European and Asian stock markets and the euro have all fallen after Greece rejected the terms of an international bailout in Sunday's referendum.

The euro fell 0.4%against the dollar and 0.5%against the pound after the vote, which many believe could lead to Greece's exit from the eurozone.

Japan's Nikkei index fell more than 2%, while Paris' Cac 40 and Frankfurt's Dax dropped 1.4% and 1.6% respectively, a more muted reaction than forecast.

In London, the FTSE 100 slipped 0.9%.

"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.

Impact on banks

In early bond trading, the reaction was similarly soft. The interest rate on German bonds fell slightly as investors rushed into perceived haven assets, while yields on Italian government debt rose sharply.

On the stock markets, Bank shares were some of the biggest fallers, with Barclays down 1.4%, while in Italy Unicredit dropped 3.5% and Monte dei Paschi fell 5%.

Analysts said the falls were linked to fears that the crisis could increase losses from bad loans and potentially drive up borrowing costs for governments.

But most banks have already made sure their exposure to Greek assets is limited.Markets volatile after Greek vote.

Overall, European banks have reduced their exposure to Greece by over 80% since the 2011-12 crisis, according to Huw van Steenis, a banking analyst at Morgan Stanley.

His research shows that the threat of serious contagion in the banking has reduced since the initial Greek crisis.

(BBC)