Eurozone stocks would fall and borrowing coasts soar if Athens were to leave the euro, say investors.
Letter from Athens requesting six-month loan extension 'does not match criteria agreed by Eurogroup'.
Greece's finance minister dismissed the argument that his only option is to extend a bailout rejected by voters.
Greek banks are losing around 2 billion euros of deposits a week.
Stocks rose to two-month highs, while government bond yields hit their lowest in three weeks.
Yanis Varoufakis played down a failure to reach a common position with the rest of the euro zone, saying he believed a "healing deal" was possible.
Roughly one in five of the eurozone's top lenders failed landmark health checks at the end of last year but most have since repaired their finances, according to the European Central Bank
Jean-Claude Juncker has handed out responsibilities at the commission with a keen eye on the political implications
Germany's economy has contracted in the second quarter, while France has stagnated over the same period