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.

The Stoxx Europe 600 index, which on Friday hit its highest level since November 2007, ended the session 0.7% higher, in line with moves on most country indexes across the region.

Government bond prices of many European countries climbed too, indicating a slight uptick in risk appetite. Greek markets were closed for 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 sharply against the dollar on the news before retreating somewhat on Monday. At around $1.1320 to the buck, the single currency remains comfortably above Friday's pre-agreement level.

Market watchers said that Friday's agreement buys Greece time, but in the same breath they cautioned that it shouldn't 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 that while "this is obviously a positive outturn" it should not "be considered an endgame."

"Political risk is likely to remain non-negligible for Greece and Europe in the months ahead," he added.

Greece is confronted with its next test later 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 softened against the dollar after Moody's Investors Service Friday downgraded the country's debt rating to junk.

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 above 64 rubles which is around 3.5% more on the day and 5.8% 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 OAO, for example--due to mature in March 2017--was around half a percentage point higher Monday at 6.78%, according to Tradeweb.

Across the border, Ukraine's hryvnia chalked up a fresh record low against the dollar, after the country's central bank said it plans to tighten currency controls on importers.

"The central bank has raised interest rates aggressively and the currency is still weakening," said says Piotr Matys, emerging market strategist at Rabobank.

"If it continues to weaken, this might lead to full-scale panic which could eventually even lead to the central bank having to implement capital controls in the worst case scenario," he added. "At the moment it is very difficult to be optimistic."

Back in equity markets, the European earnings season remained in focus Monday.

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, weighing on London's FTSE 100, after the bank reported a sharp fall in full-year net profit.

Additionally weighing on the FTSE 100, Brent crude suffered a fresh beating, falling 1.9% to $59.11 per barrel in late trade, which traders attributed to fresh global oversupply concerns. Gold lost 0.1% to $1,204 per troy ounce.

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

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