By Josie Cox 

Relief stemming from a last minute agreement struck Friday between Greece and its international creditors to extend a bailout program continued to reverberate through European markets Monday, buoying equities and bonds.

By mid morning, the Stoxx Europe 600 index, which on Friday hit its highest level since November 2007, was up 0.3%, in line with Germany's DAX. Almost all other country's indexes rose too, mirroring a climb in the government bond prices of many European countries. Greek markets were closed in observance of a public holiday.

Under a deal clinched late Friday, Greek officials agreed to a four-month extension of the country's bailout program, removing immediate concerns over a potential exit from Europe's currency union. The euro rose against the dollar on the news. The single currency was trading Monday around $1.1310 to the buck, 0.25% lower on the day, but still above Friday's pre-agreement level.

Market watchers said that Friday's agreement buys Greece time, but should not be treated as a conclusive solution.

It is more of an "interim agreement" and is "not really a victory for anyone," said Gary Jenkins, credit strategist at London-based asset manager LNG Capital.

Economist François Cabau at Barclays agreed, saying: "While this is obviously a positive outturn, it should by no means be considered an end-game".

"Political risk is likely to remain non-negligible for Greece and Europe in the months ahead," he added. Geoffrey Yu, senior currency strategist at UBS said "the agreement is nowhere close to a structural solution."

Greece is confronted with its next test on Monday, when it faces a deadline for presenting a list of budget cuts and economic overhauls, which has to pass the scrutiny of the supervisors of the bailout, the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund. Finance ministers will review the proposals Tuesday.

Elsewhere in currency markets Monday, the Russian ruble weakened against the dollar after Moody's Investors Service Friday downgraded the country's debt rating to junk status.

Moody's said in a statement it believes "the government's financial strength will diminish materially as a result of fiscal pressures and the continued erosion of" Russia's foreign exchange reserves due to capital outflows and restricted access to international capital markets.

One dollar now buys just under 64 ruble which is around 3.3% more on the day and 5.7% more on the year. Over the past six months, the dollar has appreciated almost 80% against the ruble.

The yield on bonds issued by Russian companies rose too, signaling a fall in prices. The yield on debt issued by Gazprom, for example, that is due to mature in March 2017, was around half a percentage point higher Monday at 6.78%, according to Tradeweb.

Back in equity markets, the European earnings season remained in focus. Shares in Dutch postal services provider PostNL NV climbed to the top of the pan-European index after the group reported a 4% rise in revenue for the fourth quarter of 2014. Shares in U.K.-based recycled packaging provider DS Smith PLC also rallied, after the company said it is acquiring Austrian peer Duropack GmbH.

At the other end of the spectrum, shares in HSBC Holdings PLC were close to the bottom of the pan-European index after the bank Monday reported a sharp fall in full-year net profit.

Chief Executive Stuart Gulliver was dragged into a tax-avoidance scandal swirling around the bank Sunday after a newspaper alleged that he had held funds in a Swiss account via a Panamanian company.

Mr. Gulliver held around GBP5 million ($7.7 million) in a Swiss account and is domiciled in Hong Kong for tax and legal reasons, the Guardian newspaper alleged in a report on Sunday night.

In a statement on Sunday, HSBC said Mr. Gulliver has a Swiss account and is domiciled in Hong Kong. The Panamanian company was used for privacy reasons, the bank said. HSBC shares have now fallen more than 9% over the last six months and more than 4% since the start of the year.

In commodity markets, Brent crude was 1% lower at $59.60 per barrel while gold also lost 1% to $1,192 per troy ounce. In the U.S., the S&P 500 was indicated opening 0.2% lower. Futures, however, don't necessarily reflect moves after the opening bell.

Write to Josie Cox at josie.cox@wsj.com

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