Investors breathed a sigh of relief on Monday after Portugal prevented the collapse of one of its biggest banks, putting some life back into European stocks following last week’s slide and pushing bond yields lower across the board.

Lisbon announced a near €5 billion rescue of the country's largest listed bank Banco Espirito Santo, preventing its collapse and potential contagion across the continent's banking sector.

This dovetailed with easing fears of higher US interest rates following Friday’s US employment report, and eclipsed growing geopolitical concerns surrounding the Middle East and effect of Western trade sanctions on Russia.

"The market's initial reaction is that it's pretty reassuring to see Portugal moving quickly to rescue BES. Overall it eases systemic fears that had resurfaced last week," Saxo Bank sales trader Andrea Tueni said.

“But it’s not enough to spark a real rebound in the overall market. This is mostly a technical bounce from last week’s slide and the trend remains negative for now,” he said.

In early trade on Monday the FTSEurofirst 300 index of leading shares was up 0.2 per cent at 1,335 points, led by a 0.8 per cent rise in pan-European banking stocks. Euro zone financials were up 1.3 per cent and Portuguese banks were up 6 percent. Shares in BES were still suspended.

Germany’s DAX rose 0.2 per cent to 9,226 points, France’s CAC 40 was up 0.5 per cent at 4,223 points and Britain’s FTSE 100 index was up 0.2 per cent at 6,692. European shares led the losses last week as concern mounted over tension between Russia and the West, as well as the BES crisis which saw its share price plunge 50 per cent on Friday alone.

It was a more mixed picture in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent, largely as Chinese shares continued to rally on signs that the economy was regaining momentum, but Japan’s Nikkei average hit a one-week low.

The three main indices on Wall Street pointed to a higher open on Monday of around a third of one percent .