Europe's main equity markets rebounded from initial losses but the euro fell as investors digested snap French elections in which a hung parliament appeared the likeliest outcome.

In France, the left was set to emerge as the biggest group in a new parliament, beating out a resurgent far-right in a vote called by President Emmanuel Macron three years ahead of schedule.

Macron's centrist alliance will have fewer seats in parliament, but held up better than expected.

The outcome, in which no bloc is expected to have an outright majority, has left the country in a "thick fog" of uncertainty, according to one pollster, with the euro dropping slightly.

European equities swiftly turned positive on investor relief that Marine Le Pen far-right National Rally (RN) had suffered a stinging defeat.

"European stocks have recovered from earlier losses as investors recover from the shock of the French election result," City Index analyst Fiona Cincotta told AFP.

"Of course, there are concerns over a left-wing alliance, but this is a preferred result to a right-wing win that the market had been dreading."

Ahead of the vote, investors voiced concern about high-spending pledges by the far-right.

The left-wing New Popular Front and its allies won 187 seats in the 577-seat National Assembly, Macron's centrist group won 159 seats and the National Rally and its allies won 142 seats, interior ministry figures show.

All three blocs fell far short of the 289 seats required for a clear majority.

Rabobank analyst Jane Foley sounded a note of caution regarding the impact on the French stock market.

"There is also speculation as to whether a politically-fractured France and a weakened Macron means that France's leadership position within the eurozone has been weakened," she said.

"In this environment further pressure on French assets cannot be ruled out."

She added that "France's political and budgetary uncertainties" remain a negative factor for the euro.

In Asia on Monday, stock markets mostly sank with Hong Kong's Hang Seng Index closing down more than 1.5 percent.

Tokyo's Nikkei index seesawed in and out the red throughout the day before finally ending slightly down, while the broader Topix shed more than one percent after hitting a new high last week.

Taipei was a rare bright spot, posting solid gains on the back of a surge in shares of chipmaking giant TSMC, which added nearly three percent over the course of the day.

 Key figures around 1045 GMT 

 London - FTSE 100: UP 0.3 percent at 8,226.27 points

Paris - CAC 40: UP 0.4 percent at 7,705.73

Frankfurt - DAX: UP 0.5 percent at 18,559.68

EURO STOXX 50: UP 0.5 percent at 5,004.49

Tokyo - Nikkei 225: DOWN 0.3 percent at 40,780.70 (close)

Hong Kong - Hang Seng Index: DOWN 1.6 percent at 17,524.06 (close)

Shanghai - Composite: DOWN 1.0 percent at 2,922.45 (close)

New York - Dow: UP 0.2 percent at 39,375.87 points (close)

Euro/dollar: DOWN at $1.0828 from $1.0842 on Friday

Euro/pound: DOWN 84.47 pence from 84.58 pence

Dollar/yen: UP at 160.99 yen from 160.78 yen

Pound/dollar: UP at $1.2819 from $1.2816

West Texas Intermediate: DOWN 1.1 percent at $82.28 per barrel

Brent North Sea Crude: DOWN 0.8 percent at $85.84 per barrel