asian markets surged on the receding risk of a Greek eurozone exit after parties that accepted austerity measures came out on top in a legislative poll.
But the global rally lost steam, especially in southern European trading as investors worried about whether Spain and Italy would avoid bailouts that could stretch the currency union to the breaking point.
"For the second week in succession, euphoria over apparent progress in the eurozone has lasted for only a few hours," noted Chris Beauchamp, a market analyst at IG Index trading group.
"In summary, we are really no further along than last Friday, and markets have reflected this; last week's relief rally lasted barely a day, this one has been even briefer.
The euro gave up early gains, and slid to $1.2572 in afternoon European trading from $1.2644 late on Friday in New York.
London's FTSE 100 index of leading companies closed with a gain of 0.22 percent at 5,491.09 points and in Frankfurt, the DAX 30 added a modest 0.30 percent to 6,248.20 points,
But in Paris the CAC 40 slipped by 0.69 percent to 3,066.19 points, Madrid's Ibex 35 was down by a sharp 2.96 percent at the close, and in Milan the FTSE Mib index closed with a loss of 2.85 percent.
Most US stocks were lower in midday trading, with the Dow Jones Industrial Average dropping 0.23 percent to 12,737.28 points.
The S&P 500 gave up a slight 0.04 percent to 1,342.25 points but the Nasdaq gained 0.23 percent to 2,885.95 points.
"Greek elections? That's yesterday's news. Today's crisis is a spike in Spanish bond yields," said Dick Green of Briefing.com.
The rate which Spain must pay to borrow for 10 years spiked briefly to a record above 7.0 percent after initially dipping in response to the Greek election.
The sudden rise was a sign that dangers of debt contagion within the eurozone remained despite the Greek vote in favour of rescue terms.
And in Berlin, European Central Bank executive board member Joerg Asmussen warned that easier terms for Greece such as a mooted extension of the aid reimbursement period would entail higher costs.
"As long as a country has a primary deficit, an extension of fiscal targets automatically means there is are additional external financing needs," Dow Jones Newswires quoted Asmussen as telling an event hosted by Germany's Green party.
The Spanish 10-year bond yield spiked to 7.241 percent, the highest level since Spain joined the eurozone, from 6.838 percent late on Friday, before settling back later to 7.117 percent.
The gap with the yield on German 10-year bonds, the eurozone benchmark, also widened to a record 5.89 percentage points at one point during trading.
Italian yields rose to 6.067 percent from 5.912 percent, while that on German bonds fell to 1.390 percent from 1.436 percent.
Greece's stock exchange started the day with a leap of 6.48 percent after a cliffhanger election won by a conservative party which pledges to honour the country's bailout obligations, and closed with a gain of 3.64 percent.
The conservative New Democracy elected 129 deputies in the 300-seat parliament and there were hopes that a workable coalition would be forged with the socialist Pasok party, which secured a further 33 seats.
Socialist leader Evangelos Venizelos said he hoped a government of national unity could be formed on Tuesday
The vote essentially became a referendum on the country's membership of the eurozone, with European leaders warning that a win for hardliners would likely see Athens renege on its debt commitments and ultimately exit the bloc.
Athens has benefitted from two bailouts amounting to about 347 billion euros, and European leaders warned Greece it must respect its international debt commitments.
Attention shifted to G20 meeting in Mexico over the next two days, where Europe's debilitating debt crisis will be discussed ahead of a summit of European leaders next week.
Dealers were also looking to a US Federal Reserve policy meeting this week amid hopes that it would announce fresh monetary easing to kickstart the economy.