By Josie Cox 

European stocks and the euro fell after Greeks rejected creditors' demands in Sunday's referendum.

However, the losses weren't as steep as many investors and analysts had expected. Some are still reluctant to make major bets with so many questions still unanswered, strategists said.

The bloc's single currency fell as low as $1.0952 during Asian trading hours Monday before recovering slightly to trade around 0.3% lower on the day at $1.108 early in Europe.

The pan-European Stoxx Europe 600 index fell 1.2%. Germany's DAX declined 1.3%, France's CAC-40 was down 1.6%, Spain's IBEX lost 1.7% and Italy's FTSE MIB was off 2.6%. The Stoxx Europe 600 has fallen more than 2.5% over the past month as Greek talks intensified.

"This is a selloff but it's not as bad as it might have been," said Neil Mellor, a strategist at BNY Mellon.

"I think there is still a tentative feeling in the market that we've been here before and there is still hope of a deal," he said, adding that "we will only see the market moving in any one direction strongly" once we get more clarity.

Eirini Tsekeridou, an analyst at Julius Baer, said that her base scenario is still "that some form of compromise will be reached."

Demetrios Efstathiou, a strategist at ICBC Standard Bank, said that any selloff may also be limited by news that Greece's confrontational Finance Minister Yanis Varoufakis is stepping down.

"Without Varoufakis, negotiations will become somewhat easier," he said.

More than 61% of Greeks voted "no" in Sunday's referendum on austerity measures and other overhauls that European and International Monetary Fund officials had demanded in recent talks.

While the outcome spurred popular celebrations into the night across downtown Athens and other Greek cities, many strategists said that this result pushes Greece further toward an exit from the euro area.

Government bonds in Italy, Spain and Portugal--countries seen most vulnerable to any Greek contagion--sold off slightly. Demand increased for German government bonds, commonly considered safer during times of stress.

In early trade, the yield on the 10-year German bond was at 0.74%, around 0.05 percentage point lower on the day. The yield on 10-year Italian bonds rose 0.05 percentage point to 2.31% and on Spanish 10-year rose 0.05 percentage point to 2.27%. Yields rise as bond prices fall.

Trading in Greek government bonds was halted last week on some platforms. Greece's stock markets were closed last week and won't reopen until Tuesday at the earliest, along with the country's banks.

Brent crude was 0.9% lower on the day at $59.76 per barrel. Gold, another asset commonly sought during times of volatility, was 0.3% higher at $1,166.60 per troy ounce.

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