Europe sighed with relief yesterday after all but a handful of the continent's banks passed financial stress tests, but analysts warned the exams might not be tough enough to restore confidence in the sector.

The euro fell just after the release of the test results late last Friday but made up the lost ground.

US stocks also ended slightly higher but European governments face a nervous wait for markets to reopen tomorrow to get the full global reaction.

Only seven out of 91 banks failed the tests, organised in hope of reviving investor confidence in Europe's embattled banking sector.

German state-owned lender Hypo Real Estate, five regional savings banks in Spain and ATEBank of Greece failed the test of whether they could resist a new financial shock. All have been ordered to recapitalise or take state aid.

The Committee of European Banking Supervisors (CEBS), which carried out the tests, said the seven banks would need about €3.5 billion.

Unicredit chief economist Marco Annunziata said that the results showed that "the bulk of the eurozone banking system is sound, but there are serious questions on whether the tests can be considered sufficiently stringent".