By Nigel Stephenson
LONDON (Reuters) - Shares fell, the euro stumbled and yields on weaker euro zone economies' bonds rose after Greece overwhelmingly voted against conditions for a rescue package, but there was no rout and contagion was limited.
Investors sought low-risk assets including Bunds, but the yield premium of Italian 10-year debt
The euro
Analysts attributed the relatively muted market reaction to expectations the European Central Bank would act to limit any damage. The ECB's governing council was holding a conference call on Monday to decide how long to keep Greek banks afloat.
"The market is, rightly or wrongly, taking a great deal of credence of the fact that the ECB has many more defense mechanisms in place than it did in 2011-12," said Andrew Milligan, head of global strategy at Standard Life (LONDON:SL) Investments.
"Some of the measures we've seen already could be seen as a subtle signal by the ECB that it is ready to step up... This point ...is very important to the market reaction we've seen."
Many traders and analysts had expected a closer result or even a 'Yes' in Sunday's referendum. In the event, more than 60 percent of those who voted rejected the conditions demanded by Greece's creditors.
The pan-European FTSEurofirst 300 index (FTEU3), led lower by banks, was down just 0.6 percent by 1000 GMT (6:00 a.m. EDT), a far less dramatic fall than indicated by futures prices before the open.
Germany's DAX (GDAXI) was down 0.8 percent while Italy's FTSE MIB index (FTMIB) dropped 2.3 percent. Italy, Spain and Portugal are seen as the economies most vulnerable to contagion from Greece.
Some bankers said the result made it more likely Greece would leave the euro. However, a poll of investors taken on Sunday by Germany's Sentix research group showed expectations of a "Grexit" in the coming months unchanged from a week earlier at 50 percent.
"Markets have yet to be convinced in full either that the (Greek) exit door will be open or that the extent of any contagion from this could be irreparably damaging to the system," said Neil Williams, chief economist at Hermes Investment Management.
Yields on Italian, Spanish and Portuguese government bonds rose between 6 and 11 basis points. German 10-year yields
The yield gap between Italian and German 10-year bonds, at 159 bps, held below last Monday's eight-month closing high, which followed the collapse of talks between Greece and euro zone leaders.
Greek bond markets have been closed since the regulator requested their suspension last week but dealers' quotes indicated two-year yields
U.S. 10-year Treasury yields (US10YT=RR) dropped 7.2 bps to 2.32 percent
The euro's fall helped push the dollar up 0.3 percent against a basket of currencies (DXY)
RUSH FROM RISK
In Asia, a rush from risk took MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) down 2.8 percent in the steepest daily drop in two years.
Chinese stocks rose, however, after an unprecedented series of support measures from Beijing to halt a slide of around 30 percent since mid-June. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen (CSI300) rose 2.9 percent.
Japan's Nikkei (N225) shed 2.1 percent, while U.S. equity futures dropped 0.7 percent
Brent crude oil futures