* MSCI world equity index down from earlier peak
* Caution ahead of earnings, stress test results
* Euro down, yen stabilises
By Natsuko Waki
LONDON, July 12 (Reuters) - World stocks slipped after
hitting a two-week peak on Monday while the euro fell broadly as
investors grew cautious ahead of a slew of key U.S. corporate
earnings and details of tests on European banks' financial
health.
The yen briefly slipped after Japan's ruling coalition lost
its upper house majority in Sunday's election, putting the
government's policies to deal with the country's massive debt at
risk. []
While second-quarter earnings are expected to come in
strong, investors stayed cautious as companies, especially in
Europe, could struggle because of government belt-tightening to
combat high debt and budget deficits.
"The austerity measures and the slowdown in major markets
will probably force companies to be a little bit cautious on
their outlook and that will probably have an effect on the
market in the short term," said Mark Bon, fund manager at Canada
Life.
The MSCI world equity index <.MIWD00000PUS> was down 0.15
percent, having hit a two-week high of 280.79. The Thomson
Reuters global stock index <.TRXFLDGLPU> was down 0.1 percent.
The FTSEurofirst 300 index <> also ticked down on the
day while emerging stocks <.MSCIEF> rose 0.1 percent.
Wall Street was set for a weaker open with U.S. stock
futures <SPc1> falling 0.4 percent. This week's key earnings
include Alcoa <AA.N>, Intel <INTC.O>, JP Morgan <JPM.N>, Google
<GOOG.O>, Bank of America <BAC>, GE <GE.N> and Citi <C.N>.
Thomson Reuters data shows earnings of S&P 500 <.SPX> firms
are expected to grow 27 percent in the second quarter from the
previous three months, after expanding at a rate of 58.3 percent
in the January-March period.
So far, with 26 of 500 firms already reported, 69 percent of
earnings are coming above expectations.
EURO WOBBLES
The euro fell 0.6 percent to $1.2570 <EUR=>, pulling away
from last week's two-month high as concerns about the
effectiveness of stress tests on European banks prompted
investors to trim long positions in the single currency.
Bund futures <FGBLc1> rose 47 ticks, drawing safe-haven
bids.
The results of the stress tests are due on July 23.
"Only a test that takes into account all potential outcomes
will convince the financial markets," Commerzbank said in a
note.
"Even though a default of a euro-area member state is very
improbable, it should be part of the test scenario. After all, a
dire scenario is a key element of a stress test, which aims, in
the end, to give an impression of the worst possible outcome."
The yen stabilised at 88.60 per dollar <JPY=>, erasing
losses made after Prime Minister Naoto Kan's Democratic Party of
Japan lost its upper house majority less than a year after it
swept to power promising change.
The Democrats still control the more powerful lower house,
but they need help from other parties to push bills through the
upper house as they struggle to end decades of stagnation in the
world's No.2 economy and to cut the massive public debt.
The dollar <.DXY> rose half a percent against a basket of
major currencies.
U.S. crude oil <CLc1> fell 0.6 percent to $75.66 a barrel.
(Additional reporting by Dominic Lau; editing by John
Stonestreet)
